Product Market Fit: what it is and how it can help you scale up

As it usually happens with those terms that can be found on an eCommerce Dictionary, most of the time it is just naming while we take intuitively to narrow them down in some way and turn them into factors on which we can work in a strategic way.

The PMF or Product Market Fit fits to the millimeter with what we are talking about. You will see it as we develop it in this post illustrated with some examples of how you should analyze it.

We could complicate the definition as much as we like, but in reality it is (in theory) as simple as finding the product that satisfies the main needs of a specific niche market.

This, in reality, means that we have hit the right key and, therefore, the product we are selling is providing an optimal user and buying experience to our customers.

As a result, we have a loyal, recurring public with a very long CLV (Customer Lifetime Value), which gives us a higher profitability per customer throughout their life cycle.

The first thing I am going to recommend is to be objective. We all believe that we have the perfect product for our target, but intuition or biased analysis is not enough. You have to be able to validate your hypotheses with data and not on the basis of intuition or assumptions.

There is a certain risk when we take that sweet spot for granted. The investment can literally get out of hand because, instead of achieving the maturity of the product in its market, we will be focusing our efforts on attracting a product that simply does not work or, at least, does not work for the audience we are targeting.

Thousands of impacts, visits and euros thrown away by not performing a simple analysis to validate our product in the same way that we validate our business model to be clear about its viability before investing.

It is not that it is not possible to scale a product that has not reached the Product Market Fit. But even if the results are increased, the profitability will always be much lower if it is not at this point.

In reality, there is no specific metric; you will have to start from the most in-depth analysis possible of different aspects.

The first one we have already mentioned: the life cycle of the customer. If your customers buy that product recurrently, as well as updated versions (upselling) or complementary products (cross-selling), and do so in a sustained manner over time, you have a very good indication of Product Market Fit. One of the key indicators is that customer retention capacity.

The level of peer-to-peer recommendation and social proof would be another aspect to assess. In fact, monitoring and improving the reviews published on different portals also gives us a first-hand indicator of satisfaction that we are meeting the specific needs of the market.

You can also use other qualitative techniques such as surveys, user tests, focus groups, etc... These have the great advantage of focusing on discovering "what" rather than "how much". They are a great source of insights that will help you draw an accurate picture of how you are doing in the market and what is the positioning of your product.

This does not mean that you should forget about qualitative techniques and identifiers. These data provide you with volume and are also highly relevant. Look at KPIs such as the growth rate, the market share with respect to your competition, the churn rate or the rate of cancellation or the ratio of returns that your eCommerce suffers.

With all these variables correctly analyzed, you will be able to consider scaling up your business with much more guarantees. You will know that every euro you invest on making it grow will be backed by a product that meets customer expectations and, therefore, you will achieve more conversions consistently over time.