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Product/Market Fit 101: The What, Why, And How | #customersupport #supporticket

What is product/market fit?

Entrepreneur and investor Marc Andreesen defines product/market fit (PMF) as ”being in a good market with a product that can satisfy that market” in his article The Only Thing That Matters1.

You reach product/market fit by getting the right product to the right people, fulfilling a specific need that hasn’t been served properly before.

Some companies get this right off the bat because they do their research, internalize their audience’s needs, and develop their products accordingly. However, it’s much more likely that the product/market fit process will take time, and potentially several tries to get right.

Why do you need to evaluate your product/market fit?

Though the concept is most often associated with startups who are finding their footing in an industry, product/market fit is relevant to enterprises of all sizes. It requires companies to take an objective look at their business from three perspectives:

  1. The size of the target market: Is the market for which you’ve chosen to build your product/service large enough to sustain your business?
  2. The needs of the market: What is the problem you need to solve for your audience?
  3. The product: Does what you’ve built satisfy your customers’ needs well enough to win their loyalty?   

If any of these three areas is lacking, your business will suffer. There’s no point in making a brilliant product if there’s not enough demand for it. Without a thorough understanding of your target audience to judge what products will suit their needs, you’re taking a shot in the dark. And finally, for people to stick with your brand, you need to keep your product on point and stay ahead of the competition.

The components of a great product/market fit

Achieving product/market fit requires a deep understanding of the needs of the target market, and a product tailor-made to satisfy those needs. The key components needed to get to product/market fit are best represented by the below diagram, courtesy of Dan Olsen2, creator of The Lean Product Playbook and product creation consultant.

Product Market Fit Pyramid
Product Market Fit Pyramid by Dan Olsen

These include:

  • Data on your target customer: Your knowledge about your target customer will inform all the other concepts in the pyramid, so it’s important to do in-depth research from the outset to properly identify who you want to target.
  • Details of your target customer’s underserved needs: Your target customer might have a variety of potential demographics and backgrounds, but they should all have one thing in common: underserved needs that will be met by your product.
  • Your value proposition: The part that will really determine whether your product has the right market fit is how well it resolves the underserved needs of your customer base. Your value proposition is a description of the way your product will meet these needs.
  • Your product’s feature set: What features will your product have that will resolve customer needs?
  • Your product’s UX: How will your customers’ experience of using your product attract them and ensure they continue to use it?

A product/market fit example: Spanx

Let’s take a real-life example of the above to illustrate how each stage of the pyramid helps to create product/market fit.

One brand that successfully understood its audience and created a product that met underserved needs is Spanx, founded in 1998 with $5,000 in initial capital.

The founder of Spanx, Sara Blakely, pinpointed key aspects of the pyramid: 

  • Target Customer: Her target customer was women who wanted to use comfortable, concealed, shapewear to make their clothes more flattering.
  • Underserved Needs: Before Spanx was launched, shapewear was generic and ill-fitting. There was a one-size-fits-all approach that left many of the target audience out of the equation.
  • Value Proposition: As part of the target audience herself, Blakely knew that a footless pantyhose shaper product would be desirable. The product would also target current and new customers of all sizes and ages. 
  • Feature Set: Blakely’s well-fitted shapewear was invisible under clothing and inclusive of all body types, far outdoing her competitors’ products.  
  • UX: By testing her shapewear on real women and adapting her prototype, Blakely ensured her products were comfortable and flattering, unlike her competitors’ ranges. She also created packaging that was bright and fun, with illustrations of women of all body shapes. 

She created a shapewear product that solved common complaints, understanding that her audience – like her – wanted a solution that wasn’t available on the market. Spanx is now worth over $1 billion.

Though Spanx markets a physical product, the principle is the same for software/SaaS businesses. Find your audience, identify a need, and make sure that your product meets that need accurately through research and testing.

How do you establish your product/market fit? 

The best way to ensure the right product/market fit is by researching, developing, and testing. Dan Olsen’s suggested approach for starting from scratch is as follows:

  1. Determine your target customer
  2. Identify underserved needs of your target customer
  3. Define your product’s value proposition
  4. Determine your minimum viable product (MVP) and its feature set
  5. Develop the MVP
  6. Test your MVP with customers

This will help you to create your initial product and test it. Once you’ve launched your final product, you’ll also need to continually assess your product/market fit so that you don’t miss the mark over time.

Best practices for assessing your product/market fit

Below are some best practices to assess your product/market fit, no matter where you are in the product development process.

