Product Market Fit Flashcards
(39 cards)
Product Market Fit (PMF)
Being in a good market with a product that can satisfy that market
Finding PMF Loop
- Define, define the initial PMF narrative
- Validate, validate the riskiest assumptions of the PMF narrative
- Measure, quantitatively measure PMF and decide next steps
- Traction
Finding PMF Loop - PMF Narrative
A dynamic document that encapsulates our product strategy hypotheses along six dimensions
1. Problem to solve
2. Target audience
3. Value proposition
4. Competitive advantage
5. Growth strategy
6. Business model
Finding PMF Loop - PMF Narrative - Initial Insight
We need good initial insight to seed PMF narrative
Signals of a good initial insight
1. Earned, justified by in depth, authentic experiences and observations
2. Unique, should be underappreciated, not an obvious truth
3. Grounded, grounded in at least one dimension of the PMF narrative, usually value proposition
When building a new product in an existing org, it’s PMF expansion. At least one dimension should align with existing product strategy
Finding PMF Loop - PMF Narrative - Problem to Solve
Frame gaps as problems, not rephrased solutions
1 What is the customer trying to achieve?
2 Why does the customer want that outcome?
3 Why can’t they do this today? => problem to solve
Finding PMF Loop - PMF Narrative - Target Audience
Start small and expand to adjacent market
1 Target audience attributes
1.1 Demographic (Age, gender, location, income, education, and family size. most relevant for B2C)
1.2 Psychographic (Beliefs and values of customers)
1.3 Position (For BB, organizations, industries, company size. For B2C, budget and family role)
2 Customer segments, combining attributes to create as many customer segments as possible
3 Now or future
3.1 Now: Most acute problem to solve, strongest resonance with value prop, strongest competitive advantage, greatest ease of reach, and strongest willingness to pay
Finding PMF Loop - PMF Narrative - Value Proposition
Focus on customer benefits not features
1 Ideal homepage
1.1 Product tagline/value proposition, communicates the overall value promise to prospective customers
1.2 3-5 Sub-benefits, communicate how the product solves key customer challenges
Finding PMF Loop - PMF Narrative - Competitive Advantage
Don’t overlook the long-term advantage
1 7 powers for Long-term success
1.1 Scale economic, per-unit costs decline as production volume increases
1.2 Value realized by customers increases as the installed base increases
1.3 Counter-positioning, implementing a new, superior business model discourages competitors from mimicking due to anticipated damage to existing business
1.4 Switching costs, customers would have incurred a value loss from switching to an alternate supplier
1.5 Branding, enjoys a higher perceived value to an objectively identical offering that arises from historical information about the seller.
1.6 Corner resource, has preferential access at attractive terms to a coveted asset that can independently enhance value.
1.7 Process power, embedded company organization and activity sets which enable lower costs and/or superior product and which can be matched only by an extended commitment
2 Short-term success
2.1 Competitive Landscape Map
2.1.1 Direct competitors, Most obvious; closest prop to ours
2.1.2 Indirect competitors, Companies seen as a viable alternative
2.1.3 Adjacent market, Potential future competitors
2.1.4 Identify customer segments
2.1.4.1 List out identified competitors
2.1.4.2 Think through the customer segments they best serve
2.1.4.3 Scan the list to consider the segments underserved by competitors
Finding PMF Loop - PMF Narrative - Growth Strategy
Short-term traction channels normally are different from long-term growth channels
So focus on both.
Finding PMF Loop - PMF Narrative - Business Model
Business Equation, set of levers or controllable inputs, that we can pull to optimize the profitability of our business.
Business equation lever types
1 Revenue streams, source of revenue (e.g. subscriptions, transactions, ads, take rate)
2 Pricing (Willingness to pay and payment model)
3 Lifetime value (Average revenue generated by a customer over their lifetime)
4 Cost structure (fixed vs variable costs)
Risk Validation Techniques
- Broad Validation. Identify and prioritize the riskest dimensions of our PMF narrative
1.1 Market research & expert advice
1.2 PMF interviews - Targeted Validation Techniques. Tools that enable us to address and de-risk the identified riskiest dimensions of our PMF narrative
Risk Validation Techniques - Market Research & Expert Advice
- Market Research. Pressure test product strategy and identify risks.
1.1 Identify analogs and antilogs along each dimension of the PMF narrative. It is about the quality, not the quantity of analogs and antilogs. - Expert Advice. Obtain insights from experts in the field.
