Defining Product Market Fit
The original definition of Product Market Fit (“PMF”) was “the degree to which a product satisfies a strong market demand”. In the mid-2000s, Marc Andreessen defined the term as follows: “Product/market fit means being in a good market with a product that can satisfy that market.” I don’t think you need to be in a “good market” as Andreessen uses in his definition. Andreessen’s definition forces us to define what a “good market” is, which is just another area for confusion and debate.
How do I think about PMF? I believe that PMF requires customers who are not friends of the organization to be using your product and getting utility from it. In addition, to truly have PMF these customers need to be paying for the product or they need to be some type of monetizable audience.
Let’s break this down further. First things first. Having a small number of customers that are your friends or family members does not equal Product Market Fit. Those are just your beta testers. How many customers do you need to hit this milestone? If you are in a consumer sector, figure at least 1,000 users, maybe more. To truly achieve PMF, you need to be well beyond a close group of friendly users and into a group one or even two levels further. You should have the vast majority of your customers or users from organic or paid acquisition if you want to consider PMF checked off the list.
For the next part of my Product Market Fit definition above, you need to be providing utility to your customers at this point. What do I mean by this? If you are selling some type of consumer product, then the customers need to be buying and using it, and hopefully buying it again. If you have a subscription product in the entertainment or fitness space, people need to be paying for your product and using it for several consecutive months before you consider PMF solved. If your business is in the content space and is free on a social platform or your website or some other distribution channel, then you need to have people watching a meaningful portion of your content and doing it across numerous episodes or shows. A great way to know if your customers are getting utility from your product or service is by seeing if they are telling their friends, either on social or through a referral program.
If you have customers that are not your early beta testing buddies and they are getting value out of your product or service, you are well on your way to achieving Product Market Fit. If you haven’t hit these metrics yet, you just need to keep plugging away and continue to improve your product and engage more customers.
Thanks for reading today’s post, I hope this gives you a framework to evaluate the status of your product and where you need to focus your resources. In the next post, we will talk about how your customers are paying for your product as the final stage to Product Market Fit.