Figuring Out Your Product/Market Fit

The Details
-> ↓

Allsmith Growth

This month, Allsmith Growth hosts Blake Allsmith and Alex Bowman help pin down the hard numbers behind one of the most important concepts in startup marketing: Product/Market Fit (PMF). PMF can be a difficult quality to explain, much less quantify. Who has it? How do you know when you have it, and how would you know if you don't have it? It’s something Blake and Alex have plenty of experience with as startup founders, and in this episode, they reveal how they utilize Superhuman’s influential Product-Market Fit survey and the power of ChatGPT to better understand customers, the market segments they occupy, and the best way to service the needs of an ever-growing, ever-changing market.

‍

A Magical Mysterious Milestone

We start off with an overview of just how important PMF is for startups, how much it’s talked about, and how easy it can be, in the absence of any empirical data, to overestimate how much of it we have. “It’s so important as a startup founder,” Alex notes, “to get to that magical mysterious milestone with your product, and a lot of time founders believe that they have it but they don’t.” Blake agrees, and he recalls how a documentary on Irish MMA fighter Conor McGregor, Notorious, illustrated the value of self-encouragement and confidence in achieving success. “There’s this weird balance,” Blake says, “as a founder where you need to maintain some intellectual honesty in order to make a good product, and you need to manifest things that aren’t yet as you raise money and enact your vision.”

Blake and Alex discuss Brian Balfour’s article “Four Fits for $100M+ Growth” which describes the four pieces of a marketing puzzle that need to fit together to succeed: product, market, channel, and model. Blake explains how Cladwell went from a strong channel and weak product/market fit to a strong product and weak channel, and notes how important it is to consider the economics of marketing at scale. “We needed to get a billion dollars in order for our investors to be happy,” he recalls, “which means this many users, which means this many installs, which means this many clicks, which means this much ad spend, and... there weren’t enough humans on Earth to get what I needed.”

Alex describes his experiences as the founder of Casamatic, and how a market shift from Cincinnati to Chicago that the startup thought would be trivial turned out to have a tremendous impact. “We thought Chicago was going to accelerate our earnings,” Alex says, “because we’d be going into something that’s completely different. That was naive. Obviously, what we should have done is look for all the other Cincinnatis in the United States. Of course, nothing is exactly like Cincinnati.”

‍

And the Survey Says...

Blake and Alex discuss some of the tools Allsmith Growth leverages to help clients evaluate whether they truly have product/market fit, including an adaptation of Superhuman’s Product-Market Fit Survey. “Don’t grow before you have product/market fit,” Blake cautions. “Growth is an accelerator. It’ll either accelerate you into the sky or into the ground very quickly, and if you don’t have product/market fit, it can destroy a company quite quickly.”

The most critical question on the survey from a PMF perspective, they observe, is the very first one, which groups customers into three broad categories: those who would be “very disappointed” to lose access to the product, those would be “somewhat disappointed,” and those who would be “not disappointed” at all. They recommend sending the survey to at least 4,000 customers and aiming for at least 40 responses, and Alex shows us how he's used ChatGPT to sort through and organize the data not only by subscription tiers but also into brand-new segments suggested by the AI itself.

‍

Alex notes that ChatGPT invented three categories to describe the survey results, Analytics & Performance-Focused Creators, New & Exploring Users, and SEO Focused Creators, and Blake explains Superhuman’s metrics for gauging PMF: “They said if 40% of your customers who have paid you money say ‘I’d be very disappointed if you disappeared,’ you have the beginnings of product/market fit. What I love about this,” he adds, “is that it’s something clear.”

Looking at the chart, Blake and Alex note that just two of the categories fall below that PMF threshold: the Basic subscription plan along with ChatGPT's New & Exploring Users segment. “This table alone tells you,” Alex explains, “here are the customers, or here are your segments of customers, that do really like your product and have the early stages of product/market fit with, and you can really lean into that. And now you also know, here are the categories of customers that you don't have it with, and you could either choose to continue to work at it... or you can choose to forgo that.”

‍

Making Sense of the Numbers

Now that we know how the numbers are distributed, it’s time to figure out just what they’re telling us. Alex has another ChatGPT trick up his sleeve: he’s fed all the positive survey responses into it with the instruction to summarize the responses, and he shows us what it came up with, both the summaries it provided of what those customers appreciate most and a word cloud of their feedback.

‍

“I remember hearing from a product standpoint,” Blake observes, “that you should spend 50% of your time going deeper into the things that your core targets already love about you.” Alex agrees, and they discuss how playing to your strengths can go against a startup founder's instincts. “I'm a new-new thing guy,” Blake admits. “I love what aren't we doing that we should be doing.” “I think most founders are,” Alex adds. “That's what drew them to found a company in the first place."

They go on to test the same ChatGPT process on some different surveys, those customers who would be “somewhat disappointed” by losing the product, or, as Alex puts it, the ones who are on “the precipice of loving your product.” He pulls up another chart that shows what ChatGPT came up with for their feedback and how they might be converted from ‘meh’ to ‘wow’ customers.

As Blake and Alex note, the other 50% of your time should be spent on the people who are potential customers but haven’t arrived there yet. Unlike most marketing research, both the survey and ChatGPT’s analysis of the feedback cost nothing, and the data provides a valuable road map for how to drive growth. “I just think that’s so helpful,” Blake says, “because it gives a measurable number that your product team can look at on a quarterly or six-month basis to say is our product getting broader usage or broader adoption.” Alex adds his more hands-on perspective as well: “To me, as a product person, that just solidifies the decisions that you’re going to make on what to build next.”

‍

What Your Customers Want

It all comes down to knowing what your most enthusiastic customers – and those who find value in your product even if they're more lukewarm about it – are looking for and giving it to them. “In a world of being a founder,” Blake says, “where the hardest thing is not knowing what's most important, this actually gives you a prioritized list.” As Alex explains, the high survey scores are the target customers and core demographic to focus half your effort upon; the other half of your time and energy should go to those mid-range scores to try and lift them into positive users as well.

Blake recalls a podcast interview with LinkedIn co-founder Reid Hoffman, who recounted how his childhood games of Dungeons & Dragons helped prepare him for the business world. “This is a game that you can win,” Blake adds, “just by looking at the score, by segmenting, strategizing, developing new things, and then watching the score go up. That is an addictive thing for your team.”

‍

Episode Timestamps