How Do You Measure Product Market Fit?
In response to a question from an Indie Hacker:
PMF was first coined by Don Valentine, then refined by Andy Rachleff, and popularized by Marc Andreessen in his pmarca blog (& perhaps Steve Blank when Lean Startup become popular). [1] [2]
The usual description is that you’ve got PMF when people are damn near beating down your door to get your product. [3]
For obvious reasons, PMF is rarely talked about in marketing science.
But if you’d ask me how to measure it, I’d think what you’d be looking for is negative churn in absence of paid marketing.
Because paid marketing makes attribution to organic marketing incredibly difficult.
If you’re solely doing organic marketing, then if not only churn is quite low but each customer is bringing in friends, you’re on to something.
Think of it as the equivalent of an R0 viral coefficient greater than 1.
IRL though, I’m not terribly convinced PMF is a useful concept because ultimately it describes a destination more than a way to get there. And also, how many companies have PMF? Look around you, pretty much everything you own, you’re barely ambivalent about.
This is exactly what the literature reflects. Most literature on consumer loyalty (often, not always, defined as frequency of repeat buying) shows consumers being polygamous not monogamous brand-wise (Aggarwal & Shi, 2018). We also know that most purchase decisions are not made with system II thinking (slow, effortful), but rather mostly with system I thinking (automatic and unconscious)(Kahneman, 2011; Samson & Voyer, 2012).
I think PMF can be a useful mental tool for truly unique and disruptive innovations, but for the vast majority of companies and indiehackers (who’re simply trying to make a living), I don’t think it’s necessary.
Just figure out who you wish to serve, do ethnographic research such that you have a solid understanding of their wants and needs, the exact language they use to describe those, figure out how much they’d pay for a solution to their problem (WTP: willingness to pay), and make sure your price point sits below that.
“If you address a market that really wants your product — if the dogs are eating the dog food — then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the dog food, you have no chance of winning.”
-Andy Rachleff
IMO it’s important to remember that almost no indie hacker is creating new dog food. We’re all addressing existing needs (which, most of the time are already being addressed). While in VC-land, new technological breakthroughs can create needs that didn’t exist before.
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REFERENCES
Aggarwal, P., & Shi, M. (2018). Monogamous versus polygamous brand relationships. Journal of the Association for Consumer Research, 3(2), 188–201. https://doi.org/10.1086/697078
Kahneman, D. (2011). Thinking, fast and slow. London: Allen Lane.
Samson, A., & Voyer, B. G. (2012). Two Minds, three ways: Dual system and dual process models in consumer psychology. AMS Review, 2(2–4), 48–71. https://doi.org/10.1007/s13162-012-0030-9
[1] https://a16z.com/2017/02/18/12-things-about-product-market-fit-2/
[2] https://a16z.com/wp-content/uploads/2021/08/The-pmarca-Blog-Archives.pdf
