You’ve just come up with an interesting product or service idea.
The product solves an ongoing pain point for you. You’re enthusiastic. You already picture yourself as a successful businessman. You’re a millionaire.
Now stop. Come back to reality. What you perceive as a million-dollar idea might simply be your emotional and subjective opinion.
Your product might solve similar pains of your customers but it might not be in demand at all.
As a result, you may appear in a situation where you have spent lots of money, efforts and other resources to take your product to market, but failed.
Luckily, there’s a way to avoid this scenario and it’s called achieving product-market fit, which is done through market and product validation process.
This article will dive into different definitions of product-market fit, its benefits and why product-market fit is important for startups. We’ll also elaborate on who is responsible for product-market fit and walk you through the process of market and product validation. Lastly, we’ll point out the most effective ways to measure product-market fit and introduce you to Prelaunch.com—an all-in-one product validation platform. As a bonus, we’ll also cover an example of product-market fit from our very own experience.
What is Product-Market Fit?
Product-market fit is something that every startup strives for. It’s the holy grail of marketing, in which you have a product so well-suited to its audience that people buy it without any convincing at all.
Because the concept is relatively new, ithere is no one product-market fit definition. Everything depends on who you ask.
So let’s see the most common answers to the question “What is product-market fit?”
Let’s first start with the product-market fit definition from Marc Andreesen, who originally coined ‘Product/Market Fit’ in his post “The Only Thing That Matters”:
According to Andeersen, product-market fit means being in a good market with a product that can satisfy that market.
He then goes on explaining the concept in greater detail by pointing out two cases:
You can always tell if product/market fit isn’t happening by examining these signs: customers aren’t getting enough value from your product or service, word-of-mouth isn’t spreading as quickly as expected, usage growth is stagnant after launch day (or declining), press reviews are mediocre at best then they go on to say “try again next time”, sales cycle takes too long with lots of deals dropping out before anything even happens for them in their life, etc.
And you can always feel product/market fit when it’s happening. You know you have something special on your hands because customers are buying the product just as fast as you can make it — or usage is growing just as fast, and money from those customers is simply increasing at the speed of light. It doesn’t take long for reporters to hear about this hot new thing that’s making waves with users everywhere and they want to talk to whoever created such an amazing idea so they call you…
Product designer Josh Porter in his book Principles of Product Design points out another indicator of product-market fit—customers’ level of dedication and excitement. According to him, you hit the perfect product-market fit if your customers begin selling for you. This occurs when customers not only understand and use your product enough to recognize its value, but also start telling others about it. This means you have found a winning formula in your hands! Now you have an extension of your marketing efforts—your very own customers.
Another helpful product-market fit definition offered by Andy Rachleff, the CEO of Wealthfront, has to do with the validation of the value hypothesis. As put out by him, a value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Thus, if you manage to identify the right value hypothesis, you have found the product-market fit. In fact, a value hypothesis is a thoughtful evaluation of both the features and business model required to satisfy your customers.
In short, product-market fit means that people love your product, buy it and can’t stop talking about it. The concept is important because businesses must know whether they have a product with market appeal before they dive into the production phase. Investing funds into developing goods nobody’s looking for, or which are inferior to existing products, is a waste of money and time. Without a deep understanding of how well or poorly a startup is doing in its quest to find product-market fit, founders will be flying blind – always missing one metric while chasing after another with no end goal in sight.
Overall, product-market fit can often be an early step when building a successful enterprise; it revolves around answering important questions like “do I have found something people would want?”. This helps lay more groundwork beforehand and avoid losses in the future.
Benefits of Product-Market Fit
Finding product-market fit is one of the most important steps for any business.
It helps you identify the following:
- What features your products need to satisfy customer expectations
- The most relevant demographics for your product
- How you can grab a prospect’s attention and persuade them into buying your product.
- What you need to do to turn your prospects into your product ambassadors
All this will help you set yourself apart from your competitors who failed to find their product-market fit. As a result, your chances of attracting loyal customers, boosting your visibility online, and increasing conversions will be much higher. And not only this. Once you strike a perfect balance between your product and market needs, you’ll be on the right track to developing products of high demand. This means lots of sales, loyal backers who look at your product as a solution to their problems and pain points, as well as high possibility of them turning into your brand ambassadors.
Now you say, isn’t the time and efforts spent on finding the right product-market fit really worth it?
