Coming up with a unique and interesting product or service idea is easy. Ensuring that it’s going to generate revenue, well, that’s a different story!
If you’re after sustainable growth, then you’ll want to make sure that your offering is going to be accepted and purchased extensively by consumers. In fact, this research should form an integral part of your business plan.
In this guide, we’ll discuss product-market fit and how surveys can be applied to best determine how well your product offering is going to be accepted by consumers. We’ll also briefly mention SMS surveys as a means of engaging with customers for quick and honest responses.
What Is Product/Market Fit?
While the term “product market fit” is frequently applied in the conversations of larger new high-growth companies, it doesn’t seem to have gained traction in the small business world just yet. Our hope is that this changes in the near future.
The definition:
The concept was originally created by Marc Andreessen, a successful Silicon Valley entrepreneur, and refers to the ability of a product or a service to fit in with and satisfy the market that it’s intended for.
Essentially, if you want your business to turn a profit and grow, then you need to determine if consumers are actually going to want your product and, ideally, not live without it. It’s also important to ascertain if the market is large enough to sustain the extent of growth you have in mind.
Before you can measure whether people are going to flock towards your idea, you’ll need to define your project strategy. Thereafter you can engage your customer base to measure your concept’s worth.
What Is A Product Strategy?
A product strategy is a plan that determines what you are going to do with your business idea in a short term, usually within a year.
Generally, a product strategy focuses on answering three important questions:
- What do we sell?
- Who do we sell it to?
- How do we know if it will be sold successfully?
The third key question is what will prompt the need for product-market fit measurement, with a product test survey being the current most popular method of gathering feedback from users.
How Can You Measure Product-Market Fit?
Conducting surveys is an age-old method used to successfully gather feedback from people. The “people” we refer to are your target customers who you feel will be most intrigued with what you have to offer. These surveys can be conducted in person, over the phone or by using digital methods of communication such as emails, text messages, and social media.
Surveys are a cost-effective way of getting to know your audience. As such, start-up businesses can make full use of this technique before investing thousands – if not millions – of dollars in something that’s not going to effectively move through the sales chain.
Surveys can produce a large amount of data in a short time for a fairly low cost. Researchers can therefore set a finite time-span for a project, which can assist in planning and delivering end results. – Oxford Academic
Below, we’ll talk you through the steps of how to best use surveys for outcome analyses, with much emphasis being placed on the right type of question/s to ask your target audiences.
How to Create a Product/Market Fit Survey
Once you have defined what it is you want to sell and who you want to sell it too, the next step is to create a survey that asks questions. The answers to these questions can help you to accurately determine if your item or service is actually going to be bought and appreciated by people.
This is where we would like to introduce the “Sean Ellis Test”.
Sean Ellis is a marketing veteran who is responsible for the successful growth of companies such as Dropbox, LogMeIn, and Uproar. He is also the author of a book titled “Hacking Growth” which helps entrepreneurs measure whether they have reached their product-market fit or not.
His approach is simple:
He creates a survey that lists a set of questions that ask users what they think about a product, and what they think their relationship with a product will be (that is, will they only use it once, will they continue to use it, will they buy it again and again, will they refer it to their friends and family, etc.).
Using his marketing knowledge, Ellis created the number-one standard product market fit survey question:
“How disappointed would you be if you could no longer use this product?”
Using a scale or a multiple-choice format, respondents can answer anywhere from “very disappointed”, to “not disappointed at all”. By asking this one simple question, business owners and marketers can gather invaluable data regarding sales outcomes.
Tip: you can enhance the results by following up with an open-ended question so that you can gauge the reasons behind each individual’s answer. For example, if a respondent said that they would be disappointed if they could no longer use your product, you could ask them “what would you miss most about this product if you no longer had access to it”.
This is just one type of question that can be included in a questionnaire. Questions can vary depending on the type of feedback you’d like to collect.
What Metric Can You Use to Quanitify Feedback From Customers?
Continuing with Ellis’s approach to establishing whether your product planning process is on the right track, the marketing guru also introduced the 40 percent rule, a popular metric for measuring product-market fit.
This metric is applied as follows:
When a customer responds that they will be “very disappointed” if they can no longer purchase a product or service, then this confirms that the product is a “must-have” to that person”. Once 40% of the entire survey team answers that they are “very disappointed,” then there’s an excellent chance that the product is worthy of sustainable and scalable growth.
But why 40 percent?
This “40%” figure isn’t one that’s been thumb-sucked for convenience. Instead, it was established after studying comparison results taken from hundreds of start-ups who ran Ellis’s test. The start-up businesses that received at least 40% of their target audience’s responses as “very disappointed” managed to build high-growth business models. On the other hand, findings showed that start-ups that received results below 40% for this question, well, they battled with sustainable growth.
Selecting The Right Survey Target Group
When running a survey to determine your target market’s reactions, then selecting the right target group of customers is important. That is, you’ve got the right question/s to ask, but whose answers are going to be the most viable?
Referencing Product Coalition, it’s suggested that the following qualifications are considered in order to ensure that you’re interviewing the right audiences:
- Customers who have experienced the core of your product.
- Customers who have experienced your product at least twice.
- Customers who have experienced your product in the past two weeks.
It’s recommended that the results from these customer segments are analysed as both combined figures as well as studying the separate numbers from each segment.
Why?
Because scenarios can be defining. For example, your product may not have appealed to an individual when they first used it, however, after the second or third use, they may discover its qualities and be more akin to it.
*If you find that an audience is more accepting of a product after they have used it a few times, then you may want to research what it is that didn’t have the customer “sold” the first time they used it. First impressions are important, so use feedback to guarantee that your offering is a hit from the get-go!
SMS Surveys for Product Market/Fit
Asking the right audience, the right questions/s is good practice. However, asking the right customers the right question/s using the “right platform” is even better.
An SMS or text message is an effective way of communicating with customers. This method is popularly applied to conduct surveys as a cost-efficient and accurate means of determining product-market fit.
Did you know –
Did you know that SMSes have an immense opening rate of 98%? This compared with emails which only have a successful opening rate of 22%?
To add – according to an investigation conducted by the University of Michigan, consumers are more likely to give accurate feedback over text.
With mobile usage growing extensively across the globe, several businesses are selecting SMS as a preferred communication channel – especially when conducting surveys.
How Do SMS Surveys Work?
SMS surveys allow you to send one or more questions to qualifying recipients with the intent of them responding with qualifying feedback. Audiences can be prompted into replying to your text messages directly or they can click on a link that will redirect them to a survey page that opens up in their preferred browser.
SMS surveys are a brilliant and quick way of gathering feedback to ensure that your concept is one that’s going to gain traction within a market.