Market fit will allow you to determine the true value of your idea and how it can grow in the current or future market.
Product-Market Fit is about the value hypothesis and growth hypothesis. Product-Market Fit is intended to be considered after you understand your Product-Solution Fit. Market Fit will allow you to determine the true value of your idea and how it can grow in the current or future market. Problem-Solution Fit is about identifying your customer and what problem they are facing. Only after identifying a customer and a problem can you formulate a solution that fixes their problem.
🔬 Related: Product Development in Life Science
When Product-Market Fit is actually happening, you won't be able to make your product fast enough (because it is flying off the shelves). This technique should enable you to get in touch with your customers and market, so that your product is the most desirable it can be. This may sound too good to be true, but it isn’t. The one caveat is that Product-Market Fit is not a simple or one-step process. It requires research and loads of effort to execute properly, but it is worth it!
Often, startups that struggle to get off the ground are the ones that fail to create a Product-Market Fit for their idea. This requires lots of planning, but Product-Market Fit should be established before the product hits the market.
Startups can fail for a variety of reasons, and CB Insights has surveyed and documented the top reasons. It is suggested and encouraged to understand and establish a Product-Solution Fit before trying to determine a Product - Market Fit. Here is a great quote from Alex Schultz:
“The number one problem I’ve seen for startups, is they don’t actually have product-market fit, when they think they do.”
42% of startups fail partly because their product does not satisfy a market need. Often, inventors and entrepreneurs will believe that they have completed a Product-Market Fit, but they actually have not.
In order to best understand Product-Market fit, it is best to understand Product-Solution Fit. Here is the basic idea. The first thing to do is to start with a hypothesis. For example, let’s use "Doctors and nurses are tired and scared in the COVID-19 pandemic." The next step is to test his hypothesis. You do this by asking doctors and nurses directly what they think. Then, you need to prove your hypothesis to be true or not. This requires data, both quantitative and qualitative, from your interviews with the doctors and nurses. Then, based on your findings you should try to refine a new hypothesis.
Here is the process in 4 easy steps:
These steps will allow you to stand back and evaluate the impact of your hypothesis. If customers are not receptive to your idea, it is not a personal attack on the idea itself. They are sharing their experience and opinions with you. That is what the fourth step is all about, revising and refining. Sometimes, inventors will become attached and defensive about their product or idea. This may lead to developing selective hearing when talking to customers. Instead of this, try to keep an open mind when asking others about your new idea so you get the most out of the experience.
🔬 Learn more about: Understanding Problem-Solution Fit
Now that you understand the process of Problem-Solution Fit, we can get into understanding Product-Market Fit. They are essentially the same process, but with different questions and intentions, and both are performed at different times.
Again, you will start with a hypothesis. But this time the hypothesis is about your idea specifically. Let’s continue with the doctors and nurses example from above to better grasp this idea. Before, the hypothesis was “Doctors and nurses are tired and scared in the COVID-19 pandemic.” Now, your hypothesis should build upon the findings of the Product-Solution Fit, and should be something like, “Doctors and nurses would benefit from a remote care platform because it would save them time and allow them to safely care for their patients.”
Your next step is about testing this hypothesis. You should ask doctors and nurses what they think of the remote care platform you have built. See what they like and don’t like about it. See what they would change about it if they could. Ask them if they would pay for it. All of these questions are great for feedback.
Once you interview enough doctors and nurses, you should have substantial statistical evidence to prove or disprove your hypothesis. Then, depending on your results, you should modify your technology and its features based on that feedback.
🔬 Related: Implementing Voice of Customer (VOC) in Your Business
Now that you have completed some more industry interviews, you want to create a value hypothesis. This involves asking yourself a few questions:
The first two questions focus on asking what and who. You can use the answers to these questions to build out your value proposition. The third question you only need to worry about after you have asked and understood the answer to the first two.
A customer buys a product because it solves a problem for them, or it does a job that they need completed. Customers generally do not care how a product does a job, as long as it does it effectively and efficiently. To create the value proposition, you need to understand exactly what the problem the customers want to solve is. In order to buy a product, the customer needs the three questions above answered clearly and concisely by the company.
A hard answer to find is “who.” Oftentimes, a product will have the capacity to market to multiple groups. For example, in healthcare, you can market to insurance groups, individuals, doctors, hospitals, and more. Instead of attempting to encapsulate all of these groups in the first go, you should fixate on just one. This will allow you to create and market a product that is perfect for one group, instead of ‘just ok’ for many groups.
The next aspect of a value proposition is differentiating yourself from the competition. Why should customers buy your product instead of what they are already doing, or instead of another product?
🔬 Learn: 4 Key Types of Market Segmentation: Everything You Need to Know
Once you understand the type of product you want to create, for a certain group of people, you need to do some traditional market research. Market research is trying to identify your particular market, how big it is, and what your share could be worth.
Let’s use an example about the diabetic market in the US. The CDC has said that there are 100 million people in the US with diabetes or pre-diabetes. Of that group, only 34 million are diabetic, the rest are pre-diabetic. Let’s say that your product is mainly for diabetics who might have to undergo a limb amputation.
There are 44,000 individuals at risk for limb amputation due to diabetes in the US. This is the niche you should go after. The total market of 100 million people is not your market niche because it includes many who would not need or benefit from your product.
Later you can think about the next steps and expand into the larger market (assuming your product does well).
🔬 Look into: A Deeper Dive into Market Segmentation
The growth hypothesis is thinking about how your customer will be able to buy the product. How will you reach your customers? Here are a couple of options for startups to expand their customer base:
Paid engine growth is the traditional marketing method. Examples include paid advertisements, trade shows, etc. to get the word out.
It is best to combine multiple of these strategies to maximize your possible customers.
The revenue hypothesis is putting all of these elements together. The revenue hypothesis will allow you to understand how you can make money with a sustainable, long run, business plan. Use this to continue testing your product and ensuring its continued viability.
In order to create a Product-Market Fit that solves a real problem and is sustainable, you should follow the above steps. This will allow you to enter the market with confidence, even if it requires changing your product or service a small amount to fit a particular need.
🔬 Find out: How to Create a Business Plan
This content comes from a University Lab Partners webinar hosted in partnership with ScienceDocs, presented by Fehmida Kapadia. Check out the full video here.
Dr. Kapadia, PhD in Biochemistry, is a commercialization expert who has supported over 100 startups in the scientific space. As a university professor she has taught entrepreneurship classes, as a mentor she has served startups through the NSF iCorps program, and as a consultant, Dr. Kapadia has provided startups with such services as market research, customer segmentation, value proposition development, go-to market strategy and much more.
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