Product-Market Fit Goals for Startups
A startup’s success depends on the product it offers and its demand on the market. Without a good market fit there is no point in wasting time and money to develop your solution, because it will never sell! This is the exact reason why many startups fail.
Thus, as a startup you should pay close attention to product-market fit in the first place as it’s a determining factor for your success. For this, ensure you deeply understand their customers’ pain points and how your product can solve them. You can do this by considering six primary areas discussed below.
1. Know who your target customer is
If you need a breakthrough idea for your product, it’s time to analyze what makes people tick.
For this, you should first of all find out who are those people who would benefit the most from your product.
A good way to make sure you’re on the right track is by creating buyer personas based on market segments so that the team will know who they’re building toward – their perfect customer!
Here are a few steps suggested by TechStars’ Entrepreneur in Residence Sean Higgins to make the process smooth:
- Analyze your product or service
- Know your competition
- Choose segment criteria
- Perform research
All these steps will help you identify your ideal customer and know in advance which part of that persona you’ll target.
2. Gather insights
The best way to improve your product is by talking to the people who are buying it.
To develop a sound marketing strategy, first talk to your customers and ask them about their pain points. Find out how much they would be willing to pay for solutions through surveys or face-to-face conversations with potential buyers in person.
Also, it’s a wise strategy to ask your colleagues from the sales department as well as those involved in customer service what issues often come up between themselves and clients that are not being solved by current offerings.
What’s more, make sure you collect a large enough data sample to provide meaningful feedback.
Note that you can do this through surveys as well, but face-to-face conversations can often generate feedback that online surveys won’t.
3. Identify your narrow niche in the market
What startups really lack is a big budget, meaning they should do their best to sell their product to the right people. Considering everybody here is a path to an absolute failure.
That’s why the best thing startups can do is to narrow the focus of their activity and become an expert in a specific industry to boost their sales.
For example, Netflix saw that people were ready to pay a fee for watching films without advertisements. This very concept brought them incredible success and popularity. Today Netflix is a streaming giant with a 25 billion U.S. dollar revenue. This means they found a narrow niche in the market—an unoccupied blue ocean—and targeted the people there.
That’s the way to go!
4. Think twice about your value proposition
Think about what you’re offering to your customers. Which of their needs can you satisfy? Can you offer a solution that will surprise them or solve their problem in a unique way?
For instance, Netflix’s entire value proposition positions them as providing a huge variety of quality entertainment to their users, 24/7—without ads!
5. Measure your product-market fit
You can never know whether you’ve succeeded or not unless you measure your performance. Here you need to identify key data points to help you track your performance. For more specific ways to measure your product-market fit, go to How to Measure Product-Market Fit section below.
6. Continue growing
And last but not least, product-market fit is not permanent. Once achieved, it won’t last forever. Times change, your customers’ needs change and your competitors change too! So stay in the loop of all developments and constantly develop your product to stay on top!
Who is Responsible for Product-Market Fit?
Usually the concept of product-marketing fit is associated with product management and marketing. However, experience shows that everyone at the company has a role to play in achieving and maintaining it. Sales, finance, business development, support, —all departments have a role to play here. By working together towards this important milestone is a guarantee to success.
The Process of Product Validation
Product validation process is when you’re making sure that your end product satisfies your customers’ expectations.
Now you may ask: “But how to do product validation?”
To answer you, let’s first look at the steps you should take to achieve it. Note that the order of the steps cannot be changed.
- Problem: If you want to succeed, you should start not with the product—as many people do—but with the problem first. Is the problem you’re aiming to solve with your product a big one? Is it an important one? One of the useful ways to do this is by interviewing your potential customers. But before doing this it’s worth working with your team to come up with the best ideas. Here are a few mini-steps to validate the problem:
The first step is to create a map to understand the problem. You can do this by focusing on key parts of the problem, and seeing the related areas, stakeholders, and concepts. With clever mapping practices, understanding the problems can become much easier!
It’s important to think of different solutions for the problem you are trying to solve. For this it’s a good idea for your team to break up into smaller groups or pairs and brainstorm a few ideas each before consolidating them later on in the process. This will get you 2 – 5 different solutions at your fingertips so that you can make an informed decision on how best to proceed with solving the issue or challenge presented before you. When it comes time to present your ideas, be sure to not only offer up a single idea but also take into account feedback from other members in order to find the best solution.
