While stats vary, there’s a huge body of evidence which shows that a majority of startups fail—usually within the first year of their launch. Young startups often run into a number of problems such as lack of experience, capital crunch, lack of demand for their product, and cut-throat competition.
The first-order effect for most of these startups is not being able to find their product-market fit (PMF). It often is the first domino in a series of events that gets knocked over, eventually leading them to failure. The inverse is true, too—if a startup finds its PMF, it can help you overcome a majority of the above-mentioned problems.
In this post, we will cover:
- How to achieve product market fit
- The myths about PMF
- How to prioritize product features
- Steps to build products that your customers want
How to achieve product market fit
Product-market fit is like finishing an unsolved puzzle—you usually have the product but you aren’t sure who will benefit the most out of it. That’s why most startups begin with a broad hypothesis, assuming a certain type of buyer or market segment will be happy to use their product.
There are a few signs that validate your product-market fit. You can be sure you have found the right customers if:
- they are willing to pay (preferably a premium) for it
- their use cases describe exactly what your product solves
- they are forthcoming with constructive feedback and complementing feature requests
- they refer you to their network or bring you new customers
- the cost of customer acquisition reduces with time
When you find the right set of people to market your product to, you will also inevitably notice that this demographic will see your product and its features as a must-have for their needs and not just as a nice-to-have add-on.
The goal to achieve PMF is not hard once you start talking to your potential users. It’s often the process (or the lack of it) that makes it challenging.
The myth about product market fit
When you are launching your new startup, achieving product market fit seems like the Holy Grail of success. And at that point, it’s the primary focus for everyone in the organization.
But product market fit is a moving goal post. True, it can do wonders for your startup when you are starting from scratch. More often than not, PMF is an elusive, non-linear business goal that keeps changing with the change in your user behavior.
This brings us to another myth about finding PMF, i.e.—assuming that it’s the product team’s job to find the product-market fit. Finding a PMF is a collective goal for all customer-facing teams—the product team is the one that executes all the necessary actions to get there faster.
Here is an example:
Let’s say you’re an early-stage startup trying to find the right market for your product. Assuming that you just have one salesperson who conducts discovery calls with prospects all day, chances are they won’t be able to document or share all the important customer insights with the rest of the team.
And it also raises two key questions:
- How to capture important customer information—such as requests for new product features?
- How to decide which of these requests should you entertain and add to your roadmap?
Also it’s quite possible that this critical information may get lost in thin air if you don’t have a dedicated system and process to capture customer conversations. And the complexities increase as your number of sales reps or customer conversations increase.
Prioritizing the right product features
Finding the PMF is not the be-all-end-all solution to all your problems, especially if you go on to become a successful scale-up. When you are a growing product company, you constantly have to add new product capabilities to fulfill your customers’ growing needs. If you don’t, they will churn and find someone else who will solve their problems.
Prioritizing the right features is a common challenge that early and mid-stage product companies go through when they are trying to become profitable. Prioritizing and building the features that your customers will appreciate is one of the key components of ensuring continuous product market fit.
And customer intelligence is the catalyst that can help you build the right product features at the right time. But the key is to be able to differentiate the signal from the noise.
Just because people are asking your product to have the capability to connect with the latest IoT gadgets doesn’t mean it’s a must-have feature. A lot of times, customers ask you for features based on what they see on other products in the market. And this is a critical aspect to be aware of when prioritizing new features.
Here are few important questions to ask:
- Does this feature truly enhance the product’s existing capabilities or are we just playing a catch-up game with the competition?
- Does the feature request come from your Ideal Customer Persona (ICP)?
- Is it a one-off request or do a lot of your existing customers ask for it?
- How does the requested feature improve the workflow of your customers?
Pendo, a well-known product analytics platform, ran a study a couple of years back which found that customers rarely or never use 80% of features in a typical cloud software platform. When you translate that number further into real-world revenue, it’s a waste of about $29.5 billion investment on products and features that no one uses.
The Pareto Principle seems to work its magic in the context of product development as well. If you can just build the top 20% feature that your customers need and use—you’re on the right track.
It makes a lot of sense to use a conversation intelligence platform to understand what your customers and prospects want and why. It would certainly make your life easier to have a blow-by-blow account of the features that your customers are truly craving.
Here are some examples of customer insights you might want to track:
- Which features do clients request the most?
- Which business needs do prospects mention the most?
- What are the features that customers are most interested in?
Tracking these key aspects not only helps you add the right features to the product roadmap but also prioritize the ones based on demand. However, we also need to have a balance between what's requested and the north star vision you have for the product or platform.
If you are getting strong pull signals from customers for new feature requests that don't fit your product’s current vision, that’s still a good thing. It means that there is probably a profitable market for a product and you can either decide to pivot your product to that direction or launch a new product from scratch to tap into the demand.
But that said, always ask ‘why’. Understanding why a customer is requesting a feature or what they are seeking to accomplish might help you come up with a better and scalable solution than the specific feature requested.
Also—always be aware of who is requesting the feature. Ask yourself—are they your ICP? And would the ‘requested feature’ help other customers?
4 step process to achieve product market fit
Most startups take a long time to find their product market fit —or fail to pivot—because they don’t understand their customers well. Many times, what customers say they want and what they actually need are two very different things.
