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Every edition focuses on a key element or strategy of growth marketing that's working right now to add 00's to ambitious brand's revenue. You get an insight into how to run effective growth, along with the templates and frameworks to help you action it.
This edition is all about product market fit, and how the commonly held belief prevents brands from experiencing - or maintaining - effective growth.
When it comes to growing a successful business, most founders and growth folk are focused solely on scalable growth tactics.
Here’s the thing.
Growth comes AFTER you’ve properly validated your idea.
You have to have hit the nebulous idea of “product market fit” before you can seriously think about scaling.
A poor business idea won’t scale well. And yet, too many brands are quick to throw money at scaling operations before they’ve validated their idea.
Which is a recipe for disaster.
The problem though, is that a lot of advice on product market fit barely scratches the surface.
We default to the basic - but logical and correct - advice of “find a problem and solve it”.
The belief then is that once a problem has been solved you’re able to flip some imaginary scale button to roll it out to millions of people at crazy profits.
There’s so much more that goes into devising and developing a solid idea to best serve your market.
In this edition, I’m going to analyse the core concept of product-market fit and analyse a couple of brands that prove the current model is broken.
And, of course, offering my thoughts on what is a better way to approach this.
Why the Accepted Idea of Product Market Fit is… Off
“Have you found product market fit yet”.
A problematic, but common question in the startup world.
The question hides an implication that finding product market fit is a one-time action.
That it’s a single point in your company’s history which, when hit, guarantees ongoing success.
A lot of the advice around product market fit outlines a growth journey that looks like the below.
And of course, this process outlines a very simple view of product development that follows the below steps.
- Find a high-value market
- Identify a problem
- Build your beta product
- Market it and adapt on feedback until you hit PM Fit
- Product market fit point
But this approach is far too one-sided.
After the initial research, the market is cut out of the equation. They’re there solely to validate the fit at that singular point before being expected to simply “buy in bulk”.
Which I agree with, to an extent.
Your business will only be successful as long as it’s identifying market need and meeting it.
Find the right market, genuinely solve a need and you should see traction.
But there’s one element that blows the legs off the common argument.
Your market is not static.
And the question you need to ask yourself is, what are you going to do when the landscape shifts?
Reimagining Product Market Fit
Growth marketing is a game.
We’re all looking for the key actions that will help us win and increase key revenue metrics today.
Thing is, the rules and parameters of the game change every day.
Success with product market fit today doesn’t mean you’re still addressing the need of your market in a day, week, or month from now.
External developments can ruin the product market fit you’ve worked so hard to secure. Developments like…
- Industry developments that make your offer obsolete or less appealing
- Toys R Us failed to embrace eCommerce and suffered the ultimate price
- Changing consumer expectations
- Blockbuster died after the rise of - and their failure to adapt to - movie streaming services
- Worldwide developments that ruin entire industries
- The Pandemic’s effect on restaurants and in-person events
- Competitor developments
- Hat feature or service your audience has been asking for could be developed by a new competitor
All of the above developments relate directly back to the market and their needs.
Brands that adapt their offer to fit the ever-changing market needs continue to thrive.
Brands that rely on having hit product market fit in the past die.
This is why I think the term Product Market Fit is wrong. It places product first, when really, we should all be focused on the market first.
The market will help you identify how and why to develop and improve your product.
Perhaps something like Market Led Product Development would be a better term.
Your market will tell you what they want, leading to short-term growth. And if you listen, they’ll continue to tell you what they want to help you stay as their top choice.
How to measure the effectiveness of market-led product development?
This is the key question.
The problem with current product market fit model is there are no hard metrics to effectively measure your success.
A lot of it all boils down to a feeling. A “you’ll know when you’ve hit it” approach.
Which I can attest is true. But it doesn’t help with iterative improvements and knowing whether that stagnation in your growth is because people are being put off or you’ve hit market saturation.
Rand Fishkin has a novel approach which I like.
Rather than the binary “have you hit product market fit” he assigns a range to key metrics like brand awareness, conversion rate, and market size.
The scale is more effective because it’s more flexible. It could be used accurately with a new social media platform or for a consultant.
This scale will also help you better identify where it is you need to focus your attention.
You’ll easily be able to see which metric you’re struggling in. Couple that with your market first research approach, and you have a simple potential action to increase the metric. .
For example, let’s imagine you’re currently falling short in brand awareness.
Talking to your ideal market and finding out where they go to learn more about offers like yours gives you an easy action to increase brand awareness.
This, of course, massively complicates the entire process.
You’ve effectively switched out the single, binary metric question of “do you have product market fit” with an approach that has multiple sliders and dozens of potential actions to increase each metric.
But growing a business isn’t simple. Fooling ourselves into thinking it is won’t help anyone.
Before I get onto the 3 common methods of product improvement, I’ll explain the common process for growth.
