5 Tips for Determining Product Market Fit
Achieving product-market fit is one of the most telling signs that your product and business are positioned for long-term success. It helps Consumer Packaged Goods (CPG) companies understand if their product addresses and satisfies a specific market gap, whether or not consumers acknowledge their product’s value, and how they can iterate products to continuously grow and scale.
This article will overview what product-market fit is, why it is important, how to achieve product market fit, and how to determine when you have achieved it.
What is Product-Market Fit? Why is it important?
Product-market fit is when your product sells, addresses the needs of your target market, promotes business growth, and sustains repeat customers. It’s all about learning what your customers want and delivering that to them consistently. When a business achieves product-market fit, it has proven to solve a real pain point, is well-positioned to make a large impact in a specific market, and is worth scaling.
Reaching product-market fit signals that consumers are convinced of your product’s value. It turns your consumers into advocates and thus helps you grow your customer base (and eventually, your sales!). This will only occur if your product upholds its value proposition, solves consumers’ pain points, and replicates that excellent experience for new customers. A great example of a CPG product that has achieved product market fit is the RXBar. Peter Rahal, founder of RXBar, realized there was a market need for clean, healthy energy bars that are delicious and nutritious without being packed with sugar. So, he introduced the RXBar—a no B.S., sugar-free bar made only with real ingredients. Rahal reached product market fit by noticing a specific pain point, using his product to provide a solution for that consumer need, and employing effective marketing and sales strategies in order to position his product for success.
Because reaching product-market fit promotes the success and longevity of your business, it is often considered an ultimate end goal for your business—but how do you get there?
How to Achieve Product Market Fit
Achieving product-market fit is intimately related to making things people want. On average, 80 new consumer products are introduced into the U.S. market every day. This can seem like a daunting data point for new businesses—how can your product possibly distinguish itself from the other products entering (potentially the same) market? The answer lies in making things people want. To do this, you must know the pain point, gather feedback from customers, and iterate your product to meet those needs.
The product you are introducing into the market must address your consumers’ pain point—or a specific problem, desire, or need they experience— and not necessarily yours. This is the only way to ensure that your product sees success in its target market. Samy Kobrosly founder of Snacklins, for example, identified the pain point many consumers face: wanting to snack without consuming excess calories. So, he developed Snacklins, puffed vegan crisps made of mushroom, yuca, and onion that clock in at only 80 calories per bag. It’s all about determining whether anyone needs your product and whether anyone is willing and eager to invest in it.
Once you’ve identified a pain point, you must then determine your target customer and understand what they want. By speaking with customers, gathering data, and conducting surveys, you can understand what customers think of your product’s appearance, flavor, texture, packaging, etc. You will also get a better idea of what type of person is likely to invest in your product—someone younger who prioritizes a lower price and convenience? Or health-conscious environmentalists who care more about quality and eco-friendly ingredients and sourcing?
All of this information will give you a clearer picture of what markets and audiences you should target, as well as what those customers actually want. Ultimately, making things people want and reaching product-market fit requires a commitment to going to stores and talking to customers. It is only by gathering this crucial feedback that you will be able to tweak and iterate your product until it is positioned for success. When you have a product people want, dominating locally becomes almost a given. And when you dominate locally, expanding regionally, and eventually nationally, becomes a much more seamless transition—it simply becomes a question of logistics rather than a stalemated process of trying to force a product into a market that no one actually wants.
How to Know if You’ve Achieved Product-Market Fit
There are several indicators that signal that your product has reached product-market fit. It ultimately comes down to if you are selling into more stores and selling more per store.
- Your product is selling faster than you can produce
If your product is flying off the shelves and you are outselling the national category leader, that means that your product is in the right market and is effectively addressing consumers’ needs. Once your production capacity can no longer fit the demand for your product, it’s time to start thinking about scaling up.
- Profits are increasing and your business is experiencing growth
If your profits are growing and you are getting picked up by more accounts, it likely means your product has reached product-market fit. As long as consumers continue to acknowledge your product’s value proposition, your business will continue to experience this growth.
- Growing press coverage
The press and media highlight products and businesses that are gaining traction and popularity with consumers. Increased press coverage is a strong signal that your product is positioned for success. Once your product starts receiving press coverage, you should expect to see that growth continue, as it will only attract new customers and increase sales.
- Word of mouth advertising
Word of mouth marketing is when a customer praises or recommends your product on their own, rather than as a paid endorsement. As people begin buzzing about your product and your product receives an increasing number of good reviews, press, and social media coverage, that signals that your product is probably a good fit for the market.
- Repeat customers
Lastly, having a large percentage of repeat customers is a strong signal that your product fits a specific market. This means that your customers are confident in the value, quality, and utility of your product, and are eager to continue investing in it!
Reaching product-market fit is about making things people want at the right time and in the right place. To do this, you will need to get to know your target consumer, understand their pain points, and learn from their feedback. This will help your business continue to iterate and improve, ensuring that your product is positioned for success in its target market.