03. Market Analysis & Product Market Fit

Estimated Time

  • Reading: ~6 minutes
  • Video: ~43 minutes
  • Activities: to be completed prior to next week

Top Insights

  • Delighting customers and focusing all your time on those customers that you delight is a key to finding product-market fit
  • Pivoting to find product-market fit is normal and even when you find it that doesn't mean you won't pivot again

Episode Date: October 25, 2019 — Link to video

  • Superhuman CEO Rahul Vohra is obsessed with product-market fit and has studied it for years
    • Superhuman leans into the leading indicator of initial product-market fit outlined by Sean Ellis and asks customers:
      • "How would you feel if you could no longer use the product?"
        • Very disappointed
        • Somewhat disappointed
        • Not disappointed
      • Superhuman then looks at the results and if greater than 40% of the users say "very disappointed" they believe they have product-market fit
      • Since this is the group where he has product-market it is where he focuses his time
    • Rahul takes it a step further and asks users three additional questions in the same survey where he questioned how would you feel if you could no longer user Superhuman?
      • 1. What type of people do you think would most benefit from Superhuman?
      • 2. What is the main benefit you receive from Superhuman?
      • 3. How can we improve Superhuman for you?
    • Superhuman then segments and analyzes the survey results to identify the groups where they should double down
      • They target other personas that match this description
      • This allows them to implement the features that matter to the users that truly care
      • Superhuman goes as far as to reject people who do not fit their ideal profile from even using the product
    • This is a great recipe for finding product-market fit, confirming your ideal customers, and building features that delight customers

Episode Date: May 26, 2017 — Link to Video

  • In this "Ask Jason", Jason provides a few examples of why startups may fail even after they have achieved product-market fit
  • There are a few common reasons this happens
    • A startup achieves product-market fit, but it is for a niche that is too small to scale
    • A startup achieves product-market fit, but there are too many competitors and not a clear enough distinction so they saturate the market
    • A startup achieves product-market fit, but the founder gets distracted and tries to move on too quickly to new features
  • The blog, How To Find Product Market Fit goes into detail on the six steps they recommended for finding PMF
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    1. This should sound familiar — talk to the users, build an MVP, collect feedback, and iterate (repeat)
  • Another blog provides specific examples on Signs You’ve Achieved Product Market Fit
    • In the same vein that Rahul looks for, they point to customers who are dependent on your solution and would be disappointed if your product went away
    • Organic growth from users spreading the word to their friends about your product is another sign of product-market fit
    • Once your CAC (customer acquisition cost) is trending down and the LTV (lifetime value) of your customer is trending up you may be on to something as well
  • A survey from December 2020, done by Wilbur Labs asked 150 founders about the lessons they learned from starting a company and the reasons for their failures
  • The top reason for failure (not surprisingly) was around financial stability (or lack thereof)
  • But several of the other reasons for failure fall in-line with Jason's point above
    • Losing focus was one of the top reasons highlighted by this group of founders
    • Another was that most startups try to solve too many problems at once
      • Stay focused on your single value proposition and deliver better than anyone else!
      • Think about these successful companies and their core solution
        • Uber was focused on its core solution of ride-sharing
        • Calm focused on their core solution of meditation
      • They didn't start expanding into other areas until they had a large and loyal user base
    • As we've discussed, staying focused on your core mission doesn't mean ignoring users
      • Ignoring customers was another common reason for failure highlighted in this study
      • No market need and not pivoting appropriately were other reasons that startups failed
        • Which at the core these are both signs you did not talk to customers frequently enough or in enough detail before launching (no market need) or while building (need to pivot)
  • The same survey went on to ask what advice those 150 founders would give aspiring founders
    • Learning from mistakes and listening to customers are at the top
    • Followed closely by ensuring there is a market for your product
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  • Eric Ries points out that a pivot because you do not find product-market fit should not be seen as a failure
    • Often when talking to founders they try to force product-market fit on their vision instead of listening and adapting
  • And equally important is recognizing that finding product-market fit does not mean you won't pivot again in the future
  • The startup flywheel is a common theme throughout Founder.University
    • Build a great product, delight customers, and build a supporting team
    • But if there are no customers to delight it doesn't matter how great you think your product is or how amazing of a team you have - the flywheel will not turn
    • You need to identify the market and how your product fits into it
  • Who is your ideal customer that would be very disappointed if your product no longer existed?
  • Find this group, talk to this group, focus on their needs, and build a great product that delights them

Additional Resources

Activities

Week 9

🔲 Analyze your market

  • Is it big enough to scale after product-market fit?
  • What does the competition look like in the space?

🔲 Solidify product-market fit by testing, iterating, and collecting feedback

  • Collect feedback and find the ideal customer
  • When the time is right, find out what percent of your users answer "very disappointed" to the question: "How would you feel if you could no longer use the product?"