What is Product-Market Fit (PMF)?
The very first stage an internet business intends to move to, from being just an idea or a business plan, is: achieving Product-Market Fit. But what exactly is it?
Quantitatively, the concept is a little nebulous to be defined. But qualitatively, it is easy to understand. It means your product is in sync with the market's demands – a sign that your business could really take off!
Example:
Let's say you work at a startup in Pune that's created an app for online grocery shopping. If it has got Product-Market Fit, it means folks in Pune are loving the app because it solves a real problem – like saving time and avoiding traffic.
They're using it regularly, telling their friends about it, and you're seeing more organically referred downloads every day. That's when you know your grocery app is a hit in the Pune market!
Explanation:
Coming back to the question of how to quantitatively measure it -- the ultimate output metric of product-market fit is profitability of the business model at both unit (CM1) and customer level.
However, in cases where:
1. Customer lifecycle window is too long, or
2. Product is not directly monetised (e.g. social media apps)
Retention & Engagement can be the input metrics that measure product-market fit.
Additionally, Net Promoter Score (NPS), or other measures of customer satisfaction, are considered leading indicators for achieving product-market fit.