How to measure product-market fit for your digital product

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product-market fit

Achieving product-market fit is a critical milestone for your business’s success. It means you have found a sweet spot between what your product offers and what your target customers need, and as a result, you can expect to see user adoption, revenue growth, and customer loyalty.

However, measuring product-market fit is not a one-time task, but rather an ongoing process that requires continuous monitoring, feedback, and adaptation. In this article, we’ll explore how to measure product-market fit for your digital product or (SaaS) platform and discuss the metrics and tools you can use to make data-driven decisions to improve your product’s fit with your target market.

“Being in a good market with a product that can satisfy that market.”

Marc Andreessen (American entrepreneur and venture capital investor) defined product-market fit as “being in a good market with a product that can satisfy that market.” The key to successful product-market fit is adding value for your customer so they become a long-term customer of the business, as retention is a primary driver of your business growth potential.

What is product-market fit?

Product-market fit refers to a product that is properly suited for the market in which it is sold. To be more specific, it is when your product and the market complement each other perfectly and create a perfect demand and supply combination.

A product that has a robust market fit satisfies the demands of its intended audience in a superior way compared to other options available in the market. Such a product can result in elevated customer satisfaction, higher adoption rates, and improved business outcomes.

The concept of product-market fit is crucial for entrepreneurs and businesses looking to introduce new products or services to the market. Prior to launching a product, it is essential to establish whether there is genuine demand or interest for it among the intended target audience. This means you need to do market research and understand what the target audience likes, struggles with, and how they behave.

product-market fit

product-market fit

Why is product-market fit important?

For your company to grow sustainably, you need a product that enough customers will purchase at a profit. Before scaling up production and planning business growth strategies, it’s crucial to ensure you have a product-market fit. Some benefits of achieving this fit are:

  1. Increased revenue: When your product meets the needs of your target market, you are more likely to generate more revenue as customers are willing to pay for your product.
  2. Increased customer loyalty: Customers who are satisfied with your product are more likely to become repeat customers and also recommend your product to others, leading to increased customer loyalty.
  3. Lower marketing costs: A product that has achieved product-market fit requires less marketing efforts as it sells itself through word of mouth. This leads to lower customer acquisition costs and higher profit margins.
  4. Easier fundraising: Investors are more likely to invest in a company that has a product that has achieved product-market fit as it demonstrates that there is demand for the product.
  5. Greater company stability: Achieving product-market fit can provide greater stability for a company as it has a solid foundation for growth and can confidently invest in scaling up production, marketing and other business operations.

How to achieve product-market fit

There are many ways to achieve product-market fit, including adapting your core product to new markets, identifying strong market demand, repurposing or reorganising old ideas, going to where the market is, or even creating an entirely new service.

Dan Olsen, Lean Startup consultant and author of The Lean Product Playbook, biedt zes stappen for a lean product process. The steps are described below:

product-market fit

Step 1: Determine your target customer

Identify your target customer using market segmentation and personas to ensure your product meets their needs. Start with a high-level hypothesis and refine it as you learn and iterate.

Step 2: Identify underserved customer needs

Understand your target customers’ needs to identify good market opportunities. Address underserved needs rather than those already met by existing solutions. Remember that customers will judge your product in comparison to the alternatives.

Step 3: Define your value proposition

Define your value proposition by focusing on how your product will meet customer needs better than the alternatives. Differentiate your product from competitors and determine unique features to delight customers. This is your product strategy.

Step 4: Specify your MVP feature set

Specify the functionality of your minimum viable product (MVP) to validate you’re heading in the right direction. The MVP approach builds only what’s necessary to create enough value for the target customer. Iterate until the MVP is viable based on customer feedback.

Step 5: Create your MVP prototype

To test MVP hypotheses with customers, create a prototype using UX design instead of building the final product. Prototypes vary in fidelity and interactivity, from low-fidelity hand sketches to high-fidelity mockups, and can be made clickable/tappable using prototyping tools like InVision. Prototypes provide valuable feedback from customers before building the final product.

Step 6: Test your MVP with customers

To test your MVP prototype, ensure you have your target market participants by using a screener. Ask open-ended questions and avoid leading or closed questions. Conduct user tests in batches of five to eight people to detect issues and identify patterns in feedback.

Effective approaches for measuring

Measuring product-market fit for a SaaS platform can be a challenging task, but there are several approaches that can be helpful:

  • Net Promoter Score (NPS): This is a popular way to measure customer satisfaction and loyalty. The NPS is calculated based on a survey question that asks customers how likely they are to recommend the product to others on a scale of 0-10. A high NPS score is an indication of strong product-market fit.
  • Customer Churn Rate: Churn rate measures the percentage of customers who stop using the product over a specific time period. A high churn rate may suggest poor product-market fit or customer dissatisfaction.
  • Customer Retention Rate: This metric measures the percentage of customers who continue to use the product over a specific time period. A high retention rate may indicate strong product-market fit.
  • Conversion Rate: Conversion rate measures the percentage of website visitors who become paying customers. A high conversion rate is a sign of a product that meets the needs of the target market.
  • Engagement Metrics: Tracking user engagement can provide insights into how well the product meets the needs of the target audience. Metrics such as daily active users, time spent on the platform, and frequency of use can be helpful in assessing product-market fit.
  • Market Size and Growth: Analysing the market size and growth potential can also provide insights into product-market fit. If the market is large and growing, it may be an indication that there is demand for the product.

Assessing product-market fit is a continuous endeavour that demands consistent feedback and refinement to ensure the product stays relevant to its intended audience. To obtain a comprehensive comprehension of product-market fit and make informed decisions based on data, it is vital to employ a blend of metrics.


“Don’t be afraid to move away from your original idea when you see a better opportunity.”

How can you test if you have reached product-market fit?

Sean Ellis, the author of the bestselling book Hacking Growth: How Today’s Fastest-Growing Companies Drive Breakout Success, created a survey to help you determine whether you have achieved product-market fit. The survey, known as the product-market fit survey, is a simple one-question test that you can use to gather feedback from your customers.

After benchmarking nearly a hundred startups, Sean Ellis found that the magic number for product/market fit was 40%. Companies that struggled to find growth almost always had less than 40% of users respond “very disappointed” in the survey, whereas companies with strong traction almost always exceeded that threshold.

product-market fit

The end

In essence, attaining product-market fit revolves around offering a solution that addresses a problem, satisfies a requirement, or fulfils a longing in a way that outperforms the other alternatives available in the market. This entails having a profound knowledge of the intended audience and a readiness to refine and improve the product until it aligns with their requirements and anticipations.

If you’re struggling to find product-market fit for your SaaS platform, don’t hesitate to get in touch. Our experienced team is here to help you overcome this hurdle and achieve your business goals.

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