According to the definition, Product-Market Fit occurs when the Value Proposition of the product (or service matches an underserved market need.
Why is it important?
Some people are quite religious about this one. The general stance on it, is that a company should concentrate on radically different things before product-market fit than after it has achieved it.
Mostly, is about scaling and performing massive sales and marketing efforts. If there is no product-market fit, marketing and scaling are pointless efforts. At this point, most of the effort must be focused onto learning as much as possible in order to achieve it.
But how do you know when you have reasonably achieved it?
Here, is important to note the word "reasonably", because during the lifecycle of a product, the needs of customers will shift, and with it, Product-Market Fit will drift away, and will require some adjustments. Or maybe, the specific definition of the ideal customer for the product will no longer exist, and the feature set of the product will have to be adjusted to a newly defined ideal customer.
While we mostly tend to concentrate on the "Product" part of the equation, we should pay attention to the "Market" piece, because this is the one that will give us the strongest clues.
You'll know you are approaching Product -Market fit when your prospective customers (the "Market") can properly describe your product's differentiators and group it with the correct set of competitors, AND you see growth in demand and some word-of-mouth recommendations taking place. Waning returns or churn are also an indicator of good product market fit.
On our next Daily PPILL, how partners can help in achieving product-market fit.