For Marc Andreessen, entrepreneur and investor known for the popularization of the term, Product-Market Fit means finding a good market and developing a product capable of satisfying it. Sounds simple, right? The truth is that convincing the target customer of a digital product to buy it, use it and share it – on a scale sufficient to ensure business growth and profitability – is no easy task.

Therefore, in this article, we will share some tips to achieve the Product-Market Fit, in addition to highlighting important details so that you can assess whether it has really been achieved. Let’s go!

Exploring the Concept

In the book Four Steps to Epiphany, Steve Blank defines Product-Market Fit as the process in which you find a group of customers and a market that react positively to your product: you solve a problem and you get paid for it. According to the entrepreneur, you need to find “the perfect fit” between product and consumers; either creating the product and then reaching out to consumers, or finding the consumers and then developing the product.

Dan Olsen contributes to this vision through his Product-Market Fit Pyramid. According to Product Management, the base of the pyramid is the target customer, and just above are their underserved needs. These two layers form the market. The top three layers relate to the product, respectively being value proposition – what target customer needs you will meet and how will you do it differently from your competitors; The feature set – which features your product will have; and the user experience – how the target customer will interact with your product.

Source: https://www.mindtheproduct.com/the-playbook-for-achieving-product-market-fit/

In this model, the product-market fit relates to how much the assumptions and decisions of the three upper layers resonate with the two lower layers. Therefore, the five layers must be solid and well-defined.

The two definitions above indicate that the Product-Market Fit is directly related to the hypothesis validation. In this sense, we cannot forget to approach the MVP idea, presented by entrepreneur Eric Ries in the book The Lean Startup. The Minimum Viable Product is the first version of a hypothesis for a new product, which after being released to the market, will be developed to reach the desired state, or will be abandoned if users do not use it – or consider it useless.

Consumers become Sellers

With a broader view, we have the definition of Aaron Walter, author of the book Principles of Product Design. For the Product Lead, Product-Market Fit refers to the sharing of the product among users. This means their experience is so good that they recommend the product to others. In Walter’s words, “suddenly your customers become your salespeople.”

This idea corroborates Andreessen’s belief that to invest in any business, proof of Product-Market Fit is required. Therefore, he divides the life cycle of startups in before product-market fit (BPMF) and after product-market fit (APMF). According to the entrepreneur, developing a product without first determining that it has enough market to sustain itself and generate profit is counterproductive.

Who is responsible for the Product-Market Fit?

It is important to point out that the duty to achieve the adjustment of the product to the market is not only of Product Managers and Product Marketing Managers: the entire team involved with the product must share this commitment, from developers, testers, and designers up to salespeople.

This means that everyone should be aware of their role and how challenging this journey can be. After all, achieving Product-Market Fit is not about constant, linear growth, but about analyzing evidence, whether positive or negative, to make decisions.

According to the entrepreneur Ryan Holiday “Product-Market Fit is not a mythical status that happens accidentally. Companies work for this; they crawl towards it and are ready to throw away weeks or months of work because the evidence supports this decision.”

How to achieve Product-Market Fit?

Of course, there is no magic formula for achieving product-market fit, but Olsen, in the book The Lean Product Playbook, offers a high-level path that can indicate the main steps:

• Determine your target customer: Who do you believe your product’s users are? Conduct market research, publish forms and conduct interviews with potential users to delimit it.
• Identify your needs: What are the pains of its users that are still not addressed; or that are underserved by other businesses? An exercise that can help in this step is the creation of an Empathy Map;
• Define your value proposition: How will your product meet the needs of your users better than the alternatives already on the market?
• Specify the MVP feature set: What are the essential features that your product must have to meet the needs of users?
• Develop the MVP: What do you need to create to test your idea with your target customer? Remember that the MVP must be simple and doable.
• Test the MVP with customers: publish your product in search of feedback. Implement improvements and repeat testing.