The Typical New Offer Growth Process
From a very high-level, there are 3 key stages to growing a new offer.
Here’s a brief overview of it.
Stage 1 - 1-2-1 sales
Here people lean on existing relationships and their network.
You reach out to as many people as possible on a 1-2-1 basis for information on…
- Their problems
- The solution they want
- Whether or not they’ll pay for the solution you’re considering creating
It is, in effect, a simple set of feedback loops to help you validate an idea BEFORE you create anything.
I’ve written about this before in my piece on launching new digital products.
These people are then the first people you sell that service to for initial traction.
Stage 2 - Scalable acquisition
Once you’ve got a couple of paying customers, you want to start scaling the operation.
That scaling action could be anything, including...
- Cold outreach
- Paid acquisition
- Organic marketing
The method isn’t important.
With paying customers from stage 1, you’ve proven this could make money. Now you need to get your offer in front of other potential customers.
Stage 3 - Solidification
If you successfully scale at profit, the time has come to solidify your place.
This, generally, is done through branding yourself as the [differentiator] service provider/offer.
Something that will stand out to other people within your target market in a meaningful way.
A lot of people skip stages here, which is when they face difficulties.
The thing most people don’t understand is that this isn’t a linear process.
You don’t simply move from step 1 to step 2 and then step 3.
Remember, we need to focus on the market. And that requires constant feedback on how things can be changed and improved.
That feedback will sometimes force you back a step. Other times it’ll help you skip over certain actions.
For example, just because you have people in your network who will pay for this doesn’t mean a person who has no prior knowledge of you will.
Your network knows you. They’ll give you the benefit of the doubt. Strangers won’t.
You ask the scalable audience why they’re not buying and they tell you the offer isn’t clear.
And so you now have to go back a stage to work on messaging with your network before pumping money into a scalable effort.
At each and every stage you need to build in feedback loops so you can make meaningful adjustments and ensure that your product continues to fit the market’s needs.
Or more importantly, you need to constantly be looking for the incorrect assumptions you’ve made and how you can change them to fit your market’s needs.
3 Methods of Implementing Market Led Product Development feedback
Depending on the stage of your business and the feedback you receive, there are generally 3 product/offer amendment to be made.
Development #1 - The Pivot - Shopify
Most brands that pivot their offer are at the initial stages of their growth.
They might have a handful of paying customers. Many of who might stick around and become repeat purchasers.
It is encouraging. And to many, it’s the first sign that there’s real potential in that offer.
So people think they’ve hit that wonderful “product market fit” point and turn their eyes off the product and start to throw money at scaling options.
However, if things flatten out and you’re maintaining instead of growing, it’s an indication that there’s a problem with the product.
You can double down on things like ad spend, but if there’s no stickiness to your offer you end up paying huge amounts to maintain revenue.
Paying to generate 100 new customers, is useless if you also see 100 customers churn.
The result is no meaningful growth.
And the problem here is most often not to do with that marketing. But rather the product itself.
This issue will often show up in the early stages of your business. And rather than continue to throw money at a leaky bucket, you’d be better pivoting the product to something “stickier”.
Your early success shows there’s something there. But the lack of growth shoes there’s also a serious problem.
You need to figure out what your market likes about the offer and how best to pivot your offer to fit their needs.
You also need to keep an open mind on this one as well, as the offer you pivot to might be quite different.
As is proven by Shopify. Shopify is a huge business - one of the largest in the eCom space.
But the founders stumbled upon the idea thanks to a prior business endeavour.
The founders originally wanted to establish their own ecommerce store for snowboarding goods- SnowDevil.
Unhappy with the services that allowed for creating your own ecommerce store, they built their own framework to host their store.
That framework allowed them to launch in 2004, and have a profitable first year.
Now, most brands would see that as product market fit and double down on scale.
Thing is, Tobi and his team realised they were getting more interest in HOW they built the site.
So, rather than continue on fighting to get a foothold in the snowboarding ecommerce space, they decided to completely pivot their offering based on what their market was telling them.
They moved from selling actual goods, to selling the platform they’d created to sell those goods.
With a year or two, the V1 of Shoopify was up.
If Tobi and the SnowDevil team had done what many brands do and cut the audience out of the equation once they’d hit product market fit, there would be no Shopify.
But, because they listened to what people wanted, they were able to create something that had real long-term potential.
And they’ve continued to develop their product based on market feedback. For example…
Shopify pivoted based on customer feedback. And they’ve continued to roll out more features based on that same feedback.
At no point did they say “we’ve cracked this nut and have product market fit”.
They’ve continued to analyse the market and their needs and update their product to fit with the shifting landscape.
So that’s how Shopify pivoted to become a huge brand from a seemingly unrelated offer.
What about when you’ve hit the “product market fit point”?
Development #2 - Scope - Semrush
If you have an offer that has that intrinsic “pull” where it feels easy to grow, you need to lean into it.
