Can Product Market Fit (PMF) be measured objectively
Paul Graham coined what it feels like to have PMF
“And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account.“
So a natural question ensues: What are the best ways to measure PMF? In this article we will discuss:
- Metrics that matter
- Identify your Power Users
- Arriving at a PMF framework
Metrics that matter
What many startups get wrong is that they drive their business with “Vanity Metrics”. Number of users, number of upvotes on ranking sites, PR campaign mentions, funds raised etc…
A great place to start on metrics that matter is with the classic Pirate Metrics. In the early stages a startup’s conversion funnel is a much better indicator of future growth than revenue.
Certainly even raising significant funds can lead to a startups’ failure.
Andrew Chen remarks that Traction is everything – it’s what investors ask for. But getting traction is really a reflection of your product “working” – where users are engaged and retaining, and there’s some organic acquisition. Really the best metric to think about is probably retention (30% of user base, rule of thumb), which you’d analyze using cohorts. That means it’s sticking, and now all you need to figure out is acquisition.
Net Promoter Score (NPS) is a great tool to measure the magnitude of your product’s or service’s word of mouth. It should come as no surprise that the most successful companies generally have the highest NPS’s.
Before it can sell the product efficiently, the entire organization needs to learn how customers will acquire and use it, a process Mark Leslie called the sales learning curve.
Previously I argued that each startup should religiously track its North Star metric and attach Customer Success metrics to be able to prove to the customer that x metric gets improved by y percentage, because of your product.
Learning is also fundamental unit of progress for startups. More learning should increase chances of success. A clear sign of progress for a startup is its ability to demonstrate that it has learned and can show that learning through experimentation and tracking of the feedback received.
However, whilst all the above are significant, the main item I would like to explore is tracking and doubling down on the actions of Power Users.
Identify your Power Users
Power Users are the biggest sign of product-user fit. Making the leap to product-market fit is about listening to these users to evolve your product to attract more users. When exploring products that have only been in market for a short amount of time, the behavior of power users is often more interesting and important than any aggregate metrics. If the goal is to “make something people want,” then continuously talking to and observing early power users is the only way to really understand what drives both user retention and non-user activation.
Andrew Chen says, usage frequency affects the value of someone’s feedback: feedback from customers who rarely use your [product] can be weighted differently from those who use it daily. The type of user—free vs. lead vs. paying—also affects their feedback value to your business. When you are looking at a piece of feedback or a feature request, you must know who it comes from: is it someone who has spent money trying to solve a problem, or put a lot of time into it?
Power Users look like:
- Durable retention that proves users are here to stay
- Engagement depth that maps to the natural user behavior (i.e. your ideal expected behavior from a user)
- User testimony that evangelizes the value
Sean Ellis, creator of the PMF survey says that you want to learn everything you can about the people who consider your product a “must have.” What is the user experience that makes people consider it a “must have?” What is the key benefit that they get from that experience? Why is that benefit important to them? You should use this information to shape the path for all future prospects with the goal of delivering this experience.
In almost every case, a key driver of bottom-up adoption is to listen to early power users closely in order to discover the insights that get you to a world-class product.
Arriving at a PMF framework
The main goal of this series of articles is to lay down the various thoughts and experiences that have led to a PMF methodology that can objectively measure a company’s PMF leading indicators. A seminal article by Raoul Vohra is a must-read for anyone who has a startup or has recently launched a product.
The Superhuman team first identified users who recently experienced the core of their product, following Sean Ellis’ recommendation to focus on those who used the product at least twice in previous two weeks. At the time they had between 100 and 200 users to poll, but smaller, earlier-stage startups shouldn’t shy away from this tactic — you start to get indicative correct results around 40 respondents, which is much less than most people think.
The process is simply to launch a survey asking the following:
1. How would you feel if you could no longer use [product]?A) Very disappointed
B) Somewhat disappointed
C) Not disappointed
2. What type of people do you think would most benefit from [product]?
3. What is the main benefit you receive from [product]?
4. “How can we improve [product] for you?”Once responses are received: Q1 – Segment responses to find your supporters and paint a picture of your high-expectation customers. Identify them by cohorts – gender, department, time with company, free or paying Note: ensure that you can track respondents to their usage data Q2 – Responses will create power user personas. Analyze feedback to convert on-the-fence users into fanatics. Why do people love the product? What holds people back from loving the product? Tip: throw the answers into a word cloud Q3/Q4- Build your roadmap by doubling down on what users love and addressing what holds others back. Create a cost benefit matrix for new features by plotting impact vs cost 50% of roadmap is doubling down on what power users love 50% is reeling in peripheral users who had the right persona and interest but were not yet bought-in Once you have established your core value adding features and those additional features that reel in personas engaged but not yet in love, you will be left with a road map for development, imbued with power user feedback.
Additional questions in preparation for the PMF framework:
- what is the north star for your company (how have you learned this)?
- how is your user experience tied to this north star?
- what language do you use to define how you provide customer success?
- who is your customer persona?
- what are your power users doing differently (or experiencing differently) ?
- do you know why people love the product?
- what is the market opportunity? Why Now? Is there a market/technology inflection point?