After you’ve given your idea a thorough review, it should be time to regroup and figure out which one is the best. You might choose between ideas that solve your problem the best way or present less of an investment required to enter the market.
- Customer: Identifying your customer is an important step in creating a product or service that meets their needs. Who is your ideal customer? Who would really want to buy your product? If you say “everyone”, then it will be a tough time for yourself since people are all different and have their own needs: concentrating on everyone instead of a niche audience will only lead you to failure.
- Market: Next, you must validate the market. Are these potential customers that I interviewed truly interested in my product? Or is there another group experiencing this problem even more intensely or at higher rates? This market validation stage is also about assessing the market size and share. If you want to turn your idea into a successful business, take the time upfront to estimate how big your target market is and what percentage of it you can realistically capture. By doing so, you can not only make for a more accurate estimation but will also legitimize your product’s launch. For products similar to yours, research sales data for comparable items; the number of manufacturers currently producing it and how much share your segment has in relation to the total market. Determine where you fit into this marketplace, assess what percentage is left for your business, and determine if that’s enough or not feasible.
- Product: If you’ve made it this far, then congratulations! Time to get your product validated. This is the stage when you tie the value of your product directly back to your customers’ problems. How does your product solve their problem? How does it make their life better? This can be tricky though so we’ll explore several methods—including prototyping and landing page testing—to help you determine if your product will be a hit with customers now.
- Profitability: You might also research prices with different markets and niches, to have a better sense of which you should tailor your product for. Which market offers not the highest price point but the highest potential profit?
Once again, make sure to do your validation in order! Don’t try to validate your product or its profitability before determining whether or not the issue is worth solving.
Methods of Product Validation
Now that you know the main steps leading to product validation, let’s talk about the specific methods you can use to achieve it.
If you want to make sure your product is worth the investment, go through all of your free options before investing in anything. Let’s start with them to specifically see how to do product validation and which strategies to use for best results.
One way to gauge the market validity of your business idea is to research monthly search volumes for terms related to what you’re selling. When consumers need a product or service, they often use a search engine like Google or Bing and type in keywords that relate specifically with their needs. To find out what they search most, you can conduct keyword research using SEO tools like Google Trends, Moz, or Ubersuggest.
For instance, if you’ve decided to create a cat water fountain, you can use Google Trends to see if it’s something in demand on the market:
To get more accurate results, you can also narrow down your search by typing “cat water fountain” if it’s specifically for cats.
If there’s not a lot of search volume surrounding your product, you should consider using terms that express customer intent. For instance, if you design a special orthopedic pillow, you could look up how many people search for “pillow for sore neck” or “best pillow for sore neck.”
In all these cases, the search results not only give you an idea about the potential customer interest but also help you get insights on which regions would be more interested in your product.
Customer Validation Interviews
Another effective way of learning about your product’s potential is through conducting interviews with your target market audience.
You can do this by running focus groups, sending out online surveys to your potential customers or meeting with them in person. Find out how they are currently handling the problem that your product solves by asking a series of questions. These questions should be aimed at revealing your potential customers needs, preferences, motivations, and the products they currently use to solve their problem.
Frame any assumptions or hypotheses you made during the market validation process as questions for your interviewees. Also, be especially open to the feedback you receive: you can use it in the future to improve your product if it proves to have weak market validity.
Here’s a list of a few questions for you as a reference:
- When did you first think about buying [PRODUCT]?
- What challenge did you hope to solve by buying [PRODUCT]?
- Where did you learn about [PRODUCT]?
- What other options did you explore before making your decision?
- What was the determining factor that made you choose [PRODUCT] over the other options?
- What solution were you using before? Why Didn’t You stick to that solution?
- Who pushed/recommended you to buy [PRODUCT]?, etc.
As a result, you might discover, for example, that although there isn’t any exact product like yours on the market at this time, they have found other ways to get around and don’t feel like paying for what you want to sell. This will help you to think of something else without making aimless investments or develop your idea further into something more valuable and demanded.
You might also find that the perfect product to provide a solution for their wants doesn’t exist yet! If that is your case, then perceive this as a green light and roll up your sleeves for the upcoming hard work.
Creating your minimum viable product and presenting it on a landing page is yet another way to get an idea about your product’s potential.
The good thing about landing pages is that you can monitor the activity on the page and make decisions based on data. For this, you need to install Google Analytics or use the built-in analytics tool built into your landing page builder.
