Product-market fit (PMF) is critical to the success of any business, from an early-stage startup to an established company launching a new product. But how do you test for product-market fit?
Read on for six proven methods and tests to determine if your company has attained the magical alignment of PMF.
If you need a primer on what product-market fit is, check out this article first: Product-Market Fit: Its Importance, Definitions, and Examples.
Testing for Product-Market Fit
The holy grail for startups, product-market fit is the key to a successful business. Achieving PMF ensures your product addresses a real need in the market and is essential to go from startup to scale-up.
Once you’ve found it, product-market fit brings benefits to your startup such as revenue growth, reduced churn, and increased customer satisfaction. Testing and measuring for PMF can give you the confidence to invest in growth and take your business to the next level.
Product-market fit testing can begin during the Minimum Viable Product (MVP) stage, when early product designs are launched. But PMF validation is an iterative process that requires repeated testing and feedback, so fully reaching product-market fit can take some companies years.
Indicators You’ve Achieved Product-Market Fit
Once your product is being tested in a market, you can get the required data and feedback from users to validate product-market fit. Here are clear indicators your product is truly delivering value:
Strong Customer Retention: When customers adopt your product and keep coming back, it’s a strong sign of PMF.
Word-of-Mouth Growth: If people enthusiastically recommend your product to others, it means you’ve struck a chord.
Customers are Spending: When customers see so much value in your product that they’re willing to pay a premium, you’re in a good place.
Positive Feedback Loops: Are customers giving you five-star reviews, suggesting new features, or even volunteering as beta testers? These are all signs you’re addressing a real need.
High Net Promoter Score (NPS): A high NPS score shows your customers are satisfied and likely to promote your product to others and help you grow.
6 Proven PMF Testing Methodologies
There's no one-size-fits-all test for product-market fit. Depending on your target market, product, and goals, you’ll want to use different methods. Here are some of the most effective testing methodologies:
Quantitative Surveys
Quantitative (numbers-based) surveys are a scalable and data-driven way to gauge PMF. The most famous quantitative survey test is called “the 40% rule” or the “Sean Ellis Test” after its creator.
For this PMF test, survey your customers with the question: “How would you feel if you could no longer use this product?”
Respondents are typically given three options:
- Very disappointed
- Somewhat disappointed
- Not disappointed
If 40% or more of respondents answer “very disappointed,” it’s a strong indication that you’ve achieved product-market fit. Quantitative surveys also allow you to segment responses by customer type, industry, or usage patterns, helping you fine-tune your product for specific groups.
Qualitative Surveys
While quantitative surveys focus on numbers, qualitative surveys dig deeper into the “how” and “why” behind customer behavior. Qualitative PMF surveys include open-ended questions such as:
- “What problem does this product solve for you?”
- “What do you like most about the product?”
- “What would you improve about the product?”
- “What, if anything, would make you stop using this product?”
The responses can uncover valuable insights into your customers’ pain points, motivations, and expectations. Compared to quantitative surveys, qualitative surveys require more effort to analyze and interpret but provide valuable and actionable feedback.
Internal Customer Churn Data
Churn is the rate at which customers stop using your product and is a critical metric for understanding PMF. The higher your churn rate, the more customers have stopped buying or engaging with your product. High churn often indicates a lack of alignment with customer needs.
- Through analyzing churn data, you can:
- Identify common reasons why customers leave.
- Spot churn patterns among different customer segments.
- Improve your product onboarding process to ensure new customers understand the value of your product.
- Address product gaps by adding missing features or enhancements.
Beta Testing
Beta testing is when you allow a select group of real users to try out your product before it fully launches. This valuable group provides early feedback and data to help you gauge whether your product resonates with its intended audience and satisfies market needs.
Key beta testing metrics include:
- Usage frequency: Are beta testers actively using your product?
- Feature engagement: Which features are they using most?
- Feedback volume: Are testers providing detailed feedback?
The beta phase also allows you to identify bugs, usability issues, or missing features before scaling.
If beta testing feedback consistently shows that users don't find your product valuable, it might be time to pivot or reevaluate your product strategy.
Interviewing Current Customers
Talking directly to your existing customers is one of the most straightforward ways to evaluate your PMF. Questions to ask include:
- “What made you decide to use our product?”
- “How does our product impact your daily life or work?”
- “What would you do if this product no longer existed?”
These interviews can help you understand why customers are staying with you and what keeps them engaged.
Interviewing Potential Customers
While current customers offer valuable insights, potential customers can provide a different perspective on your product and the market. This approach is especially helpful for startups or businesses in the early stages of launching.
Questions might include:
- “What challenges are you currently facing in [specific area or market]?”
- “How are you solving this problem today?”
- “What would you look for in an ideal solution?”
Their responses can help you determine whether your product idea has market demand and identify any gaps in your product’s proposed solution.
Calculating Product-Market Fit
PMF can be calculated using both quantitative and qualitative measures. Here are some effective methods:
Sean Ellis Test / The 40% Rule: As mentioned earlier, the “How would you feel if you could no longer use this product?” survey is a widely recognized method for measuring product-market fit. If at least 40% of users say they’d be very disappointed, you’re on the right track.
Net Promoter Score (NPS): NPS measures customer loyalty by asking users how likely they are to recommend your product to others on a scale of 1-10. Scores of 9-10 indicate promoters, while scores of 0-6 indicate detractors. A high NPS suggests strong PMF.
Retention Rate: Calculate the percentage of customers who keep using your product over time. High retention rates indicate that customers find lasting value in your offering. The specific retention rate considered "good" for your product depends on the industry and the type of business, but typically, the higher the better.
Revenue Growth: For B2B companies, revenue growth – especially through upsells or cross-sells – can signal strong PMF. If customers are increasing their spending, it’s a sign that your product meets their needs.
Usage Metrics: Monitor how often and how deeply customers engage with your product. One example: High daily active users (DAUs) and monthly active users (MAUs) counts can indicate stickiness and relevance in a market.
Remember that testing and measuring product-market fit is an ongoing process. Even if you achieve PMF in one segment, expanding to new markets or launching new features may require additional testing.
Using these methodologies, you can confidently assess whether you’re hitting the proven indicators for product-market fit and ensure your product delivers real value for your customers and your business.