Seeking Product-Market Fit?
Lost Before the Game Began
The ‘product’ is a metaphor.
The ‘market’ is a metaphor.
Product-market fit is an illusion.
In 2007, Marc Andreessen coined the term ‘product-market fit’ in his blog post titled “The only thing that matters.”
Since then, hundreds of startup founders, business owners, and CEOs have expended megawatts of energy trying to achieve something that knowingly made no sense.
Great product killer
What would you say about a company that launched 293 (!) failed products in 20 years or more than one flop per month?
Yet, it’s considered successful, and you use its products daily.
Its name is Google. Here, you can find the so-called Google Graveyard, a website listing those products.
Google has killed more products than many others have created.
You could say these 293 products failed to achieve a product-market fit, whatever it means.
But I believe we should look at it from another perspective.
The 'market' is an illusion
People in my home country like a funny toast:
“My grandfather had the opportunity to buy a goat but didn’t have the desire. My father had the desire to buy a car but didn’t have the opportunity. So let’s drink to our desires always aligning with our opportunities.”
What economists refer to as a ‘market’ is essentially desires meeting opportunities. You may have encountered phrases like ‘the smartphone market has reached saturation…’ or ‘the car market amounted to X billion last year…’
The ‘market’ here refers to the amount of goods sold within a given period in terms of volume or value.
Economically speaking, if a market has reached saturation, it makes no sense to enter it. Supply has equaled demand, and competition is fierce.
If your chief of marketing reasons this way, consider hiring someone else.
Picture this: in a certain imaginary country, year after year, X individuals purchase Y apartments and houses, spending Z dollars on them. Economists would say that the market volume is Y houses or Z dollars.
It seems like a perfect market equilibrium, a product-market fit. But let’s look under the hood. It’s safe to assume that more than X individuals have the need for a new house but don’t satisfy it for some reason.
Economists insist that market demand = solvent demand. If some people can’t afford a property, they are out of the market.
Marketers and entrepreneurs would disagree.
Everyone who has a need may become a customer.
Suppose that houses are too expensive for many citizens, but you know how to build them much cheaper. You can become a king of the market and change it.
In 1908, the car market in the USA was balanced. The average price of a vehicle was $1100 – $1700. Anyone who could afford it owned a car.
Had Henry Ford been seeking a product-market fit, he could have introduced another $1100 car. Instead, he offered the Model T at $825. The ‘old’ market evaporated, and the new one emerged.
Philip Kotler introduced another market definition:
A market = need or utility; target consumers; a place; time; the situation; experience
So, a market is shaped by the volume of need, not by the amount of products sold.
If you’re seeking a product-market fit, you are looking at existing markets or the solvent demand. But three types of potential customers drop out of consideration:
– Those who have a need but can’t fulfill it
– Those who are not completely satisfied with how they fulfill it today
– Those who have a need but don’t realize it.
And the last category is the most interesting one.
People are irrational creatures
Forty years ago, people didn’t know they needed portable computers. Today, Americans buy new smartphones every 24 months.
50% of those who buy vinyl records don’t own record players.
No market study can reveal hidden needs that people don’t realize they have.
To find them, you need to dive into their sixteen basic needs.
But if you already have a product, it’s too late to do it.
The ‘product' is an illusion
Many believe that MacOS is better than MS Windows. However, MS Windows has a 72.99% market share, while MacOS has only 16.13%.
McDonald’s isn’t the finest restaurant, but it is the most profitable one.
A product is something you come up with, build, and try to sell. This is an example of the product-based thinking.
But customers don’t care about your products. They need a solution to their problems. If a hamburger or a Windows computer suits them, they will buy it.
If you have a product and look for a market for it, it’s too late. You should start with customers and their needs.
A solution is a combination of a product and service that solves customer pain points. An entrepreneur identifies customer needs, builds solutions, and charges customers for them.
As Peter Drucker says, the aim of marketing is to make selling superfluous.
This is an example of customer-based thinking. Using it, you may create your own market – what the Category Pirates call a ‘category of one.’
A new market
When Apple launched the AppStore in 2008, it created a new market.
Southwest Airlines in the USA and RyanAir in Europe established a new low-cost air travel market.
Netflix developed the video streaming market.
They didn’t look for product-market fit. They ignored the ideas of ‘product’ and ‘market.’ Instead, they discovered the unmet needs and found ways to satisfy them.
The product-market fit concept narrows our strategic thinking.
If we employ it, we attempt to find the intersection between a “market” – a fictional entity devised by economists, and a “product” – a construct conjured up by negligent marketers.
If you build yet another smartphone, a black rectangle with no new features, it’ll have an excellent product-market fit.
As Peter Drucker says, the purpose of business is to create and keep a customer.
Read also: Choosing the Lesser of Two Evils.
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Nice article. It’s good to look at how existing markets are defined and identify the gaps, which can lead to new market spaces.
The data is often misleading. Take unemployment for example. Does it count people that don’t want to work, those who have given up and stopped looking, under the table deals, etc. The data often leads to faulty conclusions. Same with many areas of business.