How To Validate Product-market Fit In Your Industry

Long time ago, market research was used by businesses to assess information about customers’ behavior and attitudes. When your product addresses and solves the needs of customers in relevant market segments and channels, you achieve product-market fit. Using this framework may result in greater business success than if proper alignment is not used. 

Validating product-market fit is a need for every business

What is product-market fit?

In a nutshell, product-market fit is about finding a good market with a product capable of satisfying that market. It is the scenario when your company’s target customers buy and use your products/services, moreover, they will introduce your products/services to other people.

Before you launch your product, you should determine its product-market fit to better position it in front of those who are looking for it. It is important to validate product-market fit because after all, building a valuable business requires more effort than simply making a financial investment on a whim. 

When conducting research, keep in mind the needs of your target demographics, market segment, and product specifications. These are most likely the ultimate goal of every business: to provide what customers need so that they become your advocates and you can achieve business growth.

Given this, every company should be concerned with understanding and achieving product-market fit. Here is how to do it.

How to determine product-market fit for startups?

Many businesses fail because they provide products that no one wants. Startups should prioritize product-market fit over other objectives, because those who achieve it will significantly increase their chances of success.

Everyone wants to make sure the product works, is usable, and appealing to the target market. To avoid the failure, make sure you understand the pain points that your product addresses and that your customers seek to address. You can accomplish this by using 5 solutions below:

1. Determine your target customers

Determine your target customer, who represents the users who will most likely benefit from your product. Use market segments to define your ideal customer, and create a customer profile, so your product team knows who they’re building for.

Define the target market before launching products

Luckily, nowadays you can use social ads platforms for multivariate testing, making it simple to gain access to customer data & insights quickly. Platforms such as Facebook, Instagram, Twitter, LinkedIn, and Google provide instant access to millions of consumers who can be segmented into distinct audiences and targeted with multiple ads promoting a new product. Some ads will work, while others will not, providing information about where to retool variables.

The research phase is well-designed to define your buyer persona, identify your target customers, conduct market research, and summarize your findings into digestible takeaways to share with your individual contributors, executives, and board.

2. Explore customer pain points

Talk to your customers about their problems and how much they are willing to pay for a solution to those problems. In order to identify recurring customer complaints, consult with your sales and marketing teams.

Gather a large enough sample of data to provide meaningful feedback. Consider that face-to-face conversations frequently yield feedback that online surveys do not. Knowing how they think about your brand and fix customer pain points can help you improve the customer experience.

3. Find new buyers for an existing product

Heat testing can also be used to find potential growth areas for an existing product. It is risky to reposition a legacy product for new audiences as the existing customers may be turned off by new messaging or imagery.

Testing new positioning on a small scale with new audiences to identify product-market fit, this will allow your brands to unlock additional revenue streams without significant investment. Small-scale testing of winning positions with core audiences can also identify any risks posed by new messaging.

4. Measure your product-market fit

To be successful, businesses must stick to the route and manage their performance. Determine key data points that will assist you in tracking performance. Begin by determining your Total Addressable Market (TAM), also known as the total value that indicates all of the selling opportunities for your business.

TAM is calculated by multiplying your Average Revenue Per User (ARPU) by the total number of potential customers in the market. Determine what percentage of your TAM are current customers once you have your TAM to calculate Serviceable Addressable Market (SAM).

Once SAM is determined, the next step to measure product-market fit is product validation. As part of the product validation process, ask your customers if they want or need this product, send out surveys, and conduct interviews.

With all the above values, you can determine Serviceable Obtainable Market (SOM). SOM is calculated by multiplying your previous year’s market share by this year’s SAM in your industry.

Using TAM SAM SOM to measure product-market fit

5. Listen to your customers

Customers have high expectations with the businesses they choose to cooperate with. And thus, it only takes one instance of missed expectations for customers to switch providers in search of what they perceive to be a better opportunity.

According to a recent survey, 82% of customers said they would switch products or service providers if they had a negative experience with the Customer Service department. So, listening to buyer feedback is the most effective way to identify their pain points and fix them. The goal of customer service is to make people feel more comfortable with your company.

Finding product-market fit requires lots of effort. However, capturing insights based on real-world behavioral data about purchasing decisions makes it worthwhile. When you achieve product-market fit, your customers and other interested parties will become an effective part of your marketing strategies. They may even share their own stories with others, allowing you to focus on the task of providing the same excellent service to everyone who interacts with your company.