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How to find Product Market Fit? | Discover the Key to Business Growth

By Vignesh Kumar – Director – Product Pricing & Monetization and Operations at VMware

What is product market fit? For product leaders, it means being in a good market with a good product that can satisfy that market. It is a scenario where the target users are buying, using and talking to others about the company’s product in sufficient numbers to sustain that product’s growth and sustainability. 

So how do you find a good product-market fit?

Key Takeaways:

  • A product market fit is the sweet spot where a product smoothly aligns with the market needs, which leads to better growth and customer satisfaction.
  • Key factors which influence the product-market fit are product, market and price.
  • In the product aspect, product managers take care of designing the product, their timely launch, and optimizing them according to the user feedback.
  • In the market aspect, factors like understanding the market problem, targeted customer representation, determining the go to market strategy and understanding the demand and estimating the market potential are considered.
  • In the pricing aspect, perceived value of the product and understanding the customers are taken into consideration.
In this article
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    1. Designing the Product:

    The first step is designing the product. Product managers need to know and design the product that addresses the problem. You have to have a Minimum Viable Product (MVP) which is at least capable of solving the fundamental problem. Any product absolutely needs to have the “must have  features”. You can also add “the good to have ” features, but they are not a necessity. For example, if you’re designing a car, you can’t say that you will put brakes as a good to have feature.Brakes are more of a must have feature. On the other hand, AC and power windows can be good to have features. 

    2. Timely launch:

    Second is a timely launch. It is absolutely necessary for product managers to consider this step because if the product does not hit the market at the right time, it will not even thrive. Look at so many examples around you. For example, pagers which just came and went away like that, without many people knowing about them. It was not because they were bad products. It was because the market changed. Other examples are the film rolls of Kodak and the old Nokia phone- they might not have come back with products on a timely basis to counter the market changes that were happening. It’s hard to believe that the digital transformation of photography was not being preempted by Kodak.They had everything going, it’s just that they missed the bus because some other side of the industry came in the evolving market and threw in smart phones with digital photography enabled. That’s how the entire industry changed. Similarly many phones might have come into the market which were far ahead of their time. This is the reason why timely launch of your products is very important.

    3. Optimize the product:

    Third is to optimize the product to the target segment post launch. This is an iterative aspect. You might see that you launched six products, and the most spoken about feature is feature number 2 and the most disliked feature is feature number 6. Here is your opportunity to optimize your next version of the product. There are two ways to look at it. You might want to go and validate whether that’s a must have feature. For example, security. If your security is really weak, you can’t just say that people don’t like the security aspect that much so let me take out this feature. You can focus more on the top feature and try to make it even better so that the reach goes even further. If you overlook this stage, there is no way you can honor the feedback from the customers. 


    1. Understanding the problem

    It is very important for product leaders to have a solid understanding of the problem that they are solving. It involves going deep into market dynamics through extensive research. It helps in identifying the surface-level challenges as well as understanding the preferences, expectations and pain points of your customers. The product should address real and pressing issues in the current market, while laying the foundation for impactful solutions.

    2. Targeted customer representation

    The more accurately a company represents its target customers, the better it can align its offerings with their needs. It involves creating accurate user profiles, which serve as guiding archetypes allowing companies to tailor their products to specific demographics. It even goes beyond the demographics to include their preferences and behavioral patterns as well.

    3. Determine the go to market strategy

    This is similar to creating a roadmap for success. It involves strategising the entire product journey from product creation to customer adoption. A well-defined market strategy includes aspects like positioning, promotion, distribution channels, and customer engagement. This ensures that the product does not just simply enter the market, but does so with maximum impact and scalability.

    4. Understanding the demand and estimating the market potential

    It is very easy to overestimate and get overly enthusiastic about the market size. Before claiming that a particular market potential exists, it is important to do some vigorous tests and ensure that the perceived demand actually aligns with the actual market. This data-driven approach allows businesses to accordingly modify their strategies, avoiding pitfalls associated with miscalculated market potential.


    1. Perceived value

    Pricing is based on the perceived value of the product. It’s not about product managers deciding the price of the product. For example, Apple has been doing this for quite some time, where they played on the perceived value of the product and they still are encashing that perceived value. They are taking the top layer of premium pricing, and they are making huge profits. 

    2. Customer first

    Pricing is an iterative process based on customer feedback. Unless we go to the customers and ask them- how much would they pay for a particular product, you will not get the correct value of that particular product. For example, someone who values time would invest in an automobile or in a car which takes person A from point X to Y. But if you change the persona of the customer, into a customer who wants to go from point X to Y safely. Then speed might not be a big determinant for him. They will look into other areas like build quality and safety features. So understanding the customer is super important. When you price your product according to customer’s expectations, that’s when you start getting the market. 

    Hence, the product market fit is an ideal situation created for a product that is very well aligned with the customer, market and pricing aspects. It involves various aspects like understanding the foundation of the product, the problem it can solve, launching it in the right market, doing extensive market research and proper pricing strategies. By taking into account all these factors, businesses can seek to thrive in the ever evolving market.

    Frequently Asked Questions

    A product market fit is the situation where a product smoothly aligns with the customers and market needs, which leads to better growth and customer satisfaction.

    Product managers ensure that the three aspects of a product-market fit are taken care of. These are building a minimum viable product, understanding the market, and proper pricing.

    Indicators of a good product-market fit are sales, customer retention, customer lifetime value, demand, referrals, traffic, press coverage, influencer reviews, etc.

    Pricing involves two aspects- perceived value and valuing the customers’ expectations. Pricing is determined by the perceived value of the product, not the actual value. Secondly, even if a product is good, but it does not consider the customers’ expectations, it will not thrive.

    About the Author:

    Vignesh KumarDirector – Product Pricing & Monetization and Operations at VMware

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