The way I think about product/market fit has changed a lot over the years. I view it differently than I used to.
I used to think of product/market fit along the lines of: users are enthusiastic, word of mouth is positive, people are delighted, the app is a joy to use, it makes hard things easy, it nails the use case—the app solves a problem or meets a need in such a way that it makes users happy. I’ve built the right thing to do the right thing in the right way. Obviously product/market fit, right?
Nope. That’s service/user fit, not product/market fit. It’s not a bad thing, but it’s totally different. It took me a while to see that.
Let’s dig into what those three words (product, market, fit) mean. The following discussion is especially informed by my experience in business-to-business, but the general concepts are just as true in B2C or other types of businesses.
What is a product? A lot of people, especially engineers, especially past-me, think the product is the thing they build. I used to think of the product as the app, the service, the UI, the UX, the functionality. This couldn’t be further from the truth. The product isn’t what you build. The product is what you sell. It’s easy to confuse one for the other, but important to understand the difference.
Let’s take whiskey stones as an example. Look at listings on Amazon and you’ll see sellers promoting the benefits of whiskey stones: chills your bourbon without diluting it with meltwater, no mess, reusable, convenient, etc. Sounds legit, right?
But what’s the product, really? Is it the stones? No. To quote the famous line, people don’t buy quarter-inch drill bits, they buy quarter-inch holes. The product is the result or outcome. Ostensibly chilled-but-not-ruined whiskey, but we’ll revisit that later.
If I use a dating app as an example, the product isn’t the app, it’s companionship. If I use VividCortex*, the product isn’t database monitoring, it’s improved revenue through a more responsive and efficient app or service. If the example is group chat, the product isn’t chat rooms, it’s a more connected and efficient workforce with less need for meetings. (Arguably.)
Similarly, I used to think of market very differently. I used to think the market was the user, but now I recognize that users don’t have to be the buyers. In Geoffrey Moore’s classic Crossing the Chasm, he defines a market as “a set of actual or potential customers, for a given set of products or services, who have a common set of needs or wants, and who reference each other when making a buying decision.”
There are no fluff words in that definition. Importantly, the market is who you sell to. The market is the buyer, not the user.
Who is Facebook’s market? It isn’t the billions of users on their service. It’s the advertisers! If you’re selling a dating app, your users and buyers are the same. If you’re creating a free dating app that’s ad-supported, your users and market are not the same. When they’re the same, it’s just a coincidence. Many or perhaps even most products are sold to someone other than the users.
At VividCortex, for example, our users are developers, DBAs, technical operations teams, SREs, and the like. And, sure, these are our champions for promoting a sale internally, too. But we don’t sell to them, we sell to VPs and the C-suite and so on. In fact, we sell to organizations, not individuals.
A clear understanding of the market helps inform a clear understanding of the product. When you think about who buys whiskey stones, the difference becomes obvious. If you talk to a whiskey drinker, or just read the reviews on Amazon, you hear something different than the product listing would like you to believe. “One star. My brother-in-law gave this to me. I know he meant well, but don’t give these as a gift. They’re just a hazard. They’ll smash your lips, break your teeth, and you’ll end up paying thousands of dollars for dental repairs. And they don’t chill well.”
Who buys whiskey stones? Not whiskey drinkers. The actual market is their brothers-in-law. And that helps clarify what the product really is. The real product here, what the whiskey stone makers are selling, is a warm fuzzy feeling for people who think their brother-in-law is hard to buy for. The product listing, with its supposed benefits, is not designed to appeal to the drinkers, but to their relatives. And it literally plays to their ignorance about whiskey drinking.
You have product/market fit when you have clearly identified the product, as just explained, and it fits your market’s needs. Whiskey stone sellers have done a great job of selling warm fuzzies to in-laws; they have very good product/market fit. (What happens after the sale is a different matter.)
A really important part of fit includes how your market buys. If you haven’t aligned your delivery mechanism with your market’s purchasing mechanisms, you don’t have product/market fit. For example, if you sell to the government, you probably have to go through approved channels and meet various types of regulatory approval. Otherwise nobody in the government can actually buy what you’re selling.
To put this in terms of VividCortex again: we initially built a database monitoring service that made DBAs happy. Great! Nice service/user fit. Then we had to figure out how to sell it. Creating actual product/market fit required creating a sales team, enunciating our security stance, aligning our processes with the finance departments of our customers, and so on. This was way more than just the app or service; that’s a small fraction of the whole product—the tip of the proverbial iceberg. This is why I said sales is a key part of a company’s core IP. In the end, we’re selling the whole package—our entire company—to each buyer.
I remember the first time we “closed” a deal with a big company. We had all the approvals, legal signoff, even a signature on the order form! The money was as good as in-the-bank. The next step was to talk to someone in the procurement department. No big deal, it sounded like we were just talking to finance in the usual way, figuring out who could issue the purchase order and giving them the bank wiring details. NO. This time it was different. They renegotiated the entire deal from scratch, put the hammer down on pricing, and killed the deal, refusing to let the company buy what dozens of people had worked hard to bring into their team for months. What the actual!?!?!
This was our first customer with a procurement department. As I was about to learn, big companies use these because there’s no chance all of their thousands of employees are going to negotiate good deals when they’re across the table from a salesperson with decades of experience. So companies put in gatekeepers and give them commissions based on how much they’re able to browbeat vendors. These people can be absolute bulldogs (but usually in a very nice, apparently helpful but my-hands-are-tied way). The definition of their job is to get the vendor on their knees begging.
“It’s the end of the quarter and you’ve been using our service on hundreds of servers for 6 months already! Pleeeeease!!!”
I’m going on vacation, be back in a couple of weeks.
“Who’ll handle our case in your absence?”
OUT OF OFFICE: RE: VividCortex Contract
Your worst nightmare. But you know what? This is part of product/market fit. If you haven’t built your company to sell through your customers’ purchasing processes, you don’t have product/market fit. Your market is your buyers, and procurement is ultimately the buyer in this example.
Revisiting Moore’s definition, it’s also helpful to remember that your market isn’t individual buyers. It’s actually a group of buyers, plural, with commonalities. This points out that one-off deals don’t constitute “fit.” Fit is achieved when your product, taken as a whole (i.e. not only what you sell, but how you deliver it to your market) fits your market as a whole. You’re not trying to create one-by-one fit, you’re trying to create something scalable and repeatable.
Product/market fit is very different from what I thought when I founded VividCortex. I was really thinking about service/user fit without knowing it. Product/market fit isn’t when your users are getting value from your app. It’s when you sell the value you create, and your market—a set of customers with common needs and who have herd buying behavior—purchases and acquires it effectively.
All three words (product, market, fit) require clear understanding to succeed.
This post originally appeared on Baron Schwartz’s blog.
*Denotes a Battery investment. See here for Battery’s full list of all investments and exits.