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Defining, Measuring And Fixing Product-Market Match For Startups


Coined by American entrepreneur Marc Andreesen in 2007, product-market match primarily means being in a very good market with a product that may fulfill the wants of the market

“I would rather prefer to call it MPF (market-product fit) based on the understanding of the ‘Who and the Why’ (market) followed by the ‘What and the How’ (product),” mentioned BigBasket’s Tejas Vyas

We additionally spoke to Razorpay’s Khilan Haria, Browserstack’s Snehal Patel, Instamojo’s Aditya Sengupta, Moneytap’s Bala Parthasarthy, Locus’ Mohneesh Saxena, Moglix’s Rahul Garg and TrulyMadly’s Snehil Khanor for insights on attaining product-market match

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This text is a part of The Product Summit 2020, India’s largest digital product convention, to be held on October 10, 2020. Click on right here to know extra!

Within the early 2000s, plenty of peer to see file sharing platforms was hotbeds of music piracy and Napster was among the many hottest of all of them with over 30 Mn customers. This led to album gross sales plunging and music recording corporations sued Napster for copyright infringement which in the end led to its shut down.

This nonetheless didn’t clear up the issue as there have been too many such web sites. Within the mid-2000s, Scandinavian entrepreneur Daniel Ek had an concept — what if even a small proportion of the unlawful downloaders are literally keen to pay?  

Ek mentioned he “realised that you can never legislate away from piracy. Laws can definitely help, but it doesn’t take away the problem. The only way to solve the problem was to create a service that was better than piracy and at the same time compensates the music industry – that gave us Spotify.”  

At this time, Spotify has over 127 Mn paying prospects and its progress holds an important lesson for product leaders and founders — construct one thing that fixes an actual downside available in the market also called product-market match. 

Coined by American entrepreneur Marc Andreesen in 2007, product-market match as an idea has been round because the first companies got here round. Primarily, it’s about figuring out the necessity available in the market and filling it with a product. Others have tried to outline it since Andreesen, however his unique definition captures this essence the perfect —  “Product-market fit means being in a good market with a product that can satisfy that market.”

Getting The Elusive Product-Market Match

Product market match is the holy grail of tech startups — everybody desires to seek out it however solely a minute fraction of them are profitable. 

One main purpose, in keeping with Tejas Vyas, BigBasket’s product head, is that they’re usually too obsessive about the product and take their eyes off what the market desires.

“I would rather prefer to call it MPF (market-product fit) based on the understanding of the ‘Who and the Why’ (market) followed by the ‘What and the How’ (product),” mentioned Vyas, who shall be talking at Inc42 and TPF’s The Product Summit this October

The ‘Who and Why’ entails selecting a market and figuring out the ache level, whereas the ‘What and Why’ exhibits the approaches out there to companies, and why one answer would work over the opposite. It’s solely at this stage of ideation {that a} startup ought to take into consideration the structure of the product.

However product-market match is just not one thing that may be achieved in a single go — as such it’s extra artwork than math. It’s akin to a distant goal and the one method to improve accuracy is by taking a couple of photographs and see how far one has missed the mark by. 

Aditya Sengupta, chief know-how officer of fintech platform Instamojo, emphasised this in a dialog with Inc42. “It’s far better to iterate frequently and fail on most attempts than build a perfect product and have that fail,” he mentioned. 

Taking this strategy will assist an organization establish which iterations are sticking with the client in order that it may dissect that are the profitable options and double down on these.

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The Proper Gauge For PMF

Clearly, measuring the traction and acceptance amongst prospects is among the most necessary elements in attending to the PMF. A bunch of metrics have been invented over time to gauge it, together with many which are merely vainness metrics — top-of-the-funnel numbers comparable to downloads, registered customers and pageviews — which can point out surging adoption however maybe probably not changing into income. 

Bala Parthasarthy, CEO and cofounder of fintech startup MoneyTap, believes the primary indicator is product adoption. “The number of active users using your product has to be one metric. Usually, 5,000 users is a good number for B2C and 50 is a good benchmark for B2B SaaS.”