However, there will inevitably come a point where your growth levels out.
This is most often thanks to market saturation. You’ll hit a point where your feature set will have attracted as many people as you’re able within your ideal segment.
One of the adaptations you could make here is to go wide with your feature set.
By wide, I mean build your offer out to include overlapping, complementary services and benefits.
- The freelance copywriter might start offering design services to attract a wider audience who also need design
- The eCommerce platform starts offering integrations that help with complementary areas like shipping and tracing
- The email service provider releases an advertising feature to help you better growe your email list
- A furniture producer starts to offer in-home assembly and design advice
The additions are not adding to the core service itself, but are complementary catalysts that increase the value of the core offer.
It’s most similar to a cross-sell (which was covered in detail in the GoPro Growth Study)
One of the best examples of this in my opinion is Semrush.
Semrush started out as a competitor research tool, specifically for SEO in 2008.
With SEO as their core feature set, they build out various organic marketing research tools.
Initially, they went deep on that service. They offered everything from keyword research to competitor placements, and even snapshots of the SERPs from Google’s cache.
However, they didn’t just go deep with the feature set. Over the years, they looked at how they could go wide.
Rather than sticking within the tight vertical of SEO, they started to build out other features related to competitor research for traffic acquisition.
In 2012, that saw the addition of their Advertising Research features.
Over the years, they’ve built out other complementary feature sets, such as…
- Competitor research
- Backlink research
- Keyword research
- Advertising research
- Social media
- Content marketing analysis
- Local SEO research
Rather than going deep on one service, Semrush has built out a beneficial feature set that all sit within an umbrella of competitor research and analysis for traffic acquisition.
Each feature set works with the others to offer potentially compounding results.
This is one way to grow your tool and ensure that you’re still meeting market needs.
The benefit with this model is with each addition, you’re increasing the potential market you could appeal to.
Which obviously increases the market size and, as a result, potential revenue.
The above is for illustrative purposes only. The numbers are completely fabricated.
The difficulties here are that each new feature set is, in itself, a potential new offer that needs to requisite research and development to launch successfully.
This should only be attempted when the initial offer you have running has hit a level of maturity and is bringing in stable income.
And, of course, you should base it on audience feedback.
If you do it well, it should unlock more revenue with each new feature set you release.
Pros of going wide with product development
- Enables you to appeal to a wider audience and increase potential market size
- Well selected new features should release more value from existing features
Cons of going wide with product development
- Splits resources and could lead to core offering becoming underdeveloped
- Could alienate users of core offer leading to greater churn
- Risky to expand into a new feature that targets a new market
Development #3 - Depth - Ahrefs
If you don’t want to go wide and offer complementary features with your offer, you could go deep.
Which is what Ahrefs have done (we have a full breakdown on Ahrefs here)
Ahrefs started out primarily as a backlink tool - which is a super important idea for SEO.
As time has gone by, they’ve doubled down on their SEO focus with new features like…
- Rank tracking
- Keyword research
- Far more in-depth backlinks tools
- Competitor research for SEO
They have some very basic advertising tools, but the majority of their features are focused on that one key act of improving SEO - with a focus on backlinks.
While Semrush went wide with their features, Ahrefs went deep.
Pros of going deep with product development
- Enables the ability to become the “go-to” product for that need
- Enables higher pricing
- New features are easier to validate as they should all work towards a singular goal
Cons of going deep with product development
- The higher price and complexity could alienate early stage and casual customers
- New features don’t necessarily allow for targeting a new market
Product Market Fit is Not a One Time Action
This is what it all comes down to.
Whatever your product, be it…
- A service
- Physical goods
- An information product
… or anything else, finding product market fit is not a one-time action.
Product market fit is simply the indication that, right now, you have something your market wants and will pay for.
If you want to keep them paying for it, you need to consistently develop the product based on the changing needs of that market.
You can’t think of product market fit as a static goal. The goalposts are constantly moving, and for those who aren’t consistently chasing them, bankruptcy follows.
At each and every stage of growth, you need to be looking at how you can best adapt to meet those shifting goalposts to hit product market fit.
Recommended tools, reading materials, and featured brands
Below are links to the mentioned brands within this piece and some recommended tools to help you continue your research.
Books to read
A great book to help you get a better understanding on how to build more successful offers.
A great examination of getting things out quick and fast and adapting to feedback.
Probably the world’s best platform to easily build a successful ecommerce store.
In my opinion the best all around marketing research and competitor analysis tool.
An incredible tool for those focused solely on SEO and organic content.
Find downloadable templates below that have been specifically created to help you with product market fit throughout your company’s growth cycle.
Inside you’ll find…
- A “slider” based spreadsheet to help you identify the best market for you to target
- The questions you need to ask yourself AND your market to help refine or create your next $1MM product idea
- A research tracking spreadsheet so you can identify what it is your audience want from you