There’s no doubt, product-market fit is the first rung on the ladder of success for any SaaS company, but how do you get it? How do you know when you have it? And who should be responsible for driving it?
Ovi Negrean, Co-Founder and CEO at SocialBee answers all these questions and more, including:
- How to identify poor product-market fit
- How to select your north star metric
- How to determine where you need to spend your money to deliver value to your customers
Q: Can you tell us about yourself and your role at SocialBee?
A: Yeah, sure. I'm the Co-Founder and CEO of SocialBee. We started the company almost five years ago.
I'm usually in charge of the product division, helping with marketing.
I’m always trying to think about how we can keep improving what we have for our customers, how we can keep making our product better, and how we get more customers to use our products.
Q: Product-market fit is often driven by metrics to find out what your focus should be and how to tie your different departments into a common goal. How do you select your North Star metric?
A: Our North Star metric is our monthly recurring revenue (MRR). I think this is a good proxy for product-market fit. If you don't have a good product-market fit, it'll be quite hard to get that MRR up, either because people won't buy or because people will buy but then churn quite quickly.
It's difficult to get good MRR growth without having product-market fit.
There are a couple of ways to think about if you have a product-market fit or not. One is more theoretical and the other is more practical. For the one that’s more theoretical, if you have to ask yourself, “do I have a product-market fit?” you probably don't.
This is how I think about It, how easy it is to make a sale?
How is it compared to a few months ago or a few years ago, as your product evolves, or as you change your market? You need to ask your customers the question, “if I take away your product, how upset would you be?” If you have a lot of people begging you to bring it back, then you probably do have product-market fit, at least for that subset of customers, and that's the subset of customers that you should be focusing on.
Q: What are some of the key identifiers that you don't have a good product-market fit?
A: Almost by definition, when you're still trying to find that product-market fit, you're at the beginning of your journey as a company. Most of the time, that means you don't have a big budget to try out various things, and because you haven't reached product-market fit, it's harder for you to raise money.
Oftentimes it's a bootstrap type of environment and because of this, you don't have a tonne of data points, so, you can’t look at this from a high level. At this point, you won't have a lot of users, and this is why it's even more important to look at anecdotes and try to get on calls with your customers.
They can be customer discovery calls, sales calls, or customer support calls. It's just important to listen intently for feedback.
However, until you get a few more users you can gather feedback from, don’t act upon all of it.
Sometimes it's only when you see a pattern emerge that you can start to fit it into your vision.
There’s that famous Henry Ford quote, where he said, if he had asked his customers what they wanted, they would have said they want a faster horse.
Sometimes a founder needs to take a leap of faith into building the product they think should be a part of this world. Sometimes it's almost impossible to get that type of feedback from your customers. That's why I treat all the feedback as data points, when I see a pattern emerge, I pay attention.
Q: How do you determine where you need to spend your money to deliver value to your customers?
A: When it comes to spending money, especially in the SaaS world, it goes in more or less two directions. One is into the product, and the other is into the marketing. If you can do it, you should do both in parallel.
With marketing, starting very early will bring a lot of benefits by the time you want to launch what you're building. Basically, you’re able to create an audience, and you are able to use that audience to beta test your product or get feedback on your product.
Q: How do you achieve product-market fit, and how do you know you’ve achieved it?
A: As a founder, you should have a good feel for this, when you're talking with a customer or a potential customer, it's easier for you to make the sale. You see that people who signed up a few months ago stayed with you and continued to use your product.
You might even have some metrics that you're actually tracking.
In our case, we don't care if people log into our product on a daily basis, or even on a weekly basis. Our whole premise is that our product can help you set it and forget it.
It's important to look at the metrics that you're tracking so that they make sense for you.
If you want to go into a more scientific approach, it's important to automate things as much as possible. If you have an email marketing funnel, once somebody starts your trial, maybe 30 days later, send them a survey asking them an NPS type of question like: “How likely would you be to recommend our product?” Once you're a bit further down the line, ask: “if this product would go away, how upset would you be about it?”
But at the end of the day, I think if you’re involved in your product, you should just get a feeling for it. It’s not even about improving the product. You can work on the UX and maybe add new functionality, but the core value proposition is already there. People are using it on a consistent basis or as often as you want them to use it.
Q: Which departments do you think are most crucial for driving product-market fit?
A: It's important to have a culture of understanding with the customer and have the customer front and center to make sure that everybody is up-to-date on customer needs.
Everybody needs to know how to listen for this type of feedback, they don't necessarily have to act upon it. But when they do see some interesting feedback, they need to send it to the product team.
The product team is ultimately responsible for defining the product, defining the product strategy, the roadmap, and then implementing it, but they need input.
You need that help from more or less the whole company.
Q: What are some of the biggest mistakes you've come across when companies are establishing their product-market fit?
A: One of the biggest mistakes we made is that we weren’t working on the product and on the marketing. At the same time, when we first started out, we did enough marketing to get us some users and generate some buzz.
Then we focused too much on the product before we started actually doing some real marketing again. We wasted a lot of time in which we could have gotten our product in front of even more users. Especially with paid marketing, when you stop the ads, that whole funnel dries up.
But with things like content marketing, which most SaaS companies are doing, these are things that take months, or sometimes even years of work to get that marketing ball rolling and make Google see that you are an authority on a specific topic related to your product.
Another major mistake I see is people over-engineering their product. They only think about functionality, maybe they are looking at other more established competitors in the space.
But once you get your product out there on the market, and get some real feedback from real customers, that should dictate your priorities. And you will be able to see that some functionality you thought was key is not something the customers asked for.
Q: Can you share a lesson you’ve learned along the way?
Before Social Bee, we started an app that brought quotes from business and personal development books. With that product, we never got to the product-market fit stage. It would have been quite hard for us to turn that into a business because, in reality, it was a vitamin, not a painkiller, and your product should ideally be a painkiller. It needs to address a pain point.
So, looking back, should we have started this? Well, If we didn’t, we wouldn’t have been able to learn from our product and pivot into Social Bee.
I advise all sorts of startups from time to time that even if I think their idea won't work, it doesn’t mean they shouldn’t do it.
In taking those first steps on the wrong road, you might find another road, which will take you to a new product or pivot your product to your market, and then get you to success.
Most of the products out there are in no way close to how they looked when they started out. Just keep working at it.
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