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What is product market fit?
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High market demand for new products and services is an excellent indicator of future business success. That's why B2B marketers and business owners must identify, test, and measure product-market fit before launching new solutions.
This guide explains the meaning of product market fit and why businesses must find the right one. We also provide steps for using a product-market fit framework to develop, test, and measure a product's potential success.
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1. Research target customer challenges and pain points
First, research the market to understand key target customers and their underserved business challenges, pain points, and needs. Relevant market research strategies include the following:
Business owners and marketers should use the results of this research to identify only the most critical needs and challenges they can serve via new product-selling features.
The research will also help marketers develop buyer personas or ideal customer profiles (ICP) for key target audience segments by outlining their demographics (e.g., age, gender, and geographic location), psychographics (e.g., interests, hobbies, and lifestyle), roles and responsibilities, and online behaviors (e.g., purchase cycle length, and preferred media and social media channels for research).
2. Identify unique or unmet selling points and value propositions
Keep buyer personas and ideal customer profile insights in mind while listing key value propositions or unique selling points to use when developing a new product prototype.
For example, if customers have identified specific tools they need like checkout customization and optimization features currently missing on their existing ecommerce platform, this might be a significant product advantage. Or they might ask for a deep sales insights tool that helps them learn more about high-quality leads before jumping on a cold call or discovery call.
3. Create Cross-Functional Product Market Fit Teams
Keep buyer personas and ideal customer profile insights in mind while listing key value propositions or unique selling points to use when developing a new product prototype.
Achieving product-market fit requires insights and buy-in from company-wide stakeholders. Marketing and product development teams should invite input and feedback from representatives in each department —– from finance to HR, operations, and customer support—about proposed value propositions and underserved customer needs before finalizing a unique feature set (or list of priority product features) to develop a prototype.
Company-wide stakeholders need to be involved before, during, and after each new development stage as part of an ongoing, collaborative process to ensure products meet the highest standards. These stakeholders can also be involved in product testing and quality assurance (QA) before launching a new product.
4. Create and Test a Minimum Viable Product (MVP) or Prototype
After identifying unique value propositions, businesses should begin developing what is known as a minimum viable product (MVP) using a list of priority features and benefits. It should be a scaled-down prototype of only the essential features or tools that customers want.
MVPs are useful because they are faster and more affordable to develop in the early stages of a product or startup. Product development teams can also use MVPs to test their hypotheses with target users to prove that the product does, in fact, solve a significant business challenge. The results will indicate whether the future, full-scale product version will have a good product-market fit.
Businesses can either develop a working prototype or use wireframes in the initial stages to test the MVP designs and features before jumping into development. Wireframes are foundational documents or blueprints used in the planning and pre-design phases of an app, website, or landing page. They're a black-and-white, two-dimensional representation of all the necessary elements a business requires in a product user interface (UI) or web page layout from the homepage to product pages, info or content pages, and contact forms.
At this stage, development teams can incorporate user experience (UX) design best practices to create the MVP. Review LinkedIn’s User Experience (UX) Guide to plan, create, and test MVP prototypes.
5. Set and measure success metrics and KPIs
Before launching or testing a minimum viable product or prototype, businesses should identify key success metrics or key performance indicators (KPIs) they will track to ensure they remain within scope.
For example, getting positive customer feedback via online reviews or on social media about the minimum viable product. Or by achieving high results on a net promoter score (NPS) survey that measures how likely (on a scale of one to ten) a customer would be to recommend the product or service to a friend.
Additionally, marketers and product developers can track the newly launched MVP’s churn rate (e.g., the percentage of customers who cancel a product subscription or service over a set period) and customer retention rate (e.g., the percentage of customers they keep over a set period).
Businesses can use the following types of product testing to measure product market fit success and gain further insights to identify areas for improvement:
Usability testing: Researchers observe a target user or customer while trying to complete specific tasks using a product prototype. Users give feedback in real-time as they work through the tasks. The insights they learn from test users help improve the UI of the MVP prototype (before and after it is launched) for quality assurance (QA) purposes.
A/B testing: After launching a prototype, researchers use A/B or split testing to measure the effectiveness of the product’s design including headlines, copy, and images. The results help product designers improve the prototype’s look and feel to drive the highest number of leads or conversion rates possible. Researchers typically create two versions of the same page or app screen and use conversion rate optimization (CRO) software to measure which one has a more significant impact.
Web analytics: This software monitors the real-time use of a prototype website or app. The data collected can help UX researchers identify where users are having issues and troubleshoot them for a better experience. For example, they might find pages with a high bounce rate and revisit the page to try and understand why customers quickly leave or “bounce.” Or, they might see users abandoning their shopping carts at a certain point in the checkout process and investigate why that happens.
6. Iterate to improve products continuously
Product market fit and development is an iterative process involving much trial and error. Businesses should continue to improve upon what works while adapting to customer feedback and ongoing changes and challenges in the marketplace.
Make sure to follow the “40% rule.” After users have tested or used a product prototype or MVP for a while, businesses can survey them to ask: “How would you feel if you could no longer use the product?” When less than 40% answer that they’d be “very disappointed,” businesses must continue to develop their product market fit and minimum viable product.
Additionally, marketers and product developers can track the newly launched MVP’s churn rate (e.g., the percentage of customers who cancel a product subscription or service over a set period) and customer retention rate (e.g., the percentage of customers they keep over a set period).
Businesses can use the following types of product testing to measure product market fit success and gain further insights to identify areas for improvement:
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