Evaluate how well you’re doing against your financial potential

Armed with detailed information on your target audience, you can make a metrics-based assessment of your potential customers and the demand for your product. This will help you to not only ensure that there’s a market for your product but will also help you see if you’re meeting this demand as time goes on.

To do this, you’ll need to:

  •  Determine your Total Addressable Market (TAM): How many people with underserved needs can you target with your product?
  • Estimate your Service Addressable Market (SAM): Of those users, how many are in a geographical location you can service.
  • Figure out your Service Obtainable Market (SOM): Of your SAM, how many customers can you realistically acquire, based on the knowledge you’ve gained during your research?
  • Calculate your Average Revenue per User (ARPU) and your total potential revenue: How much is each customer worth, and when this is multiplied by your SOM, how much is your potential total revenue?

Your potential revenue is your goal, but you also need an accurate understanding of what to aim for and whether you’re achieving continual growth.

You can use the SaaS Rule of 403 to do so. This general rule states that your growth rate plus your profit should equal 40% for a healthy business. If your growth rate is higher (30%), your profit will likely be lower (10%) and vice versa.

Exceeding this percentage is great – but if you’re having trouble meeting it, you might need to evaluate whether your product/market fit is right and your research is accurate.

Consult your target customers on your product/market fit

As the Spanx example illustrated, you need to check in with your customers to understand whether you’re making the right choices for your product.

This is where focus groups, customer interviews, and a direct line for feedback from your front-line employees to your product team come into play. 

The best results come when you’re able to benchmark your progress towards product/market fit against a metric. This will help you figure out whether you’re going in the right direction and chart your success over time.

There are several survey metrics that can help you to determine how your customers feel about your products: Net Promoter Score (NPS), Customer Satisfaction Score (CSAT), and Customer Effort Score (CES) to name a few, but perhaps the most important for this purpose is the Product/Market Fit survey.

Developed by Sean Ellis4, Product/Market Fit surveys ask “How would you feel if you could no longer use [product]?”

Freshdesk - Delighted Blog

Rather than just seeing if your customers like the product or feel it’s easy to use, this query helps you to judge if your product is irreplaceable to your customer. If it can easily be replaced by a competitor product, you’re not meeting an underserved need.

Your PMF score is the percentage of customers who answer “very disappointed,” in case you stopped existing, indicating your product is a must-have. Based on a study conducted over hundreds of startups5, a score of 40% or higher indicates your product has reached product/market fit.

TIP: You can capture customer feedback automatically and find your PMF score with the Freshdesk + Delighted integration. Through the integration, you can trigger a PMF (or any customer) survey immediately after an interaction in Freshdesk (such as a ticket closing) and configure the survey sending to fit your specific needs. Automating your feedback program frees up time to dive deeper into feedback results and track your PMF score over time.

Adapt your product development

If you’re seeing a drop in your metric scores or your surveys are flooded with text feedback from customers that highlight issues, it’s time to update your product’s UX and features. This will help you to maintain a great product/market fit.

There are some great examples of companies that saw their product/market fit wasn’t right and changed tack for the better. Here are a few:

Netflix identified that movie-keen customers were fed up with paying late fees to brick-and-mortar rental DVD businesses. Creating its initial product – a DVD-by-mail service – Netflix quickly grew in popularity.

However, DVDs were on their way out. Netflix realized that the new need was for on-demand content, and launched its digital streaming service. The concept was the same as its original one – make movie-watching easier for customers – but the company changed its delivery system when it saw the underserved need was changing.

Like other search engines in the early 2000s, Google was offering ad space next to its search results to make its money. This worked fine at first – but with other companies offering the same, it needed to offer something more substantial that would meet an even-more underserved need than “I want to advertise my product”.

Creating AdSense meant that Google customers could not only advertise their products but also show their ads on relevant websites. Automatically displaying ads on sites that had the right audience – for example, shoe ads on a fashion website – meant that there was a much more attractive offer for their advertising customers. Changing up their approach and continually drilling down into the underserved need meant that Google’s product evolved with the times.


Getting an in-depth understanding of your customers and their evolving needs is the only way to create products that successfully resolve problems or fill market gaps. And, by gathering ongoing, automated feedback with the Freshdesk + Delighted integration, you never have to guess what your customers think or how your product is faring in the market. 

Whether you’ve just landed on a concept or you’re already selling your products, learn how to continually get up-to-date feedback and data on your customers’ views and needs.



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