Product Market Fit: Connecting Market Matters and Flattened Retention Curve

Hatched by Kazuki
Jul 23, 2023
5 min read
4 views
Copy Link
Product Market Fit: Connecting Market Matters and Flattened Retention Curve
In the world of startups and entrepreneurship, achieving product market fit is often seen as the holy grail. It is the point at which a product or service aligns perfectly with the needs and desires of its target market, leading to rapid growth and success. But how do you know when you've reached this elusive state? In this article, we will explore the concept of product market fit and how it relates to both market dynamics and user retention.
At its core, product market fit means being in a good market with a product that can satisfy that market. This means that finding product market fit requires focusing on the market first. Understanding the needs and preferences of your target audience is essential in creating a product that resonates with them. One way to gain insights into the market is by analyzing the keywords that people use to find your site. Tools like Google Keyword Tool can help you determine the search volume for specific keywords, giving you a better understanding of the demand for your product or service.
However, there are several myths surrounding product market fit that need to be addressed. Firstly, it is not always a discrete, big bang event. It is a process that evolves over time as you refine your product and better understand your market. Secondly, product market fit is not always patently obvious. It is not a black and white state that you either have or don't have. Instead, it is a spectrum, and you can always strive to improve and optimize your product-market fit. Thirdly, once you achieve product market fit, you can't rest on your laurels. The market is constantly changing, and you need to adapt and evolve with it to maintain your competitive edge.
One metric that can help gauge product market fit is the cohort retention rate. This metric measures the percentage of users who continue to use your product over a specific period. A flattened retention curve, where the retention rate remains relatively stable over time, is a good indicator of product market fit. It shows that your product is meeting the ongoing needs of your users and that they are finding value and satisfaction in it.
Another way to measure product market fit is through Sean Ellis's leading indicator. Ellis suggests that if 40% of your users would be "very disappointed" without your product, you have achieved product market fit. While this is a useful metric, it should not be the sole method of verification. Startups should consider multiple indicators and feedback loops to ensure a more comprehensive understanding of their product-market fit.
It's important to note that market dynamics play a significant role in product market fit. The market is constantly moving and changing at an accelerating pace. As such, your product needs to move with it, adapting and evolving to meet the changing needs and preferences of your target audience. This makes product market fit a pulse that you need to constantly keep your thumb on.
Now, let's shift our focus to the insights shared by Jack Dorsey at Startup School 2013. Dorsey emphasizes the importance of building a team and culture that shares a common sense of purpose. Without a shared vision and mission, it is challenging to achieve product market fit. Each member of the team should be aligned with the purpose and contribute their unique skills and perspectives to the collective goal.
Dorsey also highlights the importance of simplicity and brevity in communication. He believes that the great artists of the future will use fewer words and copy fewer things. Essays will be shorter in words but longer in meaning. This insight aligns with the idea that it's better to make something that a small number of people want a large amount, rather than a product that a large number of people want a small amount. Quality and depth of impact matter more than sheer quantity.
In terms of personal productivity and leadership, Dorsey shares the concept of the "Do & Don't" list. On the "Do" list, he suggests adding everything that you want to accomplish every single day. On the "Don't" list, add things that you never want to do again. This practice helps prioritize tasks and eliminates unnecessary distractions.
Before we conclude, here are three actionable pieces of advice for startup founders seeking product market fit:
- 1. Focus on the market first: Understand the needs and preferences of your target audience. Analyze keywords, conduct market research, and gain insights into the demand for your product or service.
- 2. Constantly monitor and adapt: Product market fit is not a one-time event. Keep a close eye on market dynamics and user retention. Continuously refine and evolve your product to meet the changing needs of your audience.
- 3. Build a culture of purpose and shared vision: Surround yourself with a team that shares a common sense of purpose. Each member should contribute their unique skills and perspectives to achieve product market fit.
In conclusion, product market fit is the sweet spot where a product or service aligns perfectly with the needs and desires of its target market. It requires a deep understanding of the market dynamics, user retention, and the ability to adapt and evolve with the changing landscape. By focusing on the market first, monitoring key metrics, and building a team aligned with a common sense of purpose, startups can increase their chances of achieving product market fit and setting themselves up for success.
Copy Link