We had previously talke about growth hacking for internet startups by focusing on the AARRR model. The AARRR model helps you get rid of various misconceptions you can drift towards by giving you the right ideas about how to consider and oversee your growth plan. (For instance, we can now easily say that increasing traffic has nothing to do with growth and growth hacking.) But is it possible for every internet startup to design their AARRR oriented growth plan after preparing their product? The answer is no, unfortunately. In order to get to the growth stage and progress, your product needs to be ready to grow. This readiness for growth is evaluated in conjunction with the concept of the product/market fit. In this article, I aim to talk about the fundamental information that every startup needs to possess.
In defining what the product/market fit is, let us begin by a quote from Netscape’s co-founder and Andreessen Horowitz’s CEO, Mark Andreessen:
Product/Market fit means being in a good market with a product that can satisfy that market.’
In this case, our focus needs to be on the concept of “the product that can satisfy the market”. How can an internet startup satisfy the market it is in? What exactly is “satisfying the market”?
In order to satisfy the market, there are three parameters you need to resolve, namely the customers, the problem and the solution. Let’s take a look at each of those:
1.The Customers: Who is the target audience your product is trying to reach? Who do you consider as your customers?
2.The Problem: What are the problems you are trying to resolve for your target audience? Do they really experience these problems?
3. The Solution: Does your product really resolve the customers’ problem? Does the solution you are bringing forth really position itself as a real solution in the life cycle of your customers?
In order to achieve the product/market fit, you need to be bringing an efficient solution to a truly agonising problem for a large enough target audience. If one of these conditions are not met, the product/market fit is no longer valid.
Let’s solidify this with an example. Pretend you are aiming to teach French to Germans by creating a new product and helping them get French lessons on it. Here are the criteria you need for your product to be successful:
1. How many people are there in Germany that want to learn French? What percentage of that audience is suitable to be your customer?
2. Is learning French a real issue, a priority for your audience? Or is it something they want to “learn someday”, but do not necessarily agonize themselves over?
3. What does your solution offer to your target audience? What did they do to learn French before your product came along? How will their process differ now that your product is here?
When it comes to solutions, even the smallest detail matters. Let’s say you are planning to build a mobile app. If it’s going to feature video lessons, how big will the files be? If you prepared excellent lesson material and it’s not being used, that might be because your users may not have that much data traffic. In that case, no matter what you do, you will never acquire new users.
What are the signs?
Following up on that example, let’s take a look at the signs that decree whether you have achieved a product/market fit or not.
– Your users may not be using the core features of your product, such as the video lessons you are offering.
–Your users have a low revisit rate. They have installed your app once, gave it a try and then never came back (or your churn rate might be too high).
–Your sales processes for B2B organisations are taking too long, or your sales calls are not successful.
– Depending on the usage rate, your users might just have a low level of satisfaction with the product. If the number of referrals, which constitute the number of users acquired via friend invites and recommendations, is low, that is another parameter that is quite telling.
Is it possible, then, to determine whether a product/market fit has been achieved by using mathematical methods instead of subjective approaches? Of course. There are two main approaches that can be adopted here:
1. Sean Ellis has a very successful theory that works with various types of startups. It is based on a survey that is done with your users. You begin by asking them how they would feel if they were not able to use the product anymore. If the answer “very disappointed” seems to have a 40% share or higher, you can definitely talk about a product/market fit. For a real-life example of this survey, feel free to take a look at Hiten Shah’s survey on the Slack users by clicking here.
2. Cohort analysis is yet another method that helps you determine a churn rate for your product. According to Andrew Chen, if upon the successful completion of a cohort analysis, your churn rate turns out to be 2% or lower, it means your product has achieved a product/market fit.
To perform a cohort analysis for your startup, feel free to read my article here.
What Can Be Done to Achieve Product/Market Fit?
If your startup has such problems, your first goal needs to be to achieve product/market fit. But what needs to be done do achieve it?
1. Consider your target audience. They may not be your real target audience. Face to face interviews and surveys might help you with that. Instead of the audience you keep focusing on, try approaching other audiences and observing how well your product does with them.
2. Consider the problem at hand. This is one of the main issues I come across when I’m working with internet startups. The issue that is considered to be legitimate from day one, might turn out to be not that important for the real customers. In that case, just like the first step, the audience who actually experiences that problem needs to be targeted, or the problem that the product focuses on needs to be changed.
3. Is your solution really a solution? You need to carefully monitor the natural interactions that occur between your product and the target audience. The features that are fundamental and necessary in your eyes might come across as confusing or complex for your target audience. Closely watch the actions they are taking on the pages by using different tools. Find where they spend time the most. Try to avoid using icons in your interface as much as you can. Do not create concepts that are unique to you only. Try to stay within the internet standards. Try to help your users by short and expressive texts that ease their interactions with the product and short, simple instructive videos.