2.1 Identify experts, using analogs and antilogs from the last step
2.2 Drive conversation
2.2.1 What do you believe are the biggest risks to us in XYZ dimensions ?
2.2.2 What are some products you can think of that have found success in XYZ dimension? - Synthesize Finding. Determine the riskest dimensions from combined research and update PMF narrative
3.1 High conviction vs low conviction
3.2 The dimension with the highest domino effect is the one that impacts the most other dimentions
Risk Validation Techniques - PMF Interviews
Targeted customer interviews that strengthen our PMF narrative by validating all dimensions
- Prepare, identify and source the target audience
- Conduct, ask the right questions in a repeatable way
- Debrief, effectively synthesize key insights
Risk Validation Techniques - PMF Interviews - Prepare
2 main aspects
1. Recruiting, identifying the right people to talk to and soliciting their involvement
1.1 Test all of the hypothesized customer segments, including future and adjacent users.
1.2 Avoid late-stage pivots
2. Logistics, who will conduct, in what setting, and what means of compensation and consent.
Steps
1. Plan, determine the types of participants to talk to and how many participants the research needs, at least 3-5 participants per segment
2. Source, find possible participants through our own network, short-term traction channels and long-term growth channels
3. Contact, reach out to participants to solicit involvement
3.1 Brevity, Keep the ask clear and easily comprehensible
3.2 Problem-led messaging, the message should center around the hypothesized problem
3.3 Emphasis on conversation, talk about experiences; don’t sell
4. Screen, ensure participants are relevant to the research in case they don’t end up being relevant participants
Risk Validation Techniques - PMF Interviews - Conduct
Conduct Structure
60 - 90 mins
Rapport (5mins)
Build (10 mins) (Good for target audience validation)
Peak (40 - 70 mins) (Other dimensions)
Wrap up (< 5 mins)
Ensuring Depth: Unaided questions -> aided questions -> stack ranking
What are the biggest problems you are facing in accomplishing XYZ? Can you stack rank them?
We have identified some problems too. Can you tell us if they affect you?
Can you rank the problems from most to least severe from both?
Ensuring Breadth: Repeat the process across all six dimensions
It’s critical to repeat what they just said
Pay attention to non-verbal signals
Risk Validation Techniques - PMF Interviews - Debrief
Insightful: pattern match across interviews, consider trends in totality
First-order insights -> Second-order insights
Iterative: Consider both interviews just finished and what is to come. Be open to iterating the interview script
Unbiased: Take time to ensure correct interpretation, keep confirmation bias in check
Confirmation Bias: the tendency to interpret new evidence as confirmation of one’s existing beliefs or theories.
Risk Validation Techniques - PMF Interviews - When to stop
Are we hearing consistent themes in the interviews?
Have we interviewed enough people per segment (about 3 - 5)?
Risk Validation Techniques - Targeted Validation
Menu of Techniques
Surveys, Gathering asynchronous feedback from potential users (problem to solve, target audience, value proposition, and business model)
Smoke tests, Tracking clickthrough rates on nonfunctional pages to gauge user interest (problem to solve, target audience, value proposition)
Prototypes, building lo-fi model of the product (value proposition, competitive advantage)
Pre-sales, pitching and advance selling the product to gauge interest (problem to solve, value proposition, competitive advantage and business model)
Product tests, building and testing the product (value proposition, competitive advantage and business model)
Growth tests, measuring growth channels against one another (Growth strategy)
Risk Validation Techniques - Targeted Validation - Surveys
Speed: Medium
Cost: Low
Applicability: A good first targeted validation technique following PMF interviews. Especially at established orgs.
Surveys are often followed by other targeted validation techniques
Use early when we can easily access users to validate PMF interviews
Risk Validation Techniques - Targeted Validation - Smoke tests
Serve the market product concept on a webpage that encourages potential customers to click something to learn more. The click-through rate then can be tracked.
Fake Door Test: less detailed invitation to new product or feature; often used in PMF expansion cases.
Landing Page Test: More detailed; sometimes include early screenshots of product, explainer video or product pricing
Speed: High
Cost: Medium
Applicability: Great alternative to surveys when there is no existing audience (zero-to-one startups) Commonly leveraged as an earlier technique.
Risk Validation Techniques - Targeted Validation - Prototypes
Experience Prototypes; Low fidelity; test user experience, user flow, and high-level value prop.
Technical prototypes; are used to validate the feasibility of the required particular technical solution.
Speed: Medium
Cost: Medium
Applicability: Especially well-suited for validating the product’s ability to deliver on the value prop.
Use when our riskiest hypothesis is solution feasibility
Risk Validation Techniques - Targeted Validation - Pre-sales
Pre-sell the product before it’s available, primarily testing the business model through the sales pitch.
Speed: Medium
Cost: Medium
Applicability: well-suited for validating business model, especially the willingness to pay or pricing viability.
Risk Validation Techniques - Targeted Validation - Product tests
No-code MVP, building an initial product using no-code tools to simulate the experience
Wizard of Oz test, little coding; automatic on frontend and manual on backend
MVP, enough coding to create a product with bare essential functionality
Phased delivery, Extensive coding to build high-quality, highly polished product
Speed: Low
Cost: High
Applicability: Often used as one of the last targeted techniques after fast and more cost-effective ones. Best way to measure actual user behavior
Sometimes the only way to validate especially for novel social experiences.
Risk Validation Techniques - Targeted Validation - Growth Tests
Directly test growth channels before scaling efforts
Dependent on the channels
Speed: Medium
Cost: Medium
Applicability: Only targeted validation technique that can validate the growth strategy dimension
