How can you tell when you've achieved product-market fit?

When I founded my first company, I had an idea for a new e-learning product. I made two calls that day where I described it to people I thought would be a fit. Both bought the offer before I even created a landing page. The ideal product is so well-suited to your target audience that it will draw them right to you. That doesn't mean you will not have to market to build your audience and awareness. It does mean that you know you've got it when the sales conversation is met with someone so excited they're ready to buy right then and there.

Telling whether a product has achieved market fit is trickier than it seems. PMF refers to the point at which a product satisfies a strong market demand and has a sustainable customer base. PMF will more often than not have:- 1. Strong retention and engagement (Retention close to the natural frequency of usage of the product by the target persona) - IMO, this is by far the best measure of PMF. 2. Strong virality and user love (User growth powered by strong word-of-mouth referrals) 3. Clear value proposition 4. High net promoter score 5. Healthy unit economics (LTV/CAC) 6. Feedback form changes from missing features or product/service complaints to enhancements 7. Positive trends in resurrection

When we see some of our early adopters proactively promote our product to others, without receiving any incentive from us. I guess in order to qualify for a "fit", you need more than a handful of those customers.

1. When customers not only use your product but also praise it without being prompted, it's a strong indication of product-market fit. We need to look for positive reviews, testimonials, and unsolicited feedback. 2. Word of mouth or you can track it by referrals

You know that you are achieving PMF when you see some organic traction, some organic growth, which means you have a degree of recommendation from your existing customers. A good NPS some could say. Of course, it is not the sole criterion, high retention rates and low churn can give you an idea too.

While the lack of growth is certainly a sign that your PMF is not what it should be, I made the experience that growth alone (awareness, trial, even retention) is not enough to demonstrate PMF. In some cases, your customer has no choice, your product is simply the only option available, they have to buy from you, whether they like it or not. In that respect, measuring satisfaction and referral helps identify if the customer is locked. If to measure, measure it all !

Growth is not the primary factor to define product market fit. Luxury car companies make same revenue as compared to lower price range car companies. This means number of buyers are less in luxury segment but the revenue is nearly same with higher number of low ticket size buyers. If your product cleared POC by getting at least 100 consumers for traction in a month of launch, your product is good enough to be a consumers pocket holder. Post that, having a good user engagement and retention defines your product likeable properties which defines product market fit.

When you can bring your competitors' customers to your product and steal market share from them, and do it without competing on price. You have been able to market fit your product.

1. Your product is being paid for by a variety of users or businesses (at least 100 in B2B case). Sales funnel is highly compressed (means high velocity or conversion). 2. Business model has shown repeatability with businesses. 3. Referenceable customers are easy to come by. Product has gone viral (extremely low CAC).

I knew we hit product-market fit (PMF) when, after a pivot, prospect calls kept going the same way. They'd ask if we had a website (we didn't), case studies (none), pricing details (still figuring that out), expected results (uncertain), and our customer count (zero). Yet, they still wanted our product and even subscribed after a short trial. This level of interest, despite all the missing pieces, was a clear sign to me of PMF.

It is okay if you cannot wholly connect customer activity and business results. There are two primary reasons for this break. First, the customer activity might not have relevance to the business; in this case, you may need to dig deeper into customers and the company. Second, the business may need to include how it looks to act on customer usage and activity. In this case, you need to work with your partners to increase the company’s customer knowledge.

An example of PMF can be users, who starts to promote your product by themselves and their own will. And even better if some of them are become evangelists. That can indicate that you are above and beyond PMF.