The single worst business decision that you can ever make is committing to a product or service that ultimately, no one wants. Thus, testing your product/market fit (PMF) is one of the first things you should do (even before you start brainstorming over your name). Product/Market fit refers to whether a company offers a proven or verified product that its target consumers want, in a market that is profitable.
Even if you didn’t test your PMF before launching your product, key metrics such as sales, word of mouth, stagnant customer base, increasing/decreasing revenue, increasing/decreasing staffing requirements, having to pay to acquire customers, and potential customers turning away from products can serve as accurate indicators of whether you have good PMF. Paying attention to these can help you understand what’s not working, and what, if anything, is.
Creating a Minimum Viable Product (MVP)
One of the most reliable ways to check your Product/Market Fit is by offering a minimum viable product (MVP) and monitoring the way your customers react to it. Along with your MVP, you must also create a business hypothesis that answers questions like who will use your product, what problems do they generally have, and what problems your product can solve. This helps you create parameters to measure whether your MVP is a success. If your MVP fails to support the hypothesis that you’ve created, then you need to embark on a new course and either offer an MVP that supports your hypothesis, or come up with a new hypothesis altogether. Many new entrepreneurs find themselves pivoting from their original plans – it’s quite common and you shouldn’t take it as a sign of failure.
Identifying the changes that you need to make
When you’ve noticed major discrepancies between your hypothesis and the way your MVP is being used, you must identify the optimum way to push forward and create a product people will use. Consumer surveys often offer great insights into areas where your product lacks useable offerings, and areas that work really well. Use this data to understand how you can improve your MVP. Interestingly, you might even find that people use your product in unintended ways, addressing a much larger gap in the market than the one you saw. In such cases, you must pivot your hypothesis because the MVP isn’t the problem, it’s the logic behind it.
For instance, Airbnb was originally a company that allowed people to stay on air mattresses in living rooms. Cottoning on to the fact that travelers desired higher levels of comfort and a unique place to stay, the brand changed its offering and is now one of the biggest unicorns in the global market.