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How to reach product-market fit using customer experience (CX) data

16 min read
Product-market fit is a vital ingredient of success for any business. Find out how you can better align your company with the market by listening to your customers.


What is product-market fit?

The phrase product-market fit (PMF) describes how well your product meets the needs of your customers. Does your product give the people who make up your market something they need? Do you have a sustainable business with customers that keep coming back? If you have found your competitive niche, you have a solid customer base and your business keeps on growing, you can be said to have achieved product-market fit.

There’s no hard-and-fast definition of product-market fit, but it’s a term that’s been around since the early to mid-2000s and shows no sign of going away. It’s generally understood to mean that your product has found its audience and that your business is growing and flourishing as a result.

Why does product-market fit matter? 

Getting the right product-market fit is considered one of the most important stages of a product’s lifecycle. According to Marc Andreesen, Silicon Valley investor and engineer, getting to product-market fit is “the only thing that matters.”

After all, if you’re not giving the people what they want, your new product or business might fall at the first hurdle. But it can be tricky to get it right.

Andreesen defines having a great market as the most important variable in start-up success, since without a great market, even the strongest products and most brilliant teams can’t survive. Success lies in finding your market and supplying a product to fit it.

Learn how to test your product concept with your target audience in our free ebook

What makes product-market fit so elusive?

Many startup businesses have tried to find their product-market fit and failed. The reason? They didn’t understand their customers well enough, or as Bernadette Jiwa put it, “they didn’t manage to get close enough to their customers.” They might have had a great market under their noses, but they weren’t able to see it.

We live in an age where businesses have all the means to get closer to their customers and their markets. Nevertheless, many of them struggle to get the right kind of feedback on how their present and future customers feel, what they currently need and what they might need in the future.

This causes a gap between what customers need and feel, and what businesses believe those same customers need and feel. As a consequence, those customer needs are then not met. This is without a doubt the reason why most businesses fail to find a product-market fit.

So how can you use customer experience data on your journey to product-market fit?

The 4 stages of product-market fit – and how CX data helps 

The journey to product-market fit is full of challenges that must be overcome. And even when you get there, no one can guarantee that you’ll manage to grow as expected. Take heart though – knowledge is power, and the more you learn in advance the stronger your position will be.

Here are the 4 stages to product-market fit that you have to go through:

1. Ideation

Coming up with the initial idea for your product or service

2. Validation

Validating your idea and fitting your solution to the customer’s problem

3. Scaling

Scaling your product with a repeatable selling motion

4. Product-market fit

The desired outcome

As you can imagine, the more customers you acquire and the deeper you dive, the more customer experience data you’ll have. This doesn’t mean you won’t have data to work on in the beginning. However, it’s likely that until you reach the later stages of the process, you won’t have the infrastructure or the mechanism to gather all this feedback and turn it into actionable insights.

Let’s take a look at each of these stages in a bit more detail:

Stage 1: Initial idea

This is where you generate ideas about the product you want to build and who it’s for. Remember: your product has to solve a real-life problem – a problem that many people have and are willing to pay money to resolve. At this stage, you need to take the following steps:

  1. Choose the problem you’re going to solve
  2. Define your target audience
  3. Create a customer persona
  4. Do competitive research
  5. Come up with a value proposition
  6. Decide on your minimum viable product’s (MVP) feature set
  7. Build your MVP

MVP stands for Minimum Viable Product. It’s the first version of your product or service, with the basic features in place. It’s a starting point and it has lots of potential to develop further, but it’s good enough to get customers excited and crucially, it’s something they are willing to pay for.

Read our guide to minimum viable products

 

 

Pro tip: Take a look at some of the market research tools you can use at this initial stage.

One thing you need to pay particular attention to is the value proposition. This is a short statement about why someone should buy your product and the unique qualities it offers. Your value proposition has to communicate the value of your MVP in the best way possible, but it should stay short and to-the-point. It’s a quick summary, not a spec.

Stage 2: Idea validation and problem-solution fit

At this stage, you need to identify whether or not there’s actual interest in the MVP you’ve built, which means you need to validate your MVP.

How do you validate your MVP?

Validation means testing out your idea in the real world with the kinds of people you’re interested in having as customers. It might take the form of surveys, interviews, focus groups, online outreach.

You also need to discover who your ideal customer is and reach a problem-solution fit. Of course, if you can’t manage to do any of this, you’ll need to pivot and change tack to something else. If you figure out at this stage that you need to pivot, you’ve saved yourselves time and money down the line. The steps you need to take here are:

  1. Validate your MVP
  2. Discover who your ideal customer is
  3. Find a problem-solution fit
  4. Pivot or persevere

One thing to remember is that many businesses make it to this stage but then fail to scale up. Why? Because reaching a problem-solution fit and a product-market fit are two totally different things.

Problem-solution fit is when you have confirmed through research and testing that real people experience the need you identified with your idea, and that they feel your product or service could be the answer to that need.

Product-market fit is when you’ve gone beyond that first group of enthusiastic people and found the same need and appetite in the wider population. You will also have tweaked and refined  your product to meet the need of that wider market, and have build a solid foundation that gives you the potential to scale and grow.

Both of them are important – however, only the second will keep your business alive.