He went on to warning startups about selecting income as an indicator for PMF. Although it might seem that having paying prospects is an excellent metric, this may change into a purple herring. Plenty of B2B founders fall into the ‘service trap’, he added, the place early adopters pay them to customize the product to their specs. At occasions, B2B startups lose give attention to the product targets and find yourself changing into service corporations. In such a scenario, it’ll neither have the fats margins of a providers firm nor the fast scale of a product firm.

“Selecting the right metrics would mean measuring two aspects — the market potential, and the product potential,” Mohneesh Saxena, the product head of logistics SaaS startup Locus, mentioned. 

This doesn’t imply that the market potential ought to be confused with the dimensions of all the market — founders ought to use metrics that additionally keep in mind organisational constraints and the execution functionality of the corporate.

Saxena added that historically, the product potential was measured utilizing metrics comparable to web promoter rating (NPS), buyer satisfaction surveys, churn fee and utilization interval or frequency. Nonetheless, primarily based on the trade and the client profile, a few of these metrics won’t work properly — for instance, a number of the largest tech corporations on the planet have a poor NPS. 

In keeping with him, crucial metrics decide if the client recommends a product to their friends, affinity to product (are they more likely to care if the product shuts down), what number of prospects cease utilizing the product after a sure interval and different attrition associated metrics. 

Why Most Merchandise Fail to Obtain PMF

Crucial activity whereas discovering PMF is to establish the important thing metrics to trace and pull the expansion levers. 

“Startups that fail to embed a data-driven approach in their product teams have much lower chance of finding PMF versus those product teams who know and track their numbers well”, mentioned Snehil Khanor, cofounder and CEO of relationship app TrulyMadly.

However working purely on information will be dangerous. For relationship platforms, glad prospects may find yourself not utilizing the platform — that means they’ve discovered a very good match and are not utilizing the app. Nonetheless, this ‘conversion’ also can have a optimistic impression among the many person’s social circles and monitoring how these relationships play out is necessary. 

In keeping with Razorpay product lead Khilan Haria, the largest purpose for a product’s failure to realize PMF is lacking such nuances of the invention part, constructing and launch phases of the life cycle. 

“In most failed product launches, the discovery phase of a product is often non-existent or is gut-driven or idea-first,” he mentioned.  

Within the product constructing part, not defining the minimal viable product is an enormous mistake. Additional, product managers usually rush by means of the conceptualisation and design phases to launch as quickly as doable and find yourself delivering an unusable product. 

“Great products have the least possible minimal viable product scope, but the best possible solution for that scope,” Haria mentioned.

However that doesn’t imply {that a} startup can take its personal candy time. Rahul Garg, CEO and founding father of Moglix, mentioned “The quicker the MVP goes live for the users, the faster you see adoption and the better PMF you will be able to achieve due to the iterative feedback loop.”

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What Subsequent After PMF?

Like we indicated earlier, getting the PMF is like taking pictures at a distant goal. Typically you’re actually near the bulls-eye and one might even hit the centre within the first try. However product leaders must recognise that the battle is barely half-won even with the appropriate PMF because the market retains evolving and the addressable base is more likely to develop and make the unique speculation irrelevant. 

Like Haria mentioned, “After finding the PMF, it’s essential for product people to double down and scale the offering by adding more capabilities or bettering existing capabilities in the existing segment or cohort as the immediate next thing.” 

A B2B startup may give attention to SMEs in the course of the early phases of the product, however as soon as it achieves the PMF in SMEs, it would begin exploring startups or mid-cap corporations.

Snehal Patel, product head for cloud net and cellular testing platform Browserstack, mentioned “In the case of SaaS, after getting the PMF you ideally want to accelerate the product growth as you have identified the product you have built has value.”

At this stage, the revenue-focussed advertising and gross sales groups ought to enter the image to drive conversions and the product workforce ought to assist in constructing no matter these groups want to realize progress, mentioned Patel.

In parallel, the product workforce ought to be both specializing in growing person engagement and adoption by new prospects, he emphasised.

TrulyMadly’s Khanor believes that at this stage startups ought to begin measuring what’s driving engagement and at what’s pushing customers to go away. “All of this will help build the next iterations of the product and eventually turn an MVP into a fully-baked product,” he mentioned. 

Tejas Vyas, Khilan Haria and Snehal Patel shall be talking at Inc42 & TPF’s The Product Summit — India’s First And Largest Digital Product Convention, supported by Amplitude and AWS. Register Now.




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