Unlock the secrets of Product-Market Fit (PMF) with the PMF Playbook. A guide that demystifies the process, offering insights into achieving that elusive balance between what the market wants and what your product offers.
The PMF Report Card
Stage
- Metric
- Product market fit (PMF)
- Funding stage
- Magic
- Idea
- Growth
- Activation
- Engagement
- Pre-seed
- Channel
- Seed
- Practice with founders
Stage 2: Habit.
65% of users should retain d30
- Users must form a habit around using your product
- Find a channel that can generate 1000 new organic users a week
- Measure this with weekly retention cohorts so that you can isolate the effect of your experiments from past user behavior
- Stage 3: Your First Channel.
The Pivot
Give it six months or so, and if you can’t get the above metrics, don’t beat a dead horse.
- Founders are always in a hurry to leave seed stage and get that big Series A check because it’s a validator that they are doing something right.
- Don’t worry about competitors getting to series A faster, because strong PMF wins over more money.
Conversion to paid can happen at very different points in time
You want a very high conversion rate from trial to paid since you have explicitly created a pay wall, and a user has gone through the work to sign up for the trial, so probably has strong intent
- If someone can see your magic before trial, it’s likely that you will have a lot more people trialing, which naturally creates downward pressure on conversion rate, but may still generate many more paid users than hiding the magic
- Monetization is the last seed step for a number of reasons
- All of the work you have done in the previous steps is going to be necessary to hit high monetization numbers
- Only people who see the magic, get onboarded well, develop a habit and become core users are likely to convert
- Experiment with a lot of bets here, all focused on the user’s psychology and how psyched they are about your product right at the moment of the ask
Experimentation
You want to test the need and whether you have a solution that resonates with users.
- Stage 1: Magic
- Once you have users engaged, put together a 3 slide deck with the right language and images and put that on Product Hunt, targeted Facebook groups, twitter chat or hundreds of other places where people go to find new ideas.
The best metric is the percentage of users who would be very disappointed if you pull your product.
A lower number here initially is better, because it shows that there is so much demand for your product that even people who it doesn’t really satisfy are willing to respond to your survey.
The Milestone: 80% of visitors who see your magic become users
If you hit a visitor with your magic and they don’t become a user, you probably don’t have your magic right
- It’s likely that the smoke isn’t coming out of their ears, they never exclaimed ‘aha’ and all of the things people do when they realize they have been waiting for your product for a long time
Stage 4: Growth Loops
You need to grow payers by 20% MoM organically.
- The Milestone: 80% of the top of the funnel should retain day 7.
- Stage 5: Activation
- Get the magic in front of every single user as soon as they get to your site (what I call discovery).
- Create a carefully planned onboarding flow that teaches a user about your product, gets the information you need from them, builds their habit, and does that all while keeping them psyched.
Experimentation
Are you doing an experiment each day?
- Do not go after only one metric at a time if you do not have enough time to think about that single metric after each round of experiments.
- You need enough density that your brain can start to put things together.
Are you willing to defer gratification?
Everything in the ecosystem encourages you to fake it, so it’s easy to buy traffic and play other tricks to get funding. PMF always catches up with you.
- Are you worrying about monetizing too early?
- Monetization is friction, so applying it too early can make you think user need isn’t as strong as it is, resulting in a false negative.
Stage 6: Onboarding
The bridge between the magic moment and habitual product use
- You need to have the user invest in learning your product to the point that they initially cement the core habit loop: stimulus (i.e. confusion) -> action (get joe’s help) -> reward (clarity)
- What makes for good onboarding
- Figure out what you want a user to do and make that your activation goal.
- Strip away everything that gets in the way of achieving that goal
- Begin your manufactured habit loops as early as possible
- If users aren’t fully engaged, go back to stage 1 and build something better
