Fit Hai To Hit Hai: Why Product Market Fit Matters For Startups?

Achieving fame, success and profitability is the ultimate goal for every startup, and a significant milestone on this journey is attaining 'product market fit'. 

The term 'product market fit' may mean differently to different people, but it generally refers to the point where a startup has found its niche in the market and can expect to grow with the right resources.

Product market fit is not only important in customer retention, but the Venture capitalists also consider it as a crucial factor before investing in a startup. If the startup hasn't reached a stage where it can grow rapidly, venture capitalists may be apprehensive about investing. 

Let’s have a better understanding of what Product-Market Fit is and how to achieve it.

What is Product Market Fit?

The concept of product market fit can be broadly defined as the stage in which a startup creates a product that is in such high demand that it becomes a challenge to keep up with customer orders. This is when the product truly resonates with the market.

Before reaching this stage, startups typically face challenges in promoting their product in the market. There may be one or more issues that prevent them from selling at a fast pace. However, through multiple alterations of the product or changes in market dynamics, the startup eventually finds the right fit and sees a surge in demand. At this point, meeting the demand becomes a challenge as the startup struggles to match supply.

Point of Achievement of Product Market Fit

Product-market fit can be defined as the stage in a startup's lifecycle when it experiences three critical elements:

• High Demand: This refers to the significant demand for the startup's product in the market. Achieving high demand involves providing a top-notch user experience and excellent customer satisfaction. With each product iteration, the startup should strive to come closer to this goal.
•  High Customer Retention: High customer retention is equally crucial for every startup. A low customer retention rate is like a leaking bucket that makes it challenging to meet growing demand. Startups should aim to minimize customer drop-offs at every interaction point. 
• Positive Unit Economics: Positive unit economics is critical for startups to sustain their business in the long run. It refers to a situation where the revenue generated by a product or service is higher than the costs incurred to produce and deliver it on a per-unit basis. This means that for every unit sold, the company is making a profit. Positive unit economics is a key factor for a startup's success as it ensures that the company is sustainable and profitable in the long run.

How to Achieve Product Market Fit?

Achieving product market fit is a crucial milestone for any startup as it marks the point where the startup has found a base line to grow from. Here are some steps a startup can take to achieve product market fit:

• Research the market: Before launching a product, it is important to research the market thoroughly. Understand the customers' pain points, their needs, and preferences, and look for the competition.
• Build a Basic version of the product: Once there is an understanding of the market, the startup can build a minimum viable product (MVP) that addresses the customers' needs. An MVP is a basic version of the product that can be launched in the market quickly, and it allows to get feedback from customers.
• Gather customer feedback: Collect feedback from customers on the MVP, and use it to iterate the product. Keep improving the product until it meets the customers' needs and expectations.
• Focus on customer satisfaction: Focus on providing the best user experience and customer satisfaction from the day the product is launched. Every alteration in the product hereon should bring the startup closer to this goal.
• Know the analytics: Measure customer retention through analysis. It is important to see the trends in the way the customer reaches out to buy the product like time based, need based, offer based etc. This will help in retention of the customers.

What next?

Once the product market fit is achieved, focus on scaling the business by increasing production and marketing efforts. With the product resonating with customers, scaling becomes easier and more cost-effective.

Startups that Achieved Product Market Fit

 There have been some game-changing Indian startups that have achieved product-market fit at the right time when the needs for these services were just budding up.

• PayTM: Paytm, one of India’s highest valued startups in 2019-20, achieved product market fit in 2016. At that time the Indian government startup promoting digital payments to curb black money in India and suddenly people started using digital payments. Initially people started liking the convenience of making payment through Paytm and ultimately after demonetization, Paytm saw 100x growth in registered users. 
• Flipkart: Flipkart, one of India’s first popular e-commerce startup that has revolutionized the way people shop in India. Through continuous innovation and a customer-centric approach, Flipkart has achieved a high level of product-market fit in the Indian e-commerce space.
• Ola: Ola is a ride-hailing startup that has transformed the way people commute in India. By providing a reliable and affordable alternative to traditional taxi services, Ola has become the go-to platform for millions of users across the country. With a wide range of ride options, including auto-rickshaws and bikes, Ola has achieved a high level of product-market fit in the ride-hailing space.
• Practo: Practo is a healthcare startup that has created a highly popular platform for booking appointments with doctors and healthcare providers. Practo has achieved a high level of product-market fit in the healthcare space.
• Swiggy: Swiggy is a food delivery startup that has been able to offer a highly convenient service to customers who are looking to order food online. With more than 1.5 lakh restaurant partners across 500 cities, Swiggy has achieved a high level of product-market fit in the food delivery space.

Achieving product market fit requires a deep understanding of the market, building a product that meets the customers' needs, continuously innovating the product until it meets customer expectations, ensuring positive unit economics, and focusing on customer satisfaction.

Achieving product-market fit is essential for startups to attract big VCs. Every startup needs to focus on reaching this milestone as soon as possible in its journey.