Therefore, understanding your customers’ purpose and workflow is a good place to start. If you are a new startup or a fast-growing scale-up that is looking for a process to prioritize features, here is a 4-step tried and tested process to help you.
1. Start with goals
A great way to prioritize product features is to adopt the “goals first” mindset in your startup. Start by defining the big picture, strategic goals that align with your product roadmap and user requirements. Similarly, define the goals that you think your customers want to achieve with your product.
For instance, let’s say you are building a disruptive CRM software for remote sales teams. Going by the goals-oriented approach, you should first articulate why the product matters to your ideal customers and explain its high-level direction to all stakeholders involved in the process. This will help everyone in your team be on the same page about the product’s scope and its real-world impact.
The second step is to come up with a list of features that you can score based on the value it provides to the market, the time it will take for you to launch it, and the benefit it will yield for you and the customers. Intercom calls this the RICE methodology of feature prioritization, where RICE is short for Reach, Impact, Confidence, and Effort.
Breaking down these metrics will help rank must-have features higher and de-prioritize the rest. You can also use this scoring method to allocate the right resources to building the top features and officially document your product roadmap.
Once you have a good list of features you want to prioritize, bucket them further by themes, customers’ desirability, and constraints to sequentially plan your prioritization process. Next, you will have to validate your feature ideas by talking directly to your customers.
2. Run effective user research
User interviewing is—without a doubt—the best way to align internal teams, build empathy with your customers, and create valuable products. User research is a way for you to listen, observe and understand the way your users behave and perceive during their interactions with your product.
When done right, user research enables you to create new product prototypes and test their feasibility with your user base. At its core, user research is having raw, unfiltered conversations with your prospects to understand the different ways in which you can add value to their lives.
For example, you can set up trackers using Avoma so that it consolidates all the feature requests based on your customer conversations. It also helps you prioritize the most requested features.
While there are many types of user research methodologies, one of our most favorite is the jobs to be done (JTBD) technique. JTBD ignores all the unnecessary noise during the research process and lets you focus on one single “job” that your users are trying to accomplish with your product.
When you run a user research program multiple times at scale, you develop an intuition for the kind of features your customers want and the urgency with which they want it. And that can give you a clear answer on which features to prioritize at what stage of your business growth. But don’t just start building the feature without aggregating data from all teams in your organization.
3. Democratize customer intelligence
Building a truly customer-centric product often requires everyone in your organization to play as one team. This means everyone should have access to customer conversations and data that facilitates a deeper understanding of customers’ pain points and use cases.
One way to approach this is to use Avoma to create playlists for various kinds of prospects and customer conversations such as—user research, sales discovery, customer success check-ins, and more. The point is—everyone in your organization consumes information in their own context, based on what they’re trying to accomplish.
For example, listening to these conversations:
- A marketer can get insights about content topics, positioning, and more
- A product manager knows how the customers are using the product
- A customer success person can identify potential signals of customer churn
- A sales rep or an Account Executive can use it for sales coaching, accelerating their onboarding process, and more.
Subscribing to such playlists not only makes it easier for you to consume important customer information but allows your colleagues from other teams to access vital information. Instead of keeping the information siloed to your team and its context, you are making it accessible for others across the organization.
Democratizing customer intelligence also makes it easy for everyone in your company to have enough context about how customers use your product, their concerns, and ways for you to get better at objection handling.
It’s a way for you to crowdsource great ideas from all quarters of your company—especially when you are looking to build great new features. When you compile a good set of data, you help the best ideas to outshine the rest because the cream always rises to the top.
4. Bias to Customer Success
While all teams are equally valuable when it comes to contributing new feature ideas, the data that comes out of customer success has the biggest potential. Customer success is the bastion of customer experience—the pivot point for customer loyalty and retention.
Here’s why customer success data is most valuable: customer success is one team that’s central to both customers and your internal teams. Compared to other front-facing teams, CSMs have the highest frequency of interactions with customers. They hold powerful data on how customers behaved with your product in the past, how they are interacting with it at present, and how they expect to use it in the future.
You don’t want that information to get siloed. In fact you can track keywords used in customer success conversations, where you look for phrases such as "leadership change," "change in plans," or "de-prioritizing" across customer calls to identify churn indicators. And that can help you proactively take preventive measures such as devising an account-based action plan to make your product contextually more relevant.
In fact, you can use Avoma to proactively set up alerts to look for potential churn phrases uttered by your customer.
If your company operates in the B2B domain, chances are you are not just serving your direct customers but also impacting their end customers as well. The conversations that your customer success has with customers can help you extend your product’s capabilities beyond your immediate line of sight. The CS data is a force that helps your brand evolve with your customers’ needs.
When you are crowdsourcing customer data from all interaction points, pay special attention to the insights you get from the success team. Aggregate the past and present customer insights to plan new product features because nothing informs your product roadmap better than your existing customers’ journey within your product ecosystem.
Actively listening to your customers is priority #1
When you are evaluating what new features to build in your product, listening to customer conversations is the number one priority. Keeping a tab on your customer conversations from day one helps you open a direct feedback loop with them and understand their use cases better.
Understanding your end-users leaves you no room for guesswork and helps you get to the point faster instead of making trial-by error-discoveries. Listen to what your customers say more often and with more intent to save everyone’s time and build successful, scalable products that your customers will love.