Your landing page can actually consist of three parts:
- Features/benefits of the product, how it works, etc.
- Options of the product (different colors, sizes, types, packages, etc)+CTA
The second page gives you further information about the product, presenting in detail its options. In case of Buffer the second page was about its packages and pricing.
For a physical item, the page may look like this:
- Subscription form
This is the part of the landing page that makes it different from a real product page: once they click on the CTA on the second page they will be redirected here to leave their email.
This pre-launch page notifies users that the product is not quite ready to go. At the same time, It gives them the opportunity to enter their email address in order for them to find out more about it once it’s ready and available for purchase.
With this three-part website, you get a chance to easily test your entire sales funnel without even creating your product.This means you can not only get an idea about the demand of your product but also address user objections well before making any investments. A landing page like this is the best way to measure your user interest as they move through your page and decide whether they want to buy your product or not.
To make this kind of page you can use landing page builder, which provides you with the features of A/B testing, analytics, and working forms. Otherwise, you can also use other tools or code it up using HTML, CSS, PHP, etc. Or you can opt for Prelaunch.com – an all-in-one platform that provides you both landing page builder and data insights to conduct your product and market validation. Read more on this tool here.
Drive Traffic and Test
Sure, you’ve spent zero dollars on your project up until this point but now it’s time to start spending some money. Stop putting all of the eggs in one basket and spend a little bit of budget to bring traffic to your page and see if people actually want to buy.
To do this, you can use Facebook ads, Google ads, LinkedIn ads, LinkedIn outbound, LinkedIn inbound, cold email, direct mail, cold calling, etc.
But before you start using all these tools, make sure to set up Google Analytics beforehand so you get a chance to track everything.
And another important thing: whatever strategy you decide to use, remember that it could take a little while for them to start really working. That means leaving them running long enough—say about a couple of weeks—depending on how big an audience you’re targeting is.
If as a result of your testing, no one is buying your product, then you should work on making changes on your landing page copy, re-evaluate your traffic sources, or even reconsider your product.
One of the best ways to validate your product is, of course, prototyping. A prototype is a test that simulates the final product. It’s actually your first step from a concept to tangible reality.
There are two main types of prototyping—low-fidelity and high-fidelity. During your validation process you’ll most likely do both, but at different stages.You’ll usually start with a low-fidelity prototype and then turn it into the high-quality version after getting feedback on how well people liked it.
- Low-fidelity prototypes – These prototypes aren’t as realistic: They can come in the form of a PNG mockup, paper drawings, or PDF of the UX. Although these prototypes lack realism and have limited functionality (as they aren’t clickable), they are still worth consideration because they’re inexpensive on a budget and allow testing different design layouts or accessibility issues in an economical way.
- High-fidelity prototypes – These projects are as realistic as possible. They look just like the finished product, but they don’t actually do anything! In the case of software, the user might be able to click on menu items a bit here and there, but all of the features will not work in this prototype. High-fidelity prototype just gives users an idea of what it could look like when finished.
During the product validation testing process, it’s important that you test your product with real prospective customers. There are two types of testings you can do—alpha and beta testing.
- Alpha testing is when the team of testers, who are part of a company’s own internal staff, tests out the product in an artificial setting. The goal for this type or testing is to eliminate any bugs, glitches ori ssues before releasing it publicly.
- Beta testing is a process of releasing unfinished versions of products to a limited number of real users. This helps identify and fix any problems before they reach your customers. Beta testers are encouraged to point out any potential issues so that you can be assured that when it’s finished, your product will be in its best shape possible! During the testing, make sure to inform the users that they are not being tested, but the product is being tested. The testing is not to check their tech savviness but rather reveal what they would change about the product and which features they would prioritize.
With the feedback you get from beta testers, you can improve your product, better leverage and meet your customers’ needs.
How to Measure Product-Market Fit
Now that you have passed all of these steps to finding your product-market fit, a question arises:
Does each of these stages require measuring the product-market fit?
The answer is no.
But conducting a product-market fit analysis, and setting up processes that will guide you in the right direction can definitely help.
When measuring product-market fit, you should consider the following:
- Your customers’ satisfaction level
- Engagement level with your products/services
- Frequency of your customers’ use of your product/services
- The number of users/customers you get through word of mouth.
Depending on the type of the business model and industry, the metrics may be different. For instance, an ecommerce business may be more interested in customer satisfaction, while a mobile app might pay more attention to the product usage interval, etc.
