A three-step approach for finding SaaS product/market fit

A well-established SaaS company with product-market-fit, a proven marketing engine, and all of the momentum behind them can essentially print money. 

However, getting from a great SaaS product idea and a lot of open-ended questions to a viable product in your target market with a large customer base can be a slog that takes years.

There is a long list of once-promising SaaS companies that fizzled out long before they reached product-market fit. 

If you want to avoid being one of the companies that don’t make it, here is a 3-step approach from a now-classic Rob Walling MicroConf talk you can follow to help you reach product -market fit. 

1. Build something people want

If you haven’t built something people want or have a bad product, a great marketing strategy will only make you fail faster. 

In fact, one of the biggest mistakes that many SaaS startups make is dumping a lot of money into their marketing efforts before they have product-market fit. They’re trying to market to prospective customers with an unproven product in their addressable market. (That's a recipe for burning through the marketing investments.)   

That’s why idea validation, product development, collecting early customer feedback, and a great onboarding experience is essential.

In addition, product-market fit is on a spectrum. You have product-market fit in one niche, but not another. You can gain and lose it as your market and product evolve. 

Fortunately, there are some tactics and metrics that can help you evaluate whether or not you have product-market fit. 

The first one is to send out this survey that Sean Ellis even pioneered that asks one question: 

How disappointed would you be if you could no longer use <product name>?"

If more than 40% of survey respondents say they would be very disappointed, that’s usually a decent indicator that you have product-market fit. 

If you have less than 40%, then you should do more customer interviews. 

Pro Tip: When evaluating customer feature requests, it is helpful to ask yourself these three questions: 

• Does it fit my vision of the product? 

• Will this feature matter in 2 years? 

• Will it grow the business? 

Another indicator is by looking at your metrics. If you notice that traffic and churn are both down, but trials and revenue are up, then that’s another solid indicator that you are onto something. 

Getting to product-market fit isn’t easy, and it also isn’t static. It is easy to get so wrapped up in this process that you forget about something even more important. That’s founder/market fit. 

2. Find your position in the market  

Another key element for getting to product-market fit is nailing your product positioning. 

Positioning is essentially context setting for your SaaS. It is how you communicate how your product is different. 

There are three primary ways you can go about this: 

• Invent a category - This works well if you have millions of dollars to invest in category creation or the patience to wait 5+ years to see results. For these reasons, this is not an advised route for most bootstrapped companies.

• Take a position in an existing category - This is the one we see all of the time. You are communicating how you're different (and presumably better) than all of the others in the category. Some companies that did this especially well in the mid-2010s are WPEngine, Close.io, and Baremetrics.

• Compare features - The third way to go about this is to compare features. 

3. Scale 

Once you have validated your idea, established your positioning, and have product-market fit in a vertical/niche, then it is time to scale. 

A helpful way to think about scaling is via concentric circle marketing. You have three circles. 

• The innermost circle is your core audience. 

• The second circle is your colleagues’ audiences. 

• And, the outermost circle are cold audiences. 

Start with your audience, and then work your way outwards. 

The marketing channels you use will vary depending on your product, your market, and even your skillsets. For some people, that might be content marketing. Others might be paid ads, outbound email, webinars, etc. 

At this stage, you are looking for escape velocity. This happens once you find a marketing channel or lever that you can pull, and suddenly growth starts to happen a lot faster. Once that happens, double down on whatever that channel that is.

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While getting to product-market fit will require a lot of hard work, this three-step approach can help you get there (and avoid some of the most common missteps.)