To carry out the last four steps, it is a good idea to rely on the Business Model Canvas and on Alex Osterwalder’s latest framework, Testing Business Ideas. Through them, it is possible to identify and test business models in order to define the value proposition, customer segment, relationship, and channel of a digital product.

Such tests can be performed with No-Code and Low-Code MVPs, which reduces development time and minimizes risk. Through these methods, it is possible to discover whether the direction we envision makes sense (Discovery) and validate whether the chosen product paths have evidence of success (Validation).

How do you know if Product-Market Fit has been achieved?

We have already written about product metrics here on the blog. Frameworks such as KPIs, OKRs, NSM, Pirate Metrics, and Sales Funnel are some options that can be used to track digital product data and evaluate its performance.

But what data are these? Key metrics for new products are CAC, LTV, CTR, CVR, and CR. They indicate how much you are investing to acquire each customer; what the lifetime value of each user is; what the click-through rate, the conversion rate, and the abandonment rate of your digital product are.

With such data in hand, and applying user surveys, try to answer the following questions:

• Are there any indications that users will adopt your product over others?
• Do users demonstrate understanding of your product’s differentiators or value proposition?
• Are users who have rejected similar products on the market willing to try yours?
• When testing the product, can people accurately compare it to the right competitive offerings?
• Do users recommend your product to others?
• Would they care if your product left the market?

These questions will indicate whether your team is on the right path in pursuit of the Product-Market Fit. Making small changes on an ongoing basis, as you gather feedback, makes customers begin to understand the value of your product and begin to share their positive experiences with other users.

Need help achieving the Product-Market Fit?

At SoftDesign, we work with the Conception and Experimentation of new digital products. The Production Conception service allows you to elaborate the idea of the product or service, define your target customer and your value proposition, and plan strategically. The Experimentation service, on the other hand, allows a No-Code or Low-Code MVP to be developed to test hypotheses and adapt the product to the market. With the success of these steps, moving towards Development becomes safer and more economical.

To understand better, fill in the form below so we can talk to you about your needs:

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Since then, the concept has evolved and has been the subject of many discussions among technology enthusiasts. After all, does the minimum version of a digital product necessarily need to have code? If you can test a business model with a No-Code initiative, is that a Minimum Viable Product? Can MVPs be used by any business?

In order to clarify this debate, in this article, we will share some currents of thought on the subject. It is important to emphasize, however, that there is no presumption of closing this debate here, nor of consolidating concepts; but rather to contribute to the area by bringing different perspectives.

The minimum version of a new digital product

Frank Robinson was the creator of the term Minimum Viable Product (2001), defining it as a unique product that maximizes the return on risk, both for the customer and for the supplier. To the CEO of SyncDev (formalized and streamlined process for the development of new products, markets and businesses) the MVP solves a series of problems in the first launch of a digital product, as it ensures that it has the necessary resources – and only these resources – to go to the market to be tested by its first users.

It’s the idea that a product that is too small or too large is problematic. In the first case, imagine a system for delivering test results to people, without a user identification (login) functionality, for example. In the second, think of a transportation app where, in addition to requesting a car to travel a certain route, you can also choose the song that will be playing on that car’s radio.

A product with many features reduces the return on investment and increases risk. In addition to taking a long time to be ready, once launched, it can generate rework, need for corrections, increase in staff, complexity, etc. All of this, obviously, generates higher costs and dissatisfaction, both for the team and for the customers.

In this first definition of a MVP, we can deduce that the concept refers to a digital product with some level of code, which has already been partially developed to go to the market. It represents a change in mindset, in which it is no longer appropriate to build a complete product and then launch it on the market; but rather develop a minimal version to test the idea and its first features.

The MVP is the product with the highest Return on Investment (ROI), and the lowest risk or effort. Source: http://www.syncdev.com/

Delivering Value and Testing Hypotheses

Now imagine the following: you have a restaurant and, due to the Covid-19 pandemic, you had the idea of creating an application that works as an online menu. Through it, people can see the meals you offer and place orders at the tables using their own cell phone, thus avoiding contact with waiters or physical menus. This same app can be used for delivery orders and therefore you concentrate all your services on a single platform.