But at the same time, despite the differences it’s important to remember one common truth: Product-market fit is all about the actual value your users/customers get from your product/service.
Below we’ll discuss the essential product-market fit metrics you should consider during the validation of your product/service.
Essential Product-Market Fit Metrics
1) Net Promoter Score (NPS)
You might have heard that many companies often send an NPS survey to their customers to measure the product-market fit.
But what is NPS?
Well, NPS stands for Net Promoter Score.
It’s a metric that measures how satisfied your customers are with your product/service. Also, it can help you understand where there might be gaps in the user experience for them and give valuable feedback on certain aspects of your product/service.
This metric is widely used by all kinds of businesses, whether ecommerce, services or SaaS.
Measuring the Net Promoter Score is pretty easy: You just need to ask your customers one simple question:
How likely are you to recommend [product] to a friend or colleague?
In answering your question, the customers have to rate from 1–10.
The answer will help you determine two things:
- Your current customers’ happiness level with your products and services, and
- How likely it is that they would do word-of-mouth advertising for you.
What you can imagine is that having an answer to this question should be critical.
But it’s not enough. Although quite important, NPS cannot work as a standalone metric.
A simple Net Promoter Score (NPS) Survey alone cannot tell you for sure if you’ve found a product-market fit or not. It won’t give you an idea on how your users feel about your product or service either.
That’s exactly why you should be using NPS along with other metrics.
2) NPS—A complementary question
To make your NPS stronger, you can apply a complementary question. This is done by gauging what percentage of your customers would be distraught if they couldn’t purchase from you anymore. As a result, you learn the true worth of your product.
This additional question usually looks like this:
How would you feel if you could no longer use [product]?
The answers are the following:
- Very disappointed
- Somewhat disappointed
- Not disappointed (it isn’t really that useful)
- N/A — I no longer use [product]
Now stop here and think of one product that you know you can’t live without. What would happen if you could no longer use this product?
If the answer to that question is “Very disappointed,” then the creators have done a great job with your favorite thingy!
Your customers should be thinking along those same lines for your products and services too. Indeed, if you find that over 40% of your users are saying that they would be “very disappointed” without your product, then you know your product is indeed a “must have” and there’s a great chance to build sustainable, scalable customer acquisition growth.
3) CSAT (Customer Satisfaction)
Now let’s get to the third metric which allows you to gauge your customers’ satisfaction level.
The question that you have to ask is the following:
How would you rate your overall satisfaction with the [product/service] you received?
And here are the answers:
- Very Unsatisfied
- Very Satisfied
In fact, this CSAT combined with NPS can give you a really good idea regarding how your customers feel about your product or service.
4) Retention Cohort
Another important metric to measure product-market fit is the retention cohort or curve.
According to Amplitude, the retention curve is “…a line graph depicting the average percentage of active users for each day within a specified timeframe.”
In other words, retention cohorts show whether new users are coming back week over week. If this does happen, then it’s a good indicator that they’re getting value out of your product and the probability of their using it in future weeks is pretty high.
The graph shows the percentage of users that got engaged with content in some way (for instance, commented on a post, or watched a video). The tracking of users starts from their signup week (week one) and continues every other week.
If you notice that users stick around for several weeks, then this is a good sign of product-market fit. In case of the absence of product-market fit, the percentage of people returning will come close to zero.
However there is no one benchmark for you to decide the acceptable percentage of active users indicating product-market fit: It largely depends on a number of factors, including your business model, product, industry, etc.
So the best way to get a realistic perception about product-market fit of your product is to ask the question the following way: “What is an acceptable percentage of active users for each day for my business?”
5) Churn Rate
Churn rate, also known as the rate of attrition or customer churn is another measurement of product-market fit.
According to Investopedia, it “is the rate at which customers stop doing business with an entity.” In other words, it shows how many of your customers leave and how soon.
In case of subscription-based businesses, the churn rate measures how many subscribers the company lost for a given period of time.
To grow, a company must make sure the number of its new subscriptions is higher than people who unsubscribe in a given period.
In this sense, the churn rate is diametrically opposite to growth rate—another metric we address below: the first one measures the loss of customers, while the second one—how many customers the company acquired.
Understanding your industry churn rate is important to compare your company with others. Notice that each industry will have a different average churn rate: so find yours to be able to determine your position among your competitors.
