This sense of excitement and camaraderie is the ~vibe~ we were aiming to recreate through our product. Photo by Beyza Kaplan.
I previously wrote an article on measuring the only leading indicator for product market fit (PMF) but I got some questions around what I tactically did to build product market fit, so I thought I would outline my process here.
Even if you know how to measure product market fit, that doesn’t tell you how to actually figure out what to build to increase your level of product market fit. I also haven’t seen many comprehensive or tactical articles on this gigantic topic, so I thought I’d give it a try.
Feel free to share your feedback in the comments section if you’d like to help anyone else who may be wandering through the Forbidden Forest of product-market fit.
Finding or strengthening product market fit can essentially be broken down into four types of problems:
- Validating the problem
- Validating the primary target persona
- Validating market viability
- Validating the product
I think it goes without saying, but these items are all quite intertwined, and I don’t do them in the same order every time.
This type of topic is always more helpful when tactical examples are given, so below I run through high-level examples of how I did this when I was the head of product at a peer-to-peer sports betting startup.
Note: I value working on ethical products that bring joy to people. Sports betting as a whole may be seen as unethical on first glance, but our product created a transparent and inclusive environment for people who might not typically interact in this space (as well as avid sports betters).
We designed our product to be honest and transparent (e.g. making wins/losses clear so that people could see if they were spending too much) and saw that our average bet size was $15, typically between friends who used betting on basketball or football games to stay in touch with each other.
As product managers, we have a responsibility to be mindful about what types of technology we help bring into the world, so I just wanted to share just a couple of the reasons why I felt comfortable building this product with the team.
Part 1. Validate the problem
1.a. What’s the opportunity/problem that we’re uniquely positioned to address?
Our hypothesis was that we were solving for the fact that, at the time, sports fans couldn’t bet with their friends on betting platforms (now there are a lot of apps popping up around this) — they could only bet against the “house” or random, anonymous people on the Internet.
That’s fine for many fans, but some fans, like our founders, wanted to bet not just to win money, but to engage in some friendly competition against a friend that’s smack talking your favorite player.
The founders of this app loved sports and wanted a space to bet with friends on different games that they cared about. They were uniquely positioned to solve a niche problem by being a power user themselves who had an intricate understanding of all the pitfalls and obstacles involved with betting on sports.
Realizing that the typical sports betting apps intimidated their friends, the founders decided they wanted to create a beginner-friendly space that focused on friendly competition over making money anonymously in a dark room. They also hated that betting apps also don’t let fans create their own bets (i.e. choosing players, stats, odds).
Product strategy is essentially deciding what problems you won’t solve and making sure that you’re framing the problems you are solving correctly, so this step is critical.
1.b. Do users really care about the problem we’re solving? What are the true alternatives?
When I asked the founder whether not being able to bet with friends was a big pain point for sports betters, his response was “Of course! I run into this all the time and it’s such a pain!”
But when I asked this question in user interviews, the average sports better didn’t seem to register it as a problem. It’s just what they knew. If they wanted to bet with friends, they hopped on Venmo or PayPal. It only became an issue when they had to track their friends down to settle up.
The question then became, “Why use our app when you can just use those alternatives? What other problems do we solve? Does our product offer enough value to change your behavior?”
Our competitors were not just the other sports betting platforms. They also included Venmo, PayPal, and cash, and being aware of that influenced our product strategy big time. Not only did we have to offer unique value on the sports betting side of the experience, we also needed to make sure that we made getting or giving payments was as easy as Venmo’ing someone.
1.c. How do we measure our desired outcome?
There’s a lot that’s already been said about defining OKRs, so I won’t repeat them here. The one key insight on determining how to measure success that I haven’t heard as much is around choosing a north star outcome that is a win-win for both the customer and the business.
A north star outcome should reflect a win-win for both the customer and the business.
Specifically, start by identifying what a win looks like for the person who actually uses your app, and then layer in success for the business.
For example, success for our users is when they can create their own bet and have a friend accept that bet. It means that they found enough value to use our platform over another option, and that they were able to compete with a friend on players that they were both invested in enough to bet on. It’s not a win for the user if they create a bet that no one accepts, because that’s a waste of their time.
From the company’s perspective, the number of accepted bets is also a good reflection of engagement on both sides of the marketplace (people who create the bet and people who accept the bet). Accepted bets is also how we drive our revenue, since we charged a small fee on every successful bet.
Part 2. Validate target persona
Assuming I already have a product, I look at the analytics to see demographics and behaviors of people who are performing the key desired actions. If possible, I interview them in person. That’s exactly what I did here.
