“The number one problem that I’ve seen for startups is that they don’t have product/market fit when they think they have.” Alex Schultz, VP Growth| Facebook
If you’re launching a startup, then venture capitalists must have asked you about product/market fit.
What is product-market fit and why it is important? What are the ways to identify the product/market fit for a business?
Product/market fit is the degree to which a product would satisfy strong market demands. In other words, it’s an analysis of whether the product-to-be-launched, has the potential to sustain in the market, would be profitable and would be capable of generating profit. The concept is coined by Mark Andreessen who divides a startup’s life into two stages: Before Product/Market Fit (BPMF) and After Product/Market Fit (APMF).
But, how to measure product/market fit? What are the metrics that can be analyzed to see if a product is the right fit for the market?
There are three ways to assess a product before you launch it in the market: Minimum Viable Product (MVP), Prototype, and Proof of Concept (PoC). In the later segment, we will discuss all three of them in detail- what they are, their pros, scenarios where they are best suited, and will then conclude the best way to measure product/market fit. So, let’s get started.
A prototype is a part of the product design that can enable a business to test a concept or a process. It is an interactive model that helps to understand the workflow and its usability. A prototype allows visualizing user experience before the product development starts. Although it is not a standalone system, it gives an idea of what kind of experience will a user have.
With prototypes, startups can find the errors and faults that can affect user experience or flow of the app. It usually include wireframes, mock-ups, design layouts, and user flows. Four types of prototypes that can be created for the test are:
- Working Prototype
- Visual Prototype
- User Experience Prototype
- Functional Prototype.
A Prototype helps in assessing how seamless a customer’s journey will be with a product. It can help to measure the product/market fit for the following reasons:
- It allows the business to understand the lags in a product, even before the development starts
- User Experience (UX) is one of the prime factors in retaining customers. A prototype helps to assess it
- It is the fastest option to test a product’s feasibility, scalability, and acceptance with visual effects
- A prototype requires very less investment in terms of efforts, finances, and time
- It informs about the limitations of a system at an early stage
2. Proof of Concept (PoC)
Proof of Concept, as the name suggests, helps in testing the feasibility of product for practical implementation. It is one of the most creative ways to test if the idea, striking in your mind is operational or not.
For developing a PoC, a small project (with a basic functionality) is executed. It is usually not shown publicly or to the customers. It helps to examine if there are technologies, platforms, or environments available to build a solution. Once a PoC proves the technical/functional feasibility of a project, product development can be initiated. Some of the reasons for which PoC can be considered to measure product/market fit includes:
- PoC is a short-term process to test the feasibility and potential of the project
- It gives a quick ‘yes’ or ‘no’ to the viability of the project
- It discloses the errors, bugs, or faults in the idea/system at an early stage
- It requires very less time to validate if you’re moving in the right direction
- PoC can help you find an alternative solution to a problem if the one you’re trying seems impractical
3. Minimum Viable Product (MVP)
A Minimum Viable Product is an initial version of the product which is designed and developed to test the market acceptability of an idea. In short, MVP is the base model of a product having a minimum but core-features of the product.
MVP is considered as one of the popular approaches to measure product/market fit as it allows the product to reach the market, helps to understand how a product is being perceived by the users, what are hindrances in its performance, what improvements can be done to make the product more impactful (technical/UI/UX), etc. Once these factors are analyzed, businesses can confidently invest in the further development of the product, offer premium services/features, and expect a profitable return on investment.
Take an example of Uber. It is one of the most-used apps to hail a taxi, globally. Uber initially launched its app with a few, core features and kept on improving its app with every new version. Today the app has an extensive set of features that are introduced only after assessing user experience with previous versions. Not just Uber, almost all popular businesses started with an MVP and grew bigger as they gained the user/customer acceptance.
MVP is indeed one of the smartest approaches to measure product/market fit for the following reasons:
- You can start small and evolve as your audience/user/customers accept the product
- Minimum Viable Product lets you enter the market will minimum (financial) investment
- It lets you understand the lags of your product and how it can be improved
- It helps you to judge if your time, money, and efforts in a product are worth investment
- It lets you understand the user, target audience, and their expectation from the product
You can check out our detailed article about Minimum Viable Product and its benefits
MVP VS Prototype VS PoC: Which one to Choose?
Amongst the three approaches shared above to measure product/market fit, a Minimum Viable Product (MVP) is certainly the best approach. It not only lets you test the project feasibility and user experience but also enables validating a product’s potential by its user itself.
Nonetheless, the two other methods, i.e. prototype and PoC have their own importance. While they might not be the finest approach to measure product/market fit, they allow businesses to assess the viability of a product at an early stage. However, whether to create an MVP, Prototype, or PoC depends completely upon the business idea.
To know which approach should your startup opt, set-up a 30-minute free consultation with our experts who will understand your idea and will help you choose the right approach to measure product/market fit.