6) Growth Rate
As we mentioned above, the growth rate is the rate at which you acquire customers.
You may think there is one acceptable or reasonable growth rate you should always always strive for.
But there’s not.
As with many of the metrics we discuss here, everything depends on your business model and industry.
However, most founders agree that the growth rate is an indicator of finding a product-market fit.
7) Lifetime Value
Life Time Value or LTV is a metric that measures the average revenue your customers will spend over their lifetime with your company.
This actual ‘worth’ of customers can help you in making many economic decisions, ranging from marketing budget and resources down the line to profitability forecasting.
To increase the LTV of your new customers you should do your best to reduce the churn. To achieve this, you can opt for using a retention strategy tailored towards different LTV segments.
As for companies with non-subscription based pricing, they can effectively increase LTV by creating and offering add-ons that can be up-sold to their customers.
Overall, by increasing the LTV you can achieve the following goals:
- Increase the actual value you deliver with your product
- Get more loyal customers who have no reason to look for alternatives to your product
- Result in long-term profitability of your company
- Improve your product-market fit even further
Thus don’t underestimate this metric that helps you better better understand what your customers think about you and make respective decisions based on it.
8) Product Usage Interval
How often would you like your customers to use your product?
Every week, every day, every month?
If you’re wondering about these questions in terms of finding your product-market fit, then product usage interval is the metric you’re looking for.
It shows the frequency with which you expect your customers to use your product.
You can choose any frequency you want, depending on your product or service.
For instance, you can break down the the usage interval into weeks for ease of measuring the results:
- Day 1 – 7
- Day 8 – 14
- Day 15 -21
Your results may look the following way:
Source: Growth Sandwich
As you can see, there’s a steady weekly retention, which is a good sign for product-market fit.
Thus, next time when measuring your product-market fit don’t forget to take into account this significant metric.
Prelaunch.com: All-in-One Product Validation Platform
Now you know everything about the importance of product-market fit, the process of market validation, its steps, as well as methods to measure product-market fit.
The next question is “Where should I start?”
Well, there are basically two options.
You can start by doing everything on your own, manually and by steps. But before you get your hands into this huge amount of work and spend most of your investors’ money, think about this statistics: 9 out of 10 startups fail because they build something nobody actually wants.
So to stay on the safe side and make the most out of your product validation process, you can go for an easier, more reliable and more convenient option by using Prelaunch.com. This ultimate product validation testing tool serves as an all-in-one platform for testing if there is a demand for your product and at what price, as well as find out which positioning and design works best for your product.
It provides you everything you need for prior product validation process in one place: a special landing page for different testings, as well as solid analytics to help you figure out if your product will be the next hit among your backers. Whether you are a startupper or a serial entrepreneur, this tool can help you set the ground for your big success.
Here are some of the platform’s benefits:
- Uncover the Perfect Price Point: Which would be the perfect price for your product? Is your product too cheap or too expensive? You’ll never know until you test. Prelaunch.com offers you plenty of opportunities for dynamic price testing. Hit the perfect price based on real tests instead of guesswork!
- Experiment with Features: Which features of your product should you focus on? Which ones would hook your customers the most? Use the landing page to test the perfect combination and different variations of your product and see what appeals most to your customers.
- Gain Customer Insights: Gain detailed insight into who your potential customers are and what they really appreciate about your product.
- Get Detailed Analytics: Get access to all the data about your landing page views, subscription and reservation rate, average session duration for subscribers and reservers, etc.
- Compare with Market Tested Benchmarks: Data are valuable when they’re based on the insight of the market. Prelaunch.com combines data with insights to provide you with the real picture about your product. With its time tested benchmarks, the platform gives you a clear answer to where your product will stand at launch.
Thus as compared to independent product validation proecess, the biggest advantages Prelaunch.com can offer you are the following:
- Gives you the convenience of using a native builder
- Allows you to make data driven changes
- Saves your time by offering only one dashboard to check data –
- Gives honest feedback about your product’s potential
- Gives you confidence on when your product is ready to launch
Now let’s consider how this tool can help you check your market demand and pricing.
- Check market demand
Prelaunch.com provides a chance to track your page visitors’ behavior to find out if they are interested in your product.
For this, the first step is to create a landing page, where you present your product’s features and benefits.
In our tool, we use a 3-page structure, where on the very first page we offer a subscription box with an exclusive discount upon launch.