Based on what I found in the analytics, I built a few different types of user personas and shared them with my team to get diverse perspectives on who our customers are. If we ever got stuck on defining who we’re building for, I switch tactics to define who we’re NOT selling to, and that usually helped provide clarity. We then tested the accuracy of our target personas by actually marketing our product to people who fit that description.
If I’m working on a marketplace product, then I have two personas to keep in mind. For this particular product, those two personas (the person who creates bets vs. receives them) could be the same person or they could be different. Some people only created and sent out bets, while others preferred to be on the receiving end of a bet. Having two personas and clarifying the different types of each was critical to understand which problems to solve. (This also resulted in two different opportunity solution trees, btw.)
2.a. What do I do if I don’t yet have a product or a solid target user persona?
I use userinterview.com or usertesting.com to talk to people who I hypothesize are my target users. In addition to moderated interviews that I run myself, I also love leveraging un-moderated voice user interviews here, because it allows to me to ask standardized questions and listen to a high volume of different responses very quickly.
Part 3. Validate market viability
3.a. What’s the market context? Why now?
Before diving into the details of what problems I’m potentially solving, I like to zoom out and see the broader market context of where I’m playing. How competitive is the landscape? What does revenue look like in this market? What’s the latest news?
Through sizing the market and revenue opportunity, we knew that sports betting was a huge and growing market that users cared very much about (and with a high willingness-to-pay). The U.S. saw $7.5 billion in revenue from sports betting in 2022, which was a 72.7% increase from 2021. That’s insane.
Timing also played a big role — the United States Supreme Court had recently issued a highly anticipated decision that struck down the federal ban on state authorization of sports betting. We were one of the first startups to have the necessary state-by-state legislation in place, and this gave us a temporary advantage that we needed to leverage quickly.
3.b. Can we reach customers in a cost-effective way?
We often hear about product-market fit, but product-channel fit is just as critical. In order to have a sustainable customer acquisition cost (CAC), it’s important to find the channel that resonates with your users and your product, and then customize your product and your marketing content to that specific channel.
While it’s good to experiment in multiple channels, most products typically get a majority of their users from one channel, so keep that in mind when finding product-channel fit.
Not only did we test the performance of marketing in various traditional channels (TikTok, Instagram, Google Ads, word of mouth), we also went to where our users are by leveraging stadium or sports team partnerships during live games.
Part 4. Validate the product
4.a. Where are we in the product lifecycle? Does the product have product market fit?
When I first joined, the founders told me that this product was actually in it’s growth phase (rather than 0 to 1 phase). Trust, but verify.
I verified that assumption by measuring the 40% rule, which is a leading indicator for product-market fit. Why did I do this? I wanted to make sure it had strong product market fit before focusing on growth optimization.
If you’re not sure whether you have product-market fit or how strong it is, this is the most comprehensive article I can find on how to calculate and use the 40% rule.
For those of you who aren’t going to read that, the tl;dr is that if roughly 40% of your current users say they would be “very disappointed” if they could no longer use your product, you most likely have product market fit.
By calculating that number and prioritizing feedback from users who were aligned with our core value proposition and who were on the fence about being disappointed if they could no longer use the app, we doubled our product market fit “score” and hit that 40% threshold (read the article if you have questions about this).
4.b. Test core assumptions of the product with zero development
Testing assumptions, rather than entire solutions, allows me to learn 10x faster and often with 0 dev effort.
When I was tasked with increasing the number of bets that get accepted, I had several solution (AKA feature) ideas to solve for that problem.
Instead of jumping to solutions and building each of those solutions in a prototype and then A/B testing them (requires a lot of design/dev work), I identified the assumptions of why people weren’t accepting bets and tested those first.
For example, if we’re trying to increase bet acceptance, we could move the location of the CTA notifying the user that they received a bet, or we could create a push notification, or we could introduce filters so users can find the bet.
Should we build each one and A/B test the results? Or is there a faster way to see which one is most effective?
Why, yes there is! You can instead identify the assumptions of what problem you’re solving for:
- Users don’t know that they were invited to a bet
- Users know that they were invited to a bet, but later can’t find their bet invites
- Users can’t find the bets that they’re interested in accepting on the feed
- Users forget that they’ve been invited to a bet entirely
I identified the riskiest assumption and built a test around that. The result?
I learned within 5 days which assumption wasn’t true, allowing me to confidently decide what to build before spending a single developer hour on it.
Conclusion
Thanks for reading my book (jk but actually).
As always, my tactical articles are much longer than I hoped. Still, I hope I gave tactical insight into how finding or strengthening product market fit can essentially be broken down into four types of problems:
- Validating the problem
- Validating the primary target persona
- Validating market viability
- Validating the product
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