However, will people enjoy ordering through the app? Or do they prefer to talk to a waiter with questions about their meals? Wouldn’t it be more fitting to collaborate with an app like iFood or Uber Eats, rather than having your own delivery platform?

Before investing in application development, it is advisable to test your product idea (your hypothesis) with a No-Code initiative: on the restaurant tables, you can provide a QR Code informing customers that they will be able to find the menu online. This QR Code is connected to a landing page that collects orders through a form. At the tables, you can also have a button available if the customer prefers to be served by a person.

For a few months, you then analyze the data generated by this test. How many people placed the order through the landing page? How many preferred to be serviced by a waiter? Which of the two options generated more sales? Which one generated the most profit?

In the concept where the Minimum Viable Product is the minimum thing you can build that delivers value to the user and captures value for decision-making, the example we saw above can be considered an MVP, even without the development of the software itself. It is the first version of a hypothetical new product that, after entering the market, will be developed to reach the desired state, or will be abandoned if users do not use it – or consider it useless. According to Eric Ries, in the book The Lean Startup, “when considering the construction of your Minimum Viable Product, remove any resource, process or effort that does not directly contribute to the learning you seek”.

A wheel has no value to the customer. A skateboard is not a car, but it has value as it serves as a means of transportation. Source: https://www.interaction-design.org/

A wheel has no value to the customer. A skateboard is not a car, but it has value as it serves as a means of transportation. Source: https://www.interaction-design.org/

While for the original author of the term MVP, Frank Robinson, the idea was to maximize Return on Investment (ROI), for Eric Ries the important thing is to maximize learning. This second vision was responsible for opening possibilities for lighter experiments such as landing pages, concierges, etc.

A minimum and qualified product

What if you understand that your user does not want the minimum, but the highest quality possible? Critics of the Minimum Viable Product claim that launching an incomplete product can hurt a company or brand, generating negative feedback and a feeling of neglect on the part of users. There are also those who say that with the MVP in the market, competitors may copy and imitate the new product and be more agile in development.

First, there is a problem with understanding when we contrast MVP with quality. The idea of a minimum product does not mean a bad product. Just think of large companies that use this concept, such as Google, Apple, Facebook, and Netflix. If we think about the latter, we can remember that its first version as a streaming service offered a reduced number of movies and series; and, with the learning achieved with the first users, the catalog gained new titles, responding to customers’ consumption habits. After all, including hundreds of horror movies at the beginning, for example, would only be a waste of money if consumers liked comedy best, right?

Secondly, the fear of imitation is unfounded in today’s market. Firstly, because, yes, if you create an innovative digital product and provoke a disruption in the market, your days without competitors are numbered. Other companies will create similar products and compete with you for consumers – soon the ocean will no longer be blue. However, if you launch an MVP and, based on the lessons learned, generate new, more suitable versions that gradually deliver more value to your user, you will definitely be ahead. Whoever delivers a complete product to the market, will take more time, spend more money, and may fail with less or more features than ideal.

In this sense, at SoftDesign we believe that for the creation of any digital product, for a startup or consolidated company, be it an application, system, or platform, the MVP is the best option. We use agile methods to support this concept, running a first Discovery Cycle prior to development – Product Conception – and running it continuously throughout Development, while the Delivery Cycles are executed. This way, we test hypotheses, gather feedback, analyze data and implement improvements.

It is only a Minimum Viable Product if…

In its first development release, be it Low-Code or No-Code, the essential is for the MVP to be a mechanism that meets a series of objectives:

• Be able to test the hypothesis of a product with minimal resources;
• Introduce the product to the first users (early adopters) as quickly as possible;
• Reduce waste with product development or features that are not desired by the market;
• Generate fast learning.

In addition, it is important to remember that the MVP must have three fundamental characteristics:

• Value enough that people are willing to use it or buy it;
• Demonstrate future benefits to retain first users;
• Provide feedback to guide future development and improvement.

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