Subscription is actually a win-win both for you and the subscriber. On the one hand, your subscribers get a chance to easily earn a discount for the product they are interested in, once it is launched. On the other hand, you get their emails, increase your subscription rate and acquire hot leads, who will fund your project once it’s launched.
Also note that at this stage your subscribers don’t see the product price, which means you get a filtered list of subscribers based purely on their interest in your product. Nothing in this world will make them subscribe if they don’t want to. This, along with the fact that through ads we target the most relevant audience from top crowdfunding-friendly countries, ensures that you get quality leads for your campaign!
But there’s even more to the page.
2. Check whether your customers will buy your product and at what price
Aside from just testing whether your customers are interested in your product, you can test whether they will actually buy it and what the best price will be. This leads us to the second page of our landing page, which appears once you subscribe on the first page.
Here we offer a reservation funnel, meaning we’re urging the subscribers to make a commitment to buy the product by putting down $1-10 based on the product price for Super Early Bird Discount.
This minimum deposit is determined according to the price of the product. Higher deposit means higher value. For instance, setting a $10 deposit for a $40 product makes no sense, since no one would put down that much but rather wait for the product’s launch. In this case offering $1 for deposit would be a much better option. Conversely, for a $1000 product the deposit could be higher, say $5. Despite this, people would still be willing to reserve the product since they are getting a discount for something expensive.
By making a reservation, the person seems to say: “I commit myself to buying your product at the mentioned price. Here is my deposit for you to rely on me.” Overall, reservers are much more likely to buy your product than just subscribers as they have already made their small “investment” in it. If you have a long list of reservers, this means your product is working really well and people are waiting for its launch.
Through reservations you can also A/B test different price points and choose the best working one. But we recommend doing this only when you ensure a high subscription rate since this would ensure more accurate results.
If the visitor presses on the “Reserve” button they are redirected to the 3rd page, where they can pay the deposit.
And once the amount is paid, they are led to the thank you page.
And one more important thing about reservations—they are refundable. Meaning if the reserver regrets putting down a deposit and decides to get a refund, they can do so at any point.
As to the subscribers who don’t want to reserve, they will be given an option to fill out a short survey to help the campaigner understand how they could improve their product to motivate subscribers to reserve it.
Once you collect all the comments, go over them selectively, prescribing value to each one. Reasonable answers will definitely get higher value than comments like “I don’t know” or “My cat stopped me from reserving [product]”.
After you fill out the survey, you are again redirected to a thank you page, with a bit different message than the one for reservers.
Based on certain behavioral patterns and data acquired from all our previous testings, Prelaunch.com uses real market projection to forecast the percentage of people that will back your campaign, as well as your product’s scalability.
After gathering enough data, we start looking at some metrics, including but not limited to the following:
1. Landing page views: This shows the number of visitors who have seen your landing page. 2,500 visitors to your landing page per variation. Based on the measurements we’ve discovered that having 2,500 visitors is sufficient for scaling and understanding market insights.
2. Subscriptions: This tells us about the market interest measured by subscription rate. The higher the subscription rate, the greater the interest towards your product.
3. Reservations: This tells us about the price validation measured by the reservation rate which we calculate from the total number of visitors.
Currently we’re working to add a few other metrics as well such as the average session duration of subscribers/reservers, average timing before the users make 1$ reservation, average timing before the users subscribe, etc. This will help you make more accurate assessments on your product-market fit.
Now you have all the data at your disposal. But how to know if these data indicate your product is performing well? For this Prelaunch.com provides you the industry averages or benchmarks so you can compare and evaluate your product performance realistically.
The basis for the benchmark is the product price and its category. For instance, for an AI robotics kit for children the benchmark subscription rate would be 20%, the price validation—4% and Sub to Reserve—15%. If you have a similar product which meets these benchmarks, then it’s performing pretty well and your campaign will most probably be a success.
Product-market fit example
Now let’s consider an example of a successful product-market fit.
We made the testings on Cheerble Fountain S—a smart self-cleaning fountain for pets.
Let’s go through all the steps and find out how we achieved product-market fit.
The very first thing we did after taking this product, was to find its best positioning. Which of its features should we promote as the key one? Who is our target audience?
Read on to find out how we used the unique selling proposition, target audience and our customer’s biggest objection to come up with a winning positioning.
