Complete Definition
Product-Market Fit (PMF) is the holy grail for startups. It describes the point at which your product satisfies a strong market demand well enough that customers actively want it and recommend it to others.
Signs of Product-Market Fit
Strong Signals
- Word-of-mouth growth - High retention rates - Customer complaints when product is down - Customers paying without heavy sales - Organic demand exceeds capacity
Metrics Indicating PMF
- Net Promoter Score (NPS) > 40 - Month 1 retention > 40% - 40% of users would be "very disappointed" without product - Organic/referral growth > 50% of new users - Low/negative churn
Before vs After PMF
Before PMF
- Struggle to get users - High churn - Need to heavily market - Lots of negative feedback - Unclear who the customer is
After PMF
- Users come to you - Strong retention - Word of mouth works - Users love and recommend - Clear ideal customer profile
Finding PMF
1. Start with a specific customer segment 2. Solve a hair-on-fire problem 3. Iterate rapidly based on feedback 4. Narrow focus before expanding 5. Measure retention, not just acquisition