What exactly is the buzz around product-market fit all about? Amit Somani of Prime Venture Partners demystifies
In this episode of Prime Knowledge video series, Amit Somani, Managing Partner at Prime Venture Partners, talks about what exactly a product-market fit is, and demystifies the complexity around achieving it.
A startup may start with an idea, but it is the market that ultimately decides the success of the product or the service or the brand itself. Companies that reached the unicorn status are really solving customer pain-points. This means, startups that fail do not recognise that the market is the ultimate decider.
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No matter how many definitions you read out there about product-market fit, it eventually boils down to the concept of creating a product or a service that people really want.
Amit Somani says, “If, as an entrepreneur, you can achieve that, you have reached product-market fit with your startup, and your business is destined for success.”
Yet, a certain amount of ambiguity still remains around the true definition of product-market fit. And then there is the all-important question of how to achieve it. Your enthusiasm as an entrepreneur must sit on the driver’s seat while taking your brand forward, but you should never lose focus on achieving product-market fit.
Watch the Prime Knowledge series with Amit Somani by Prime Ventures, an early-stage VC fund investing in technology and product-focussed businesses:
The simple definition of product-market fit
Creating a product that people really want is one way to understand product-market fit. Another way to grasp the concept is that point of time when people spend their time, energy, and money to buy your product or service.
This means that your customers are genuinely interested in your product or idea. They will not hesitate to give you their email ID or sit through multiple login steps to finally make a transaction.
But, if the concept is so simple, why do startups fail then? Isn’t solving the customer’s problem or giving them what they want is all they need to do to achieve the coveted product-market fit?
The demons for these startups lie in the word problem as not all people are bothered by the same set of problems.
Online grocery brands will work well for people in urban hubs who really struggle to find time to do their regular grocery shopping. Even a certain age group actually considers buying groceries online. Selling this idea to people for whom time is rarely a problem, the business will not work.
This second group does not care about using their phones to order groceries. A simple stroll down the street is enough.
This is what most early-stage founders miss. Entrepreneurs, driven by their new-found enthusiasm, want to believe that their products and services can actually change the lives of people.
If you can sell your product in a good market and your customers take your word to 10 others, that is product-market fit for you.
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How to achieve it?
It is easy to throw around words like planning and patience, but most entrepreneurs are often under pressure from their users and the market to launch the products as soon as possible. Hence, they miss out on the bigger picture, and the startup starts heading in the wrong direction.
To state the how-to in simple terms, you can follow these steps from the time you have an idea to the point you take your business to the ground. Give as much time as possible to these and close the loopholes early.
- Identify your target customers based on demographics, age, the field of work, and so on.
- Locate the real pain-points of these customers. Solve that instead of focussing on a general picture.
- Create a plan to face your competition. Can you do those specific things that your competitors are yet to?
- Set a clear starting point for your product or service. Define the features you will initially want to give out.
- Design a prototype of your idea.
- Test the prototype with a small group of your potential customers and closely note their feedback.
By the end of these, you will likely get an idea about how the market overall is going to react. If your test customers share your enthusiasm, you are good to go. Otherwise, back to the drawing board.
It should not be a race
As evident, product-market fit is a vital element for all startups. You will want the market to resonate with you. For B2B, it is often easier to test your product as your customers will automatically bring in their other teams if they are excited. For B2C, keep a constant look at your net promoter score.
Any deviation should be your warning signal and you will need to step back and rethink your strategies.
(Edited by Megha Reddy)
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