Look at you! You’ve already built your minimum viable product (MVP).

By now, you’ve got a great understanding of your market, the product, ​and​ your own abilities
and skill sets. But, before we go further, let me ask you a very simple question: What do ​you
think is the most important factor for the success of a startup?

The product?

You and your team?

The market?

The answer to this question will vary depending on who’s answering it. A product person will
say that the ​product​ is the most important criterion for a startup’s success, whereas a
people person will say that the ​team​ is what makes all the difference.

They’re right, but not entirely, because one of the most important factors for a startup to
become successful is the ​market​ – your potential customers.

The market is always on the lookout for solutions to its problems and will happily pick up the
first solution that comes along. The product need not be perfect – it just needs to work. And
the market doesn’t care about the team that created the product.

So you might have a pixel-perfect product and a killer team, but if the market for it doesn’t
exist, your product WILL fail.

So the biggest startup killer out there is the ​lack​ of a market.

Does this mean that success is guaranteed if there ​is​ a good market? I’m sorry, but not, it’s
not. But ​without​ a good market, you are very likely to fail.

So, assuming that you have a product that solves problems - your MVP - you, and your team
are competent enough, and there ​is​ a big enough market, how do you ensure success?

You aim for something called “product-market fit”.

I have seen more startups fail because of the ​lack​ of a product-market fit than for any other
reason. So, what ​is​ product-market fit? How do you achieve it, and how do you ​know​ if you
have achieved it?

What is product-market fit?

Marc Andreessen coined the term “product-market fit” in 2007 and ​he​ believes that
product-market fit means being in a ​good​ market with a product that can ​satisfy​ ​that
market.

It’s when your product and its value proposition ​resonate​ with your target market and fit
together perfectly to solve their problems and meet their needs.
The moment I say product-market fit, a lot of people think of it like some kind of startup
heaven. So remember this: product-market fit is not a destination but a journey.

The quest for product-market fit is never-ending. It is a continuous, iterative process that you
employ to find a repeatable and scalable model that drives demand.

You may have seen that even the biggest companies are always tweaking their products to
either satisfy the existing market or to enter a new market segment.

And ​that’s​ how your product ​grows.​

You have to do everything possible to ensure that you achieve product-market fit. Mind you,
you are at a stage where you are trying to gain some traction, so your focus should be on
major changes like your messaging, target customers, delivery channels, etc.

Don’t get too caught up in micro-optimizations like changing the colour of your font, or the
button size, or wordplay at this stage. You need to first standardize and ​then​ optimize. There
will come a time when these minor changes will have a massive impact. Right now, it is time
for you to enforce major changes, if necessary, to gain major insights and change course
accordingly.

So after all this, you’re probably wondering how to achieve this elusive product-market fit.

How to achieve product-market fit?

To achieve product-market fit, you should be able to align your product’s value proposition
and your customers’ needs with customer acquisition.

Your product’s value proposition should completely align itself to solving your customers’
problems and you should be able to ​acquire​ these customers in a way that is effective,
repeatable, and scalable.

That​ is the holy trifecta of product-market fit.

These three aspects need to be perfectly balanced, because if only two of them are aligned,
you may enjoy some short-term success, but your startup is bound to fail eventually.

During the idea validation stage and the MVP stage, you would have figured out your
customers’ needs and, hopefully, have a value proposition that meets their needs. Now, you
have to figure out a customer acquisition strategy to keep the engine going.

Your 1,000 true fans

Kevin Kelly, the founding editor of ​Wired​ magazine, came up with a very interesting theory of
the 1,000 true fans.

He argued that any creator would need only a thousand ​true​ fans who would pay around a
hundred dollars each for the creator to make a reasonable hundred-thousand dollars a year.
And ​these​ are the fans or customers who would buy anything that you produce and do
anything​ to buy what you create.

Now, in your quest to achieve product-market fit, your 1,000 true fans will help you get there
and beyond. Although Kelly’s theory stops at 1,000 fans, you can extrapolate the same
concept across many, many more customers for your startup to achieve success.

To put this into the context of startups, what he means is that you need to have ​direct
interactions and relationships​ with your first 1,000 customers. This will give you deep
insights into your customers’ needs and allow you to understand ​what​ you should build for
them. It will also tell you ​why​ they are interested in your product compared to other products
that are available.

What you are looking for at this stage is pockets of demand where your customers aren’t
satisfied with existing products or there is no solution at all. Not only will these customers be
extremely grateful for your solution and pay for it, but they’ll also talk to their ​friends​ about
your solution. Your customers are like a node in a network and you are literally one node
away from full-blown success.

Take any successful startup today and you’ll find this is exactly what they did. They went out,
spoke to their customers and helped solve their problems.

The founders of Airbnb went around New York clicking pictures of apartments to help them
start hosting people. The founders of Slack literally begged people working at 10 companies
to move to Slack and test it out. The founder of Groupon started by handing out flyers. When
Uber started, they manually looked for cabs and matched them with riders.

So you too need to go out there and start cold calling, sending cold emails, hand out emails,
social media, SEO, online ads, webinars, PR, explainer videos, tap into your personal
network, leverage communities, attend meetups - you name it.

