Are there silent factors that determine product market fit?

This post examines Model and Channel as silent factors that determine Product market fit. It also describes how each component of the PMMC needs to be looked into independently or in groups.

Product market fit is one of the concepts you come across starting a new business. You hear questions like “Does your business have product market fit?” Or “How will you achieve product-market fit?”

But the question, people largely do not answer is the question of what is involved in getting product market fit.

Before we go forward, you need to know that I got an eye-opener from reading Brian Balfour in his article Why product market fit Isn’t Enough.

The article does a deep and lengthy dive into the concept of PMMC (Product, Market, Model, Channel).

Moving forward, the question now is what are the silent factors that determine if you will ever reach product market fit? These are:

1. Model

2. Channel

Before I explain what model and channel mean, let me briefly talk about what market and product are.

Market refers to the scope or type of customers you can sell to. You can also refer to it as the sum total of buyers of your product.

Here you want to consider Total Addressable Market (TAM), Serviceable Addressable Market (SAM), and Serviceable Obtainable Market (SOM) but this a topic for another day.

However, determining your market and being clear about what your market really is is very and extremely important. Imagined or Facade Market is just a pathway to failure if we are being honest with ourselves. This is usually common with technical founders.

Many times, they see solutions more than the market. They are builders and if it solves for one person then they assume it has a very large market that can pay for the project

Though it is usually not that straightforward determining your market, you might need to consider the region, the type of customer, and their habits.

Now, let’s talk about Products. This is what the customer pays for or the value they spend money on. It could be a physical item or service. Your product can be likened to the solution to the pain of your customer.

Why are Model & Channel the silent factors that make up product market fit?

Again, this is an important question that gets lost in the conversations around PMF (Product Market Fit) which we will answer by first explaining what Model means and what channel means.

Model

A model can be also called a business model. This is where you want to figure out how you will charge your customer or how you will make your money as a business.

I will almost say you should actually figure this out before going fully into the business. You might try a couple of models but it is very important that in the end, you choose a model that is crystal clear.

Your customer should be able to understand the pricing and also have the capacity to pay for it. For example, if your solution targets SMBs as your customer and you give them pricing for an enterprise business, it will definitely fail.

[Fun Fact] We also need to get out of the bubble of I have raised funds or I can figure it out along the way because, at the end of the day, you cannot cheat business fundamentals, and business fundamental says “You have to make money to stay in business”.

We can try to wing it but we will still definitely get back to the basics.

Here is something to note under the model and it is that it is not only about figuring out how to charge the customer, it is also about figuring out how high your margin can be and the factors that can impact the growth.

For Example, a product with a high cost of goods that requires you to do high volumes to make good money could be a hard one.

Channel

As a business, your channel for getting buyers to your product is crucial.

It might take some time to figure out the best channel to get your customers or the best channel to onboard them more quickly or the best channel with lower cost but it is very important to figure out.

This is where you see businesses coming out with strategies to identify these channels. They create strategies, experiment/test them, measure repeat, or kill the strategy.

Some businesses also boast how their channel and the strategy they use to acquire their customer is part of their USP (Unique Selling Point) but that is another conversation for another day.

It is also important to know that your channel could change if there are significant changes to your market.

For example, your SaaS works for SMBs and you reach out to them through community, emails, or influencers then you realize that your product is getting more mature in the market and SMBs cannot pay for the value you currently provide or your increasing operational cost. You then switch to enterprise businesses.

In this case, the channel will change. You then probably start with direct sales/partnership and then explore other strategies.

Let’s take a breath here.

Photo by Jared Rice on Unsplash

So now, the answer to how model and channel play in product and market fit is descriptive.

When the model of the business is clear, it becomes easier to figure out the channel.

In turn, if the market truly exists, the channel will shape the product and there could be a successful business there.

This, therefore, leads us to an important question.

How do I figure out PMF if I am to start up today?

Photo by davisuko on Unsplash

The question above begs for an answer around how Market, Model, Channel & Product fit together.

First, you need to understand that building a business is a journey. You also need to be able to have an answer on what your market is, what you are building, what channel will you get customers, and how you will charge them.

However, it is possible you begin your startup and you realize your business is in the following scenarios:

1. You have figured out the market and product but the model has not been figured out

2. You have figured out the market and product but the right channel has not been figured out.

3. You have figured out the market and channel but not the right product yet

4. You have figured out a model, channel, and product but there is no market there.

I highlighted these 4 scenarios above but different businesses can find themselves struggling to figure out one or two or three of these components at the same time.

This leads us to the next question of how to figure these things out.

How do I figure out the scenario my business is in and solve it?

This is what I think you should do when trying to figure out each scenario your business is in and how to solve it.

Step 1: Ask the number 1 honest question: “If I continue on this path for the next 6 - 12 months, will this business be able to run on its own without external funding? ”

If the answer is No, ask why then you will be able to highlight which is the problem of the 4 components you are facing.

Step 2: Pick each component and ask what exactly is missing.

Is it that my customers do not have money? Or is it that they have alternatives and my product is nice to have? And so on.

These are tough questions but answer them honestly.

In this stage, you can also talk to your customers for feedback.

Step 3: You want to ensure you can in a way determine the market to a large extent. If there is no demand, then there is no point.

I say this because determining whether there is a market for a product can be very tricky.

You can build a product and people love it but won’t pay for it not because they don’t want to but for key reasons depending on whether it is a B2B or B2C product.

Step 4: You might want to objectively analyze what competitors are doing in that space. It could be that you are solving a problem that is not a pain point but is nice to have.

You want to ask:

1. Why are my competitors focused on what they do?

2. What exactly is the reason they have not tried to do what I do?

3. Are there restrictions? Or is there no market there? Or they are not just innovative?

4. Is it that customers don’t want it?

Step 5: You want to talk to business people that have built a business, successful or failed for insights. There is also the extra work in analyzing the feedback before taking a decision

My final question that we should also ask ourselves, before I round this article off, is “If the 4 components fit, is there a clear path to $10k / $20k / $50k / $100k non-COG (Cost of Goods) revenue within [a particular time frame]?”.

This question does not suggest you should give yourself or the business unnecessary pressure or try to force growth. This question will answer what the growth drivers are and how to access them.

Finally, this post is a summary of the hidden components that need to be given attention when figuring out Product-market fit.

After reading this you should explore if your business has answered the question of Market Product Fit, Product Channel Fit, Channel Model Fit, and Model Market Fit.

Again, these are my opinion as of this writing. I could come in the future and have a different approach to it.

Also, remember that the approach to figuring this thing out is picking them one by one to solve them and I am also looking forward to your view on and perspective on this article.