If you only learn one marketing term, let it be “product-market fit”. Get this right and you will have endless business; get it wrong, and you can get everything else right but you still won’t get anywhere.
Product-market fit means defining your target market, defining your product or service, and making sure they match. Sounds simple? Well, the concept is simple enough, but it can be difficult to execute.
Let’s walk through the three step process:
1. Define Your Target
Before you can work on matching anything to your target, you need to know who your target market is. Get to know them really well:
- Where do they live?
- How much money do they make?
- What ethnicity are they?
- How old are they?
- What do they like to do in their spare time?
- Where do they like to shop?
- What do they read?
- Are they introverted? extroverted?
Get a clear picture of who exactly you are trying to sell to, and make sure there are enough people like that to give you a viable market.
2. Define Your Product
Define clearly what it is you are selling, whether a physical product (clothing), a service (therapy sessions) or a service product (combination of both, think nail salon, catering, etc…). If you are selling a product, are you selling a luxury item or a basic commodity? As a service provider, are you selling hourly sessions? Packages? Results-based services?
3. Do They Match?
Once you know who you are targeting and what you are selling, you need to determine whether or not that target will want what you have to offer and how much they’d like to pay for it! Find people within your target group (relatives, acquaintances, focus groups) and ask if they would buy it. If your research shows that you do not have an market for your product or service, don’t throw it all away. Just adjust your product so that it does interest your target. This applies if you’re just getting started or are already in business- check in once a year to keep yourself on track.
Product-Market Fit in Action
Here’s a sample of how this concept would be implemented when pricing your offering:
Sarah was opening a bakery selling gluten-free products. She defined her target market as middle class professionals who have a gluten allergy. The problem was, her cost of goods was pretty high and in order to be profitable, she had to charge $9 per box of gluten-free cookies. Her target wasn’t going to buy at that price. The maximum they would pay was $5-7 box. Sarah couldn’t change her price to match her market, or she would lose money on every box sold! So instead she changed her product. Instead of selling 2-pound boxes of cookies for $9, she sold 1.5-pound boxes of cookies. Now she could charge a price that her market was willing to pay – $6 a box. Product-market fit!
Laurie made the most beautiful, intricate custom bridal headpieces, which she sold for $250 a piece. For most brides, there were so many other important wedding expenses, that $250 was a too much money to spend on a headpiece. For the wealthy brides, $250 was really no big deal, but it didn’t seem qulality to them at such a relatively low price. Laurie had priced herself out of the market. She was selling a luxury product, but instead of selling it to the people who could buy it, she was trying to sell to people who couldn’t afford it. Once Laurie raised her prices (and quality) to $1,000 to match the high-end market she was targeting, she had a product-market fit. Now she was talking business!
Stay tuned next month as we apply this principle to other marketing tactics.