February 15, 2024

How to Nail Product-market Fit by Fine-tuning your Strategy with Customer Needs

Collective member and former CPO of Calm, Mads Johnsen, and former product leader turned investor, Magnus Hambleton, share their experiences and advice on how to nail your product-market.

Magnus Hambleton
How to Nail Product-market Fit by Fine-tuning your Strategy with Customer Needs

One of the most common reasons startups fail is because there isn’t demand for what they are building. The solution seems obvious - talk to your customers - but it's not as simple as you might think. Collective member and former CPO of Calm, Mads Johnsen, and former product leader turned investor at byFounders, Magnus Hambleton, dive in:

Fall in love with the problem, validate the solution

Early product exploration typically focuses on problem validation: fully understanding customer problems and pain points. However, it is critical that you quickly move from testing problems to testing solutions with your customers. It isn’t sufficient that you solve a problem, or that adopting your solution is a rational economic choice. Many customers aren’t compelled to change behaviors or adopt solutions, and humans don't make perfectly rational purchasing choices: our decisions are colored by emotions, biases, and intangible motivations.

When I built employee benefits products, I would always ask the buyer how they decide which benefits to invest in for their employees. The initial response was typically a logical ROI-focused rationale, ensuring the benefits outweigh the costs. However, when pressed to show such ROI calculations, few buyers can produce them. Instead, the buyers typically end up measuring employee adoption rates or qualitative employee feedback as a proxy for value, says Mads.

To best create products that get adopted and deliver value, you first have to uncover how potential customers feel about your proposed solution. The set of customers you do this with early are often called “Design Partners” and they are a crucial part of setting up your company for iterating toward PMF.

The earlier you test positioning and mocks with potential customers, the better you can adjust your product and maximize your chance of success. Some of the most common reasons founders don’t engage early customers are:

  • My product isn’t built yet: You don't need a finished product to test positioning and messaging. Outline the problem you aim to solve and how your solution would be better than alternatives.   Listen closely to objections and concerns to refine your pitch. View pitching and sales conversations not as post-development tasks, but as critical pre-product insights to guide your solution development.

  • My product isn’t ready to show: No product ever feels ready to show customers, but even partial visuals elicit helpful insights. In fact, allowing potential users to speculate on unfinished aspects of your product often yields early insight into customer expectations.

  • I don’t know how to reach customers: If you can't access customers now, how will you sell to them when the product is built? Build a distribution plan, and use the first version of the distribution plan to reach customers to get early feedback: conferences, online forums, or other channels where your customers congregate are prime testing grounds to validate early prototypes.

  • Potential customers don’t respond to my outreach: Lack of interest signals your solution may not adequately address needs and you need to refine your pitch. But if access to users is limited, you can lean on user testing services, where customers are paid for their time to gather feedback. We’ve listed a few user testing services at the bottom of this article.

There is a saying that first-time founders care about product, while second-time founders care about distribution. You need to care about both: success depends not just on how great your product is but also on how effectively you can get it into the hands of your customers. Do yourself a solid and start already on day one.

Maintain a direct line to your customers as you scale

Product organizations can drift away from direct customer interactions as companies scale. It's not that product organizations ignore customers, rather they get feedback indirectly through dashboards, reports, survey results, and support tickets rather than direct interactions.

In B2C companies that are operating with hundreds of thousands of users, it can be very challenging to deeply understand how a single customer interacts with your product and what their underlying motivations are. At this scale, customer insights often become a combination of dashboards of aggregated engagement and metrics (e.g., looking at conversion rates between screens), customer support tickets, and one-off user research, conducted by user research, product marketing or marketing research.

In the early days of transitioning Uber into a superapp, our research surfaced several logical reasons for superapps rising popularity in Asia and South America, one of the most common reasons being limited device storage. Fewer apps meant less storage required. But talking directly to customers, a very different pattern emerged. Sure, space mattered - but no one obsessed over it. What got consumers pumped up were the rewards programs. I'll never forget how one consumer passionately described how he had migrated his entire family to the local superapp and had a weekly ritual to allocate the points back to his children as allowance, shares Mads.

In B2B companies, customer contact is often owned exclusively by account executives or relationship managers who maintain individual customer relationships. They frequently interact with customers, but mostly from a sales or support perspective. Product requirements are delivered second-hand back to product teams mostly in the context of support fires or customer requirements surfaced at contract renewal negotiations.

Tools for user feedback

Look for platforms that allow for granular targeting of your audience and video-sharing capabilities - there’s a lot of non-verbal communication in user feedback. It's not just what users say but also what excites them and causes them to interrupt with questions or ask for clarifications. A few platforms we’ve had success with are:

  • Maze or Usertesting are full-service platforms that allow you to specify a specific consumer or B2B buyer and lets you bring a demo or an artifact for prospective customers to react to.
  • You can also string together Prolific, which enables access to a representative sample of people to survey, and then leverage Hotjar to demo real users interacting with test versions of your pages.

Once you get customers onboarded, many startups create Slack, Whatsapp, or Discord groups with their first customers to get immediate and direct feedback. 

No matter the tools you use for talking with customers, ensure that they are less numerical and more qualitative. Numerical data is useful for making simple either/or decisions: A/B tests, signup flow optimization, or deciding on one logo over another. A qualitative understanding of your customers is what will help you figure out what options you should be testing and building to begin with.

In summary, here are the three main things we recommend:

  1. There is no such thing as meeting your customer too early: Test positioning, mocks & distribution before you build and test your product
  2. Use a prototype in your customer interaction, so you can discuss the solution rather than the problem.
  3. Reinforcing that direct customer interaction is a core part of the job for product and engineering leaders as you scale and staff up customer-facing roles in research, marketing & sales.
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Magnus Hambleton

Magnus is on the investment team.

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