By Trisha Gwyne Arancon
You have the idea. You have the resources. You have the network. But, do you have the right market?
You might have that ‘dream’ product that can help the community be one step closer to being healthier, but it doesn’t stop there. Many healthy food and beverage founders are making their stake in the industry. That makes the job a whole lot more challenging, and your product’s performance in the market can make or break your business.
Consumers today are challenged in choosing the right product. That’s where brands like you have to get leverage by looking into the market and extracting their needs and wants, excavating deeper into that ‘gap’ in the competition, and filling that up with the value that you can bring.
So, why is it important to get product-market fit (PMF) right in your journey?
The ability of a product to address and solve the needs of its buyers in correlation with their markets and channels makes it a product-market fit. It’s reaching a level of plausibility to make the business profitable, workability of the product to solve a community problem, and appeal to the community.
Brands within the consumer packaged goods (CPG) industry find it challenging to stand out from the shelves because of tight competition. However, the secret here is not to let your customer acquisition efforts go higher by focusing on the market that fits your product.
Take a look at some of the successful healthy food and beverage brands like how Siete Family Foods, HelloFresh, Boreal Botanical, Lemonilo, and Siempre Soups and see how they did with their continuous process of attaining product-market fit for their new or existing product lines. You will see how understanding and acknowledging your market can dictate the success of your business.
Source: Austin Fit Magazine
For context, Siete Family Foods, just like any other food and beverage brand, had limited product lines back then. The expansion was all in their heads and figured that they would need another product that could avoid any first-mover competitors doing the same idea that they had. Know what they focused on first? They planned out to get a commercial customer. They had