Stage 3: Scaling with a repeatable selling motion

At this stage you have to start scaling. Remember: scaling doesn’t mean that the founder of the business is making sales calls over the phone. It means your product is selling itself through different channels and selling mechanisms. This stage is characterized by:

  • Thorough understanding of who your ideal customer is
  • Core group of happy customers who continuously refer you to other customers
  • Go to market strategy that constantly generates new customers

At this stage, you also need to focus your efforts on a series of trackable metrics that reflects the overall growth of the company. This success metric is the reason why you need to build a feedback loop – in other words, a feedback collection mechanism that helps you design new experiences and then continuously improve them.

Stage 4: Product-market fit

According to Eric Ries, the author of The Lean Startup, the PMF stage is:

“When a startup finally finds a widespread set of customers that resonate with its product.”

One common mistake among many businesses is the perception that product-market fit can protect you from competition, or that finding a product-market fit keeps you safe from market changes. If only that were true. The reality is that when you find a product-market fit, that’s when you actually need to get your gears turning and start seeking growth.

Where does the CX data come in?

Customer experience data is essential for achieving product-market fit, and businesses can use it at every stage except for the very first, the ideation stage. This is because at first, businesses don’t have paying customers, so they don’t yet have access to CX data or customer feedback.

CX data in the validation and problem-solution fit stage

Often, startup businesses start charging for their products and services after finding a problem-solution fit. However, they can – and must – collect feedback from their users, even if they’re not yet technically paying customers. So, what data can a business retrieve and use in each of the four stages?

In stage two, validation and problem-solution fit, you’re trying to test and check the validity of your product concept. Businesses in this stage rarely keep track of their validation efforts, partly because they lack the infrastructure, and partly because they don’t have the resources to set up such a system. However, in this stage you absolutely should be collecting customer experience data if you can. That’s because you need to:

  • Optimize your MVP – so every kind of feedback is useful
  • Validate your customer personas – so collecting data is critical
  • Decide if you’re going to pivot or persevere – and to take that decision requires data

So even though most businesses in stage two don’t pay attention to data, data is nonetheless essential for their future.

CX data in the scaling stage

Businesses that want to scale up need customer experience data in order to:

  • Know what drives customer satisfaction
  • Understand customers’ needs and expectations
  • Identify the hidden desires of their customers, and things that could be improved and optimized

Simply put, you won’t bring in new customers if you don’t know what their main drivers of satisfaction are. To do that, you don’t necessarily need to be a customer experience professional. You just have to get a step closer to your customers.

CX data at the product-market fit stage

When a business finds a product-market fit, it’s ready to grow. To identify whether or not a business has managed to find a product-market fit, it has to conduct a PMF analysis.

A PMF analysis can help you get a 360° view on the performance of your business, and tell you how close you are to meeting customer expectations. Here are some of the metrics you can use to measure product-market fit:

Of course, the metrics you’re going to use, as well as the ways you’re going to use to collect data, differ based on the type of business and industry you’re in. Next we’ll talk about how to set up a data collection mechanism, and what to pay attention to when setting it up.

Using customer insights to find a product-market-fit

Is there a right way to measure the quality of a service? Is there a right way to know how your customers feel at any time using customer experience data? Is it important to set up a mechanism that collects data automatically? And when you set your system up, what do you need to look out for?

All these questions are critical when trying to find a product-market fit. Setting up a mechanism that helps you continually gather feedback is the best way to understand your customers better and offer them the best possible experience.

How to set up a data collection mechanism

The best way to create a culture of action that is set up to find a product-market fit, is to use a feedback management software system  Some of the most common methods you can use to collect customer experience data are:

You might use customer feedback metrics such as CSAT, NPS and CES too.

One of the most important aspects of collecting customer experience data is to choose which data collection techniques you are going to use. Yes, you can use more than one, but it’s better to focus on those which are closer to your customers’ habits. For example, if your email open rates are usually high, it would be wise to send an email asking for feedback on your products or services.

Things to look out for

What should you pay attention to when collecting customer experience feedback? Here are some tips to guide you:

1) Ask for feedback only when it makes sense

Should you ask for feedback when a user is inactive for months or hasn’t yet managed to experience the value of your product? Probably not.

This is why you should ask for feedback only when it makes sense, and only when you are sure that your customer has experienced the value of your product.

2) Collect feedback in a way that suit your customers

We know that not all data collection techniques are equally effective. Your job is to find the ones that are most effective and suit  your customers best, that way you will be able to collect the most accurate results

3) Avoid survey fatigue

Survey fatigue can happen when you send many surveys in a short timeframe. It might result in your response rates dropping, along with the quality of your insights. This should be avoided at all costs, so pay attention to the frequency of your surveys so you don’t overwhelm your customers.

4) Ask the right questions

To build an effective survey, you have to ask the right questions. Asking someone who hasn’t used Feature X what they think about it won’t help you to better understand your customers. In fact, it may harm your business rather than do any good. It’s a good idea to use customer segmentation to help plan your survey program, to make sure you ask the right questions to the right people.

Product-market fit – a long road but worth the journey

The journey to product-market may not be quick and easy, but the truth is that by understanding your customers better, you will greatly increase your chances of finding a product-market fit and start growing. What’s more, you’ll be set up to continue providing an outstanding customer experience as your business goes from strength to strength.

eBook: Introduction to Product Concept Testing