Four steps to product market fit
Would 40% of your customers be very disappointed if they could no longer use the product?
Early on, PayPal experienced explosive growth. However, their three person customer service team were overwhelmed by a deluge of complaints. Frustrated by the lack of response, customers called the company phones round the clock. In response, PayPal management made a bold and, seemingly, counterintuitive decision. They silenced the desk phones. This allowed them to focus on rapidly acquiring new customers, rather than being consumed by handling complaints. Paypal successfully outgrew their short term problems and, eventually, bolstered their customer service team. Few would have the guts and vision to take this unusual approach. Fittingly, the management, including Peter Thiel, Reid Hofmann and Elon Musk, were dubbed the PayPal Mafia. As Reid said, To master the art of letting a fire burn, you need nerves, vigilance and practice.
Product/Market fit
Make something people want. - Paul Graham
Product/Market Fit is the holy grail for startups. It’s the metric that indicates whether a product resonates with its target customers. The vast majority of startups fail as they don’t achieve it. Sam Altman said Product/Market Fit occurs when users spontaneously recommend the product to others. Marc Andreessen suggested it was when users can't get enough of the product, growth is exponential and the business seems to be on an unstoppable trajectory.
Sean Ellis proposed an objective way to measure Product/Market Fit. Ask users, How would you feel if you could no longer use the product? One of three answers could be given: 1. Very disappointed, 2. Slightly disappointed and 3. Not disappointed. If 40% or more answer 1. Very Disappointed then you have achieved Product/Market Fit.
With this target in mind, there is a four step process to achieve Product/Market Fit. Based on user survey results:
Find supporters and identify high expectation customers,
Analyse feedback to convert on-the-fence users into fans,
Focus development on what users love and address what holds others back,
Repeat process to increase Product/Market Fit score.
Superhuman are developers of a premium email system that enhances productivity with fast processing, intuitive shortcuts and efficient email management features. They successfully applied this approach.
1. Find supporters and identify high expectation customers
Exceptional customer experiences are the only sustainable platform for competitive differentiation. – Kerry Bodine
Identify and understand the users who are most enthusiastic about our product. By segmenting the survey responses, pinpoint the users who would be very disappointed if they could no longer use the product. These users are termed High Expectation Customers. These users value the product's core benefits and are likely to become great advocates.
For Superhuman, these users were often busy professionals, e.g. executives and managers, who spent a significant portion of their day dealing with emails.
2. Analyse feedback to convert on-the-fence users into fans
The customer’s perception is your reality. – Kate Zabriskie
Next, understand why High Expectation Customers love the product and what was holding back others from feeling the same way. Analyse feedback from users who were somewhat disappointed without the product. Identify the main benefits that the most enthusiastic users enjoy and focus on enhancing these aspects.
For Superhuman, this was speed and keyboard shortcuts. Users who were not fully satisfied often cited the lack of a mobile app or specific features. By addressing these issues, they aimed to convert on-the-fence users into fans.
3. Focus development on what users love and address what holds others back
Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it. - James Harrington
With a clear understanding of what users love and what needs improvement, develop a roadmap to further improve strengths and address key weaknesses. Split development effort evenly between enhancing features most enthusiastic users love and addressing feedback from the somewhat disappointed users.
For Superhuman, the further improvements related to improved speed and keyboard shortcuts and the weaknesses addressed included developing a mobile app. By doing so Superhuman systematically increased its Product/Market Fit score.
4. Repeat process to increase Product/Market Fit score
That which is measured improves. - Karl Pearson
Iteratively apply this process. Continually measure and optimise the Product/Market Fit score. Regularly tracker Product/Market Fit scores, e.g. weekly and monthly.
Superhuman improved their Product/Market Fit score from 22% to 58% in less than a year. This significantly impacted every aspect of their business.
Other resources
How I Built Superhuman talk by Rahul Vohra
How to Stand Out in a Crowded Market post by Phil Martin
What Steve Jobs Taught Me About Sales post by Phil Martin
Sam Altman suggests, Startups that hit Product/Market Fit are like a rocket ship; they just take off.
Bon voyage.
Phil…
