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How Customer Discovery Can Significantly Enhance Your Product-Market Fit Successful companies understand that having a great idea isn't enough to convince consumers to give them money for their product.

By Ethan Halfhide Edited by Amanda Breen

Opinions expressed by Entrepreneur contributors are their own.

For entrepreneurs and startups, coming up with an idea for a new product or service can be exciting. It may be tempting to charge into the marketplace with an unreasonable sense of optimism that everyone will be begging to buy your product. Unfortunately, this isn't a reality for most companies. In fact, according to Harvard Business School Professor Clayton Christensen, about 95% of the 30,000 products introduced each year will fail. Why?

Successful companies understand that having a great idea isn't enough to convince consumers to give them money for their product. While the initial feedback you get from friends, family and colleagues may be positive, you could get an entirely different reaction from your target customer. It's critical to carefully develop your product to ensure you have a good product-market fit.

What is product-market fit?

Product-market fit is a concept where a product naturally generates strong market demand. In most cases, this demand is a result of a pain point that consumers have that the product can help solve immediately. While this may seem like common sense, it can be difficult to achieve without the proper process in place to evaluate and refine your product or service.

Most companies start small and test their products before expanding. Understanding the product-market fit framework can help you determine if your business or startup is ready to be scaled up. There are many key indicators that can signal that your product has achieved a strong product-market fit.

Related: How to Find the Holy Grail of Product-Market Fit

How do I determine if I've reached product-market fit?

While there are many methods to measure product-market fit, the most popular is known as the Sean Ellis test. This method relies on asking one simple question: "How would you feel if you could no longer use (insert product)?" The goal is to achieve 40% or more responses of "very disappointed." If your product reaches this benchmark, it's highly likely that you have achieved product-market fit.

A word of caution: Be sure that this question is only directed at customers who have a good amount of experience with your product. For best results, focus on customers who have used your product multiple times and have done so recently (within the last few weeks).

The Sean Ellis test is considered the gold standard for product-market fit testing. However, other factors could signal positive market reception. Examining these additional elements can also provide the insight you need to decide whether to go to market or continue refining your product:

  • Customer feedback. How your customers respond to your product can tell you a lot about how your product is perceived in the marketplace. Can your customers easily articulate the value of your product? Are they willing to try your product over a competitor's? Is the product generating positive word of mouth? If the answer is yes to these questions, your product is likely on the right track.
  • Industry attention. If your product starts getting attention from the media or industry experts, it could be an indication that you have reached a solid product-market fit. Pay attention to any specific criticism for opportunities to refine your product.
  • Competitor reaction. Most companies respond fiercely when they encounter a worthy adversary. If your close competitors start adding features or changing their strategies as a direct response to your product, it means that they view your company as a threat.
  • Positive quantitative metrics. While some factors used to identify product-market fit are subjective or qualitative, there are some measurable metrics that are commonly used. Churn rate can tell you the number of customers who leave your company or stop using your product. A net promoter score (usually shown on a scale of 1 to 10) shows how likely your customers are to recommend your product to others. Sales conversion rates can provide insight into how well your customers respond to your marketing efforts or value proposition.

Pros and cons of the product-market fit framework

The product-market fit framework was originally developed by Don Valentine of Sequoia Capital. However, its popularity grew in the mid-2000s when venture capitalist Marc Andreessen began promoting the concept. With more than 20 years of mainstream use, the product-market fit framework has proven to be an effective methodology used by companies across the globe. The framework offers several advantages:

  • Ease of use. The product-market fit framework is straightforward and doesn't require complex knowledge of product-development strategies to implement.
  • Versatile. The product-market fit framework can be used in any industry and be applied to any product or service.
  • Value-focused. Many companies put too much emphasis on the features of their product instead of the value they are bringing to their customers. Product-market fit takes a customer-centric approach by tailoring the product to the consumer's needs.

Related: 7 Ways to Add Massive Value to Your Business

While there are many positive aspects of product-market fit, it's important to understand how to overcome some potential disadvantages or challenges if not implemented properly:

  • Extensive analysis. The more data that you can gather from customers and the market, the more opportunities you have to identify issues or potential product enhancements. Unfortunately, extensive research and analysis can be time-consuming and expensive. This may be especially difficult if you are operating in a space with major players who have access to seemingly unlimited resources.
  • Popularity. Product-market fit is an extremely popular methodology for many businesses and startups that are developing products. This means that there are lots of other companies out there using the exact same playbook as you.

Related: 3 Ways You Can Level the Playing Field Against Big Business

Leveraging a customer-discovery strategy

To be successful, your product must align with your target customer's needs. This is where many companies go wrong. They start with an idea for a product first and try to force it to fit a certain demographic. This is ineffective and the reason why so many products fail. Instead, you should put an early focus on customer discovery.

Customer discovery is the process of testing your product and getting real feedback from customers before you spend a lot of money on building and marketing your product. This is especially important if you are running a lean startup with limited resources. There are several key elements to ensure a successful customer-discovery process:

  • Define your target audience. You want to develop your product with a specific user in mind. This will help focus your efforts and ensure your customers end up with the product they need.
  • Attract early users. It's one thing to identify your target customer. It's an entirely different challenge to get them to participate in providing early feedback. Think about ways that you can incentivize or entice your target customer to participate.
  • Conduct interviews. Conducting interviews and focus groups are good ways to gather the information you need to refine your product. Take the time to evaluate what questions you can ask to get the most benefit from each session.

Developing a robust customer-discovery strategy can greatly enhance the effectiveness of the product-market fit methodology and help your product stand out in a competitive market. This may be overwhelming at first. Fortunately, there are lots of resources and services available to help you. Bringing in a customer-discovery expert can provide an outside perspective and support your team through the process.

Ethan Halfhide

CEO of &

Ethan Halfhide is a product manager turned founder, skilled in lean product development, business strategy, design and growth. He's passionate about helping early-stage startups build products that people love.

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