The Intersection Of Fit: Market ⋂ Product ⋂ Channel ⋂ Model
“The only thing that matters is getting to product-market fit”…. I don’t know about you, but I have heard that phrase many many times. There is no shortage of articles and books about this topic, heck if you write “startup fit” on Google, the first link that pops up is about how to achieve product-market fit. Don’t get me wrong, product-market fit is important for a startup to achieve, but I also see that startups and entrepreneurs get a tunnel vision from this thinking that limits them to achieve the sustainable traction they seek. Inspired by Brian Balfour, the purpose of this piece is to highlight that entrepreneurs need to seek the interaction of fit between Market ⋂ Product ⋂ Channel ⋂ Model to achieve sustainable success.
Seek Market-Product fit not Product-Market fit
I think it’s important we first discuss the difference between product-market vs market-product fit and why the latter is better wording. You may see this as just a small terminology difference, but ultimately phrases shape us a lot. The product-market fit phrase creates a mindset of first you build a product and then you look to fit your solution to customers problems that hopefully are large enough to create product-market fit.
Customers don’t care about your solution, but their problems — Ash Maurya
A market-product fit mindset is to start with the market, which means with the customer problems, not the solution and iterate from there. It’s about uncovering the right product to build based on a deep understanding of customer problems and motivations, market size and the satisfaction with existing products.
What is Market ⋂ Product ⋂ Channel ⋂ Model?
Being too focused on a specific fit leads to silo thinking. I have seen this happening in my previous jobs and in venture building that sometimes you get so focused on a specific hypothesis or a section of the business/lean canvas that you forget the interactions between the areas. Getting market-product fit is a great achievement but is definitely not enough if you want to create sustainable traction. That’s why I put together this Venn diagram, representing market, product, channel and model. These four areas are obviously nothing new and must be addressed by any startup but again they are often treated as separate parts. The goal instead is to experiment and identify how to best make them fit together to get to the intersection between all four areas M⋂P⋂C⋂M. This intersection of fit is crucial for a startup to be successful.
Market ⋂ Product ⋂ Channel ⋂ Model = 🎯🚀💰
The Intersection of fit: Market ⋂ Product ⋂ Channel ⋂ Model
Questions to uncover intersection fit
- Who are your target customers? (Characteristics)
- What problems do they have? (Needs and wants)
- What are the alternatives to solving the problems? (Competition)
- What are the motivations/triggers for customers to seek a new solution? (Push)
- What is the size of the opportunity? (Market size)
- What is your solution? (Features)
- What problems will it solve? (Value proposition)
- What are the triggers to hook the customer? (Pull)
- How long time to value creation? (Time to value)
- How do you build stickiness? (Engagement and retention)
- Where do your target customers hang out? (Reachable)
- What channel types to use? (Distribution strategy)
- How scalable is your channel? (Channel scalability)
- How much is the customer acquisition costs? (CAC)
- How do you monetize? (Method)
- When do you monetize? (Customer journey and frequency)
- How much do you charge? (Pricing)
- What is your customer’s lifetime value? (LTV)
When starting out, I suggest thinking and getting answers in the order of market-product-channel-model, which is the recommendation if you work with the lean canvas. First, seek to really understand the market, who is the target customer, what are the most important problems to address and what solutions do they currently use. This helps you fall in love with your problem and not your solution, by starting with the market dynamics. Then follow through with answers to your product area while keep validating whether it fits with the market. Don’t wait too long before you look to integrate the other areas.
You need to find channels that fit with the target market and to the value proposition of your product. It’s great that you are seeing a large number of people coming to your platform, downloading your app, but if your product doesn’t solve for their needs and wants, they will quickly leave and churn. For example, if you use a channel like TikTok for performance marketing, generally users have less patience to find value when clicking on an ad. Consider also how well that matches with the value proposition of your product and the user onboarding/registration. If your strategy is to build virality, this is more likely to succeed if your product has a quick time to value and the product’s value proposition fits with a large percentage of customers' network.
Make sure to incorporate the model, which is about how you make money (monetization). To create a sustainable business, it has to be viable, which means that the customer’s lifetime value has to be higher than the channel’s customer acquisition cost. Find out what is the right amounts to charge with the right methods taking into account your target market profile and the type of product you provide. For example, you can monetize via ads, freemium, free trial, subscription etc. but again they have to fit with the other sides to be successful.
How do you know when you have intersection fit?
I wish I had a checklist that would tell me with certainty — “You have achieved 50% fit based on XYZ, fix this and you will get to 100%..” Well, that’s not the case, instead, we can reflect on what experts say and look at successful startups to give us an indication. Below I have listed what I think can be good indicators to help.
- LTV>CAC, You can’t live off your parents' funding forever, it’s vital that the lifetime value of your customers is a good amount higher than your customer acquisition cost. If you are still a young startup not knowing your LTV, you can use annual average revenue per customer.
- Customer retention, As a Product Manager, this sometimes feels like my bread and butter. Achieving retention rates above your industry is an excellent indication of getting the right customers and creating value.
- Asking “how would you feel if you could no longer use the product” and at least 40% says “very disappointed” has shown to be a good indication for startups that gain strong traction.
- Referrals and word of mouth indicate that your existing users are getting value from your product and increases the likelihood for better conversion rates.
- Net Promoter Score (NPS), to check for satisfaction, ask customers “how likely is it that you would recommend to a friend or colleague?”, seek a score of 40+.
Getting to product-market fit is important for any startup, but I challenge the notion to get tunnel-visioned by it and instead believe you should plan early on how you are planning to get to intersection fit Market ⋂ Product ⋂ Channel ⋂ Model. I think the best way to do this is by having answers to the above questions and then through iterations see how you are progressing towards the fit.