Product-Market Fit and the Signs to Look for Before You Reach It

A product that satisfies what a market wants

Product-market fit is the state of being in a good market with a product that can satisfy that market. Marc Andreessen popularized the term in a 2007 blog post arguing that it is the most important thing for a startup. If you have released something and cannot tell whether it is working, it helps you judge which stage you are at.

What the post argued

Andreessen considered the team, the product, and the market as the factors in a company's success, and weighted the market most heavily. A good market pulls the product out of the company, he argued, while in a bad market even an excellent product struggles.

He also wrote that when fit is happening, you can feel it. Customers arrive faster than you can serve them, and each sale leads to more orders. When it is not happening, you feel that too: people do not understand the offer, do not use it, or buy once and leave.

This is a description drawn from his own experience. It does not offer a numerical test.

Signs to check before you get there

There are things you can check even before fit arrives.

• Are people using it again, or buying again? Does it continue beyond a single use?
• Do some customers come because someone recommended you? Is that share growing?
• Can customers explain in their own words why they bought?
• Are there customers who say they would be in trouble if it disappeared?

If you see even a little of these four, you may be heading the right way. If people only move for free offers or discounts, or cancel without having used it, the product or the market needs another look.

A question about missing it

Sean Ellis popularized a survey question. You ask, "How would you feel if you could no longer use this product?" and look at the share who answer "very disappointed."

A figure of about 40 percent or more is often cited as a benchmark. It is widely used, but with few respondents it swings a great deal, so for a small business it is not a strict standard. The reasons behind each answer are worth more than the percentage.

Cautions for small businesses

Fit is not something you reach once and keep. When the market or competitors change, whether you still satisfy the market changes too. Also take care not to mistake the reaction of a few enthusiastic customers for demand across the whole market.

If you see no signs, consider revising your guess about who the customer is and what problem they have before you spend more effort polishing the product.

When you see no signs

There are things you can do before polishing the product further. First, look for what past customers have in common, such as industry, size, or the problem they had. If similar people cluster, that may be your real market.

Next, compare the situations in which customers keep using it with those in which they stop. Asking why people left is as useful as asking why they stayed.

If you still find nothing, change your guess about the customer or the problem and test again on a small scale. That is not failure, just correcting your assumption.

This framework assumes you are shortly after launch. A business that already sells steadily may need different questions. Start by checking which stage you are actually in.

If you have not launched yet, talk to prospective customers first. Asking whether the problem is real and what they use now before you build lowers the risk of heading the wrong way.

What to do next

1. Count repeat purchases or continued use among recent customers.
2. Ask ten customers how they would feel if they could no longer use it, and why.
3. Check your records for customers who came through referrals or word of mouth.
4. Pick one customer group where signs appear, and rewrite your explanation for them.
5. In one to two months, check again using the same question and the same counting method.