Unique Selling Proposition
Any product’s positioning should first and foremost include its unique selling proposition, the one feature that differentiates it from competitor products. For the Cheerble Fountain S that feature was apparently the self-cleaning function. The market is full of pet fountains supplying water to pets but none of them cleans your pet’s dish for you while you’re away.
Thus we came up with a new category—a self-cleaning fountain. This is a new category among other fountains, which simply supply water to a pet and can thus have a wow effect on the audience.
Another issue we faced during positioning, was whether we should target cat or dog parents or both.
For this, we sent a survey to our subscribers to see who they needed the Cheerble Fountain S for:
The results showed that 81% of our subscribers needed the fountain for their cats.
Thus, based on the results of the survey and not to ignore dog parents we decided to still target both pet parents, with a heavy focus on cats through images and gifs on the landing page.
Besides determining the USP and the target audience, we also considered the biggest objection our customers could have. The survey showed that they were afraid their pet wouldn’t love the fountain. Thus, we took that objection and positioned the product as “Your pet’s favorite”. The implication is that the customer’s pet will love it.
After long discussions here’s the positioning we sticked to:
Pretty convincing and to the point, isn’t it? And most importantly, this positioning is based on data from people interested in the product!
As with all our pages, the landing page of Cheerble Fountain S included a subscription form and reservation funnel, just the way we described above.
During the testing we gave our reservers a VIP status and told them they would be the first to learn about the launch. We conducted the communication with them exactly within that logic.
Ads are one of the key elements during our testings. They help you understand which countries, age groups, gender, etc. work best for your product and thus adjust your ads, SMM posts, page copy, visuals and traffic sources to them.
Here are some of the key results we got from our ads:
|Age||From 20 to 40 years old.|
|Location||Europe, Australia, Korea, Japan, etc.|
|Spending Habits||Pet products|
|Interests||Parents of pets who love creative novelties|
|Reason for Purchase||Providing fresh drinking water for pets|
Based on this information, we were able to create the most working content for the Cheerble Fountain S.
Aside from this, we also tested Pixel for gathering valuable information about your page visitors and sending them relevant ads. That’s what we did for Cheerble Fountain S! In the value section we mentioned the price of our product and the reservation, which helped us find people on Facebook who tend to make reservations within the price range of our product.
Another important aspect to pay attention to are the comments under ads. These are another source to help you measure your customers’ interest. For Cheerble Founatain S, the comments were mostly positive.
At the same time, we did our best to keep the cost per lead, cost per reservation and CPM low, but increase the CTR.
One thing to remember about these metrics is that throughout the product validation testing all of them require intensive tracking—much more intensive than during live campaigns—as that helps make relevant adjustments, as well as find out the estimated costs for the campaign and predict how much the product would be able to raise. This is especially vital given the challenges innovative products face during these uncertain health crisis times.
Another thing we paid close attention to during the Cheerble Fountain S testing was the design. In the case, our testing showed that colorful images and gifs worked pretty well with our audience.
All this created an atmosphere of fun and corresponded to the mood of the product.
And lastly, we looked at the benchmarks—the average data gained from the products in our category.
According to our research, the benchmarks for pet products like Cheerble Fountain S were as follows:
- Subscription rate: 20%
- Price Validation: 4%
- Sub to reserve: 15%
After several testings, the data showed that the product was very close to achieving its product-market fit. Here are the results:
- Subscription rate: 29.32%
- Price Validation: 3.10%
- Sub to reserve: 11%
Having these data in mind, we had a strong ground to launch a live campaign.Currently the fountain—which we rebranded into a smart self-cleaning dispenser called Drinkie—is live on Kickstarter, having raised over $200K with the help of 1800+ backers.
This once again proves the importance of conducting a product-market validation and justifies the time and effort you spend on this process.
Each of us can come up with a genius idea that could help people like us in their daily life or even save humanity. But the point between the simple ideation and success is the product and market validation. You can’t start a business just because you think you have an interesting idea: This path is full of risks and losses.
A wiser and more reliable strategy is to conduct product-market fit to understand whether the market and your customers specifically need your product. This product and market validation process allows you to realistically assess the potential of your product, make adjustments to it and most importantly understand whether it’s reasonable to make big investments in it.
Thus, next time a million-dollar idea crosses your mind, don’t just jump into bringing it to life. Instead, put efforts into finding your product-market fit so you can make data-driven decisions on your next steps.