What Is Product-Market Fit?

Product-market fit is the measure of how successful your product or service offering is within the market you're selling to.

When you have product-market fit, it means customers are buying, using and telling their family and friends about you in large enough volumes to sustain and grow the business's operational expenses and profits.

There is a growing demand for your offering and your brand, and you are achieving exponential organic growth. In other words, your customers value your product so much they're raving about it to their friends, and their friends are also buying.

## Why is product-market fit important?

Product-market fit is especially important because until you have it, you don't know whether your product or service solves a real problem and if the business economics can sustain your operation and allow for adequate profits and growth.

You might have identified a need in the market. Developed a solution. Found potential customers. But if customers aren't willing to pay enough to generate the cash flow you need, your product may not be a good fit for the market.

Ultimately, it's important to identify that you have product-market fit as early as possible so you don't sink time and money into a venture that the market doesn't want — or isn't ready for right now.

## How do you know if you have product-market fit?

You'll know you've achieved product-market fit when your product or service sells itself, and you don't need to use paid advertising to grow sales. Your offering solves a real need in the market, it is highly sought-after, there is established demand, your pricing represents good value, and sales grow organically via word of mouth.

## How to identify an opportunity in the market

1. Identify a problem or need in the market and confirm there is demand for a solution 2. Define your value proposition and unique selling points 3. Pitch your value proposition to 100 people to gauge their response 4. Develop a minimal viable product (MVP) 5. Test your MVP with a small closed group and gather feedback fast 6. Determine if there is a market for your product — the size, and what they're willing to pay 7. Look for signs of organic exponential growth

## What is exponential organic growth?

Exponential growth means your solution is so good that for every customer who buys it, they naturally tell two or more friends — and each of those tells two friends, and so on.

Organic means unpaid. Your growth isn't reliant solely on paid advertising or incentives. The network effect you create fuels unlimited growth, until you've saturated the market and hold a substantial share of the marketplace.

## How much does it cost to bring a product to market?

The better your product-market fit, the cheaper it is for you to bring your product to market. When putting together your first budget, target no more than 15–20% of your gross sales going toward marketing, depending on your margins.

You might split that 20% into something like 10% for ad spend, 5% for staff and 5% for events, incentives or promotions.

## 10 ways to increase market share

1. Innovate your offering so your value proposition provides more value and is truly unique to you 2. Design "talk triggers" into your product offering and customer service 3. Grow existing customer relationships by reselling, cross-selling and upselling 4. Introduce a loyalty rewards program 5. Bundle products or lower prices 6. Build strategic alliances and partnerships 7. Advertise your USPs to people looking for those USPs 8. Work with influencers who can advocate for your product 9. Increase product quality 10. Update your market position to better align with your customer needs