A product market fit is established when your product fits your target customers perfectly. All things else equal, this is when you’re likely to be able to increase sales more rapidly than before. Sales goes viral because of demand. That is when you have a product market fit.
Two common reason why startup fails are overly focus on early product development and entrepreneurs not maturing with their company.
Entrepreneurs planning and developing their product for two long before testing their core offering on early adopters is a challenge. They risk running out of cash before reaching sales traction.
More importantly, all successful entrepreneurs will witness that they have learned form their early customers to adjust their original product.
You need your early adopters to build your product features. Those features that solve customer’s real pain points. That’s why you start with your core offering, your minimal viable product, and learn about true pain points while selling. With increasing sales, you develop your offering until you eventually reach product market fit, were demand sours.
In this article I will focus on what product market fit mean for your chance to increase sales. Why you should stay with a minimum viable product (MVP) until you have enough early adopter references. Why that will increase your changes to increase sales massively.
So, here it is:
What is product market fit?
As mentioned in the beginning, a product market fit is established when your product fits your target customers perfectly. When your sales goes viral because of the demand.
As you certainly understand, it takes time to reach product market fit.First you have to learn from your early adopters. You will have to adjust to their real pain points as you solve their problem.
When you increase sales, your insight to customers specific situations will make you learn more about their true pain points. Directing your product features to solve these paint points is what gradually develops your product appeal.
This is where the minimum viable product concept makes sense. Launching a new product, you shall only design its core, the minimum viable product. Don’t worry in the early days of your product about features or additional functions. You learn what customers really pay for as you implement your product with different applications.
With a new product you will in any case sell to early adopters first. They are your likeminded customers, less interested in specific features but more appealed to a new solution.
Product market fit is when you have sold enough of your minimal viable product, tweaked it and added features by demand and suddenly see massive increase in sales.
Read more about sales to early adopters, and why that is important.
Why is product market fit important to increase sales?
To increase sales, you need an offering that appeal to customers. Something that is not only attractive but solves their deep-rooted pain points.
However, you will not know enough of their internal pain points until you have had enough paying customers showing you.
New product launches usually start with an idea how to solve a particular problem. You develop a core product to solve that problem. Regardless how well researched you are, it’s proven that most entrepreneurs have to adjust their products as they start selling. Don’t waste time and money developing your product too much. Start fresh with a minimum viable product.
You simply can’t guess and research good enough about true pain points until you’re under the skin of your customers. Until you have paying early adopters that will show you so that you can gradually develop your product.
There is a limit however, how many early adopters there are. The problem is that the vast majority of customers are not early adopters. They are sceptic, pre-occupied and have multiple competing ideas to solve various pain points.
For that vast majority of customers, including most enterprise customers, you need a product market fit to succeed. It’s only then you have a chance to be relevant and win their trust to become their prioritized investment.
Your early adopter customers are your product development and reference partners. You will have to sell to them to get under their skin and learn their pain points. But there is a clear limit how much you can sell to early adopters only.
To increase sales into larger volumes you need to address a larger group of target customers than your early adopters. For the vast majority of customers, it’s essential that you find your product market fit, otherwise you will not increase sales.
How to develop my minimum viable product as fast as possible
So far, I have tried my best to describe that your early adopter customers are your go to friends. They will be likeminded, less sceptic and willing to be your test bench. You will learn from the inside about their true pain points. This is how you develop a minimum viable product.
Do not rush too fast past these early adopters. Be grateful. What you learn from the inside about their true pain points is gold worth. Now, it’s time to develop your minimum viable product, to add features that customers pay for.
Having said that, early adopter customers in a product development phase is usually also a less profitable business. You either burn cash or make only limited cash surplus in this phase of your business.
Early adopter customers are usually low volume customers, and they don’t purchase up sales or additional services. You’re also in product development mode. You learn as you go with these customers and you develop and add sellable features to your product. That is why you also have a sense of urgency to increase sales. You burn cash.
So, what factors determine how fast I can develop my minimum viable product to reach product market fit:
- How fast can you develop your core minimum viable product? Stay away from the temptation to perfect your offering. Don’t add features until you truly understand (paying) customers real pain points.
- How fast can you sell to a sizeable number of early adopter customers? You need a fair amount of sales to truly understand what work and what customers will pay for. Read more about sales to early adopters, and why it’s important.
- Depending on your industry, product or system you probably need $15 million in early adopters sales before you reach product market fit.
What happens then, when your sales start to increase rapidly?
Congratulation! Selling a minimum viable product to early adopters, developing the product together with them eventually reaching product market fit is an achievement.
It’s not only about product development to reach product market fit to increase sales. If you have reach this far then you have clearly figured out how to scale your sales.
You’re now ready for the next step, to increase sales to a wider group of target customers. Good luck.
Read more on how to grow tech companies beyond early customers.