Why You Need to Re-evaluate Product Market Fit (PMF)
The majority of non-marketing folks think marketing is just pretty pictures, cool swag, and fancy taglines.
As a CMO, our job is to look at the market, create a plan, and translate that plan into actionable items and results we can see in the P&L.
To know the market is to not only know our customers’ pain points, but to understand the current financial climate and existing, upcoming trends of the market we’re in. We often answer the question of what are the future pain points? What will the market be receptive to? How are buyers trending? Do we still have product market fit?
All of this knowledge gets fed back into product & engineering for new features/products.
It gets fed back to CS to help them serve our customers better to prevent churn and drive retention.
It gets fed back into sales to have a competitive advantage.
Marketing is more than just pretty pictures, cute sayings, and cool merchandise. It’s the heartbeat of any business.
Product Market Fit is a Journey
Product market fit (PMF) is vital for a business to grow. It’s typically done (albeit, usually poorly in a bootstrapped kind of way), by early stage startups to see if their product has legs. Is it solving a current problem today for people, how is it doing it, and who is the market it is solving for?
Once you find you have PMF you’re off to the races building and hiring and selling your baby.
The problem with this is that the world changes. Business and consumer needs evolve and adapt to changing markets. But if you don’t do the same for your business, it will fail.
Poor product market fit is considered the most common reason for startups failing (34%), (source: What’s the big data)
Think of all of the companies that failed to re-evaluate their PMF over time.
TiVo, the DVR company (read my mini case study)
ZoomInfo, enrichment data provider
HootSuite, scheduling social posts
Kodak Film, film for manual cameras
Play-doh, originally designed for adults as wallpaper cleaner! (not really a failure because it did pivot, but I just thought this was a super interesting fact so I included it)
Only 3% of startups achieve product market fit 😱 (source: Bain Capital)
Startup failures result in significant financial losses (over $100B annually, according to Failory). Research also shows that 75% of venture-backed companies never return cash to investors, and 30–40% of investors lose their entire initial investment.
While it’s true that poor product market fit is considered the most common reason for startups failing, the second highest reason (22%) is supposedly due to poor marketing strategies. But I would argue that you can’t out-market poor product market fit and this is why it constantly needs to be re-evaluated.
When should you start to re-evaluate your PMF?
You should start to re-evaluate your product market fit if:
Net retention goes down
Expansions remain flat or go down
Growth is slower than normal
How do you re-evaluate your PMF?
Survey people.
First, you reach out to your “friendlies” meaning your existing customer champions, then your other customers, your friends, and then finally you reach out to complete strangers.
Current Benchmarks
You could also look at the market, benchmark reports, and understand what your ICP (ideal customer profile) cares about NOW.
Feedback
But the most important thing is getting continuous audience feedback. I really like the use of in-app tools like Pendo, Appcues or Walkme to get real-time customer feedback.
Reality
As CMO, I once told a founder they did not have product market fit any longer. What I didn’t realize was that “product market fit” was a trigger phrase that ignited a visceral response. Who knew?
To support my theory, I did a ton of research on what our ICP was now looking for by talking to people, surveying folks, reading industry benchmarks and other reports, and provided a solution on how we could easily pivot. The qualitative and quantitative data I came back with calmed the waters and we were successful at pivoting. I was fortunate in that my CEO was openminded, but not every CEO/founder wants to hear they’ve lost product market fit or they never had it in the first place.
Be forewarned to tread carefully and be sure to back up your claims with data if you can, which are why both internal and external surveys, plus benchmark data are paramount.
p.s. this Substack will always be free. I don’t believe in paying for content/knowledge. So if you think someone from your network would benefit from this post, feel free to share it. Cheers!