Once you’ve crossed your first 1,000 customers, you’ll figure out which is the best channel to
acquire a steady stream of customers. You’ll also realize that managing multiple channels to
acquire customers not only increases overheads but also forces you to spread yourself too
thin.

At this point, you have to transition from a shotgun approach to a sniper approach where you
focus on the channels that give you a steady stream of customers.

But sometimes it’s not that straightforward.

When it’s not clear as to which channels you need to focus on, try to rate them based on the
following attributes:

Targeting - The ability to target your customer segment – how well does a channel do this?

Cost - The cost of acquiring a customer

Effort - The time or effort you need to invest in nurturing a particular channel
Output - The time taken for you to start seeing tangible results

Control - The ability to turn the channel on or off as needed – how easy it is to do that

Scale - The size of the audience available – how many people can a channel reach?

The ideal channel is one where you have high targeting abilities and a low cost of acquisition
with minimal effort, immediate feedback, the ability to switch it on or off at will, and the ability
to scale your reach.

And this will depend on the market you’re going after. What seems like the perfect channel
for another startup may not be the perfect channel for yours.

You’ll find the matrix to gauge your channels in the downloads section below. Once you’ve
got your first thousand customers, fill the matrix to find yourself a winning channel.

Now, how will you know when you have achieved product-market fit?

Most startups don’t achieve product-market fit overnight. You make your product-market fit
stronger by making changes to your product and getting this validated by your customers
through your marketing channels.

As I mentioned earlier, product-market fit is a journey, not a destination, but you do need to
know whether you’re on the right path. There ​are​ a few indicators that’ll tell you whether you
are:

One: Repeat purchases

One of the biggest indicators of achieving product-market fit is when you have
customers coming back and buying your product over and over. It means that their
needs are truly met and your customers aren’t looking for another solution. As a
startup, you would want your customers to buy your products more than once. This
increases the lifetime value of your customers and reduces your customer acquisition
cost.

Two: Inbound inquiries

Yet another significant indicator that your product-market fit is growing stronger is
when your consumers’ behaviour changes from push to pull - meaning your
customers are coming to you rather than you going after them.
Your customers are always passively looking for solutions to their problems and if your
solution happens to be the one, they will come knocking at your door.

Three: Referral inquiries

A good chunk of your inbound inquiries may be referral inquiries where one of your
customers refers you to another customer. These are not just your customers but
your advocates too. They will speak highly of your solution and refer other people to
try it out. This is nothing but word-of-mouth marketing. And it’s effective.
Four: Low churn
Churn is the percentage of your customers who stop doing business with you or
using your product. This is a particularly useful metric for subscription-based
business models and even for servicing companies working on a retainer basis. The
lower the churn, the better the product-market fit.

Five: Increase in use

If you happen to have a tech product that uses a considerable amount of technical
infrastructure, then you might notice that when your product-market fit is becoming stronger
the usage of your product increases as fast as you can scale your technical infrastructure.
This is equivalent to a physical product getting sold as fast as you increase your
manufacturing capacity.

These are the five primary ways to know when you’ve achieved the bare minimum
product-market fit.
But it’s always better to stay ahead of the curve and proactively check whether you are
enjoying product-market fit or not, and if not, how and where you can improve. There are a
couple of ways to do this.

One is to proactively test product-market fit

Net promoter score

The first method is a popular one, employed by even the world’s largest organizations and is
called the Net Promoter score, or NPS. NPS is a method used to figure out how happy your
customers are.

The best part about this method is that it’s solely based on answers to a single question
which is: “How likely is it that you would recommend our company/product/service to a friend
or colleague?”
Answers are given on a scale of 0 to 10, with 10 being the highest probability. NPS can vary
across industries but you should be aiming for a positive NPS.

The “must-have” survey

Apart from coining the term “growth hacking,” Sean Ellis, an entrepreneur and investor, also
came up with the “must-have survey”. Mirroring the simplicity of the net promoter score
method, the “must-have survey” also asks respondents just a single question with multiple
options.

The question is something like this:

How would you feel if you could no longer use [that product]?

Very disappointed
Somewhat disappointed
Not disappointed
Ellis claims if more than 40% of your customers choose “Very disappointed,” it is a sign of
product-market fit. Which makes sense because what this survey tells you is that you have
introduced a must-have product in the market that your customers can’t do without.

In conclusion, don’t be under the impression that once you’ve achieved product-market fit,
you will always enjoy it. Especially if you’re in the technology space where things change
very quickly.

Technology keeps changing, and so do your customers’ requirements and demands.

Regardless of your industry, your competition is not going to sit around watching you take
over the market; nor are your customers. The moment they find a more viable solution, they
will jump ship, including your true fans.

So, with that, let’s recap what we learnt in this video. We learnt

What product-market fit is;

How you can achieve product-market fit;
Why you should focus on your first 1,000 customers;
How you will know when you have achieved product-market fit; and
How to proactively measure product-market fit.

That’s it for this video, thank you so much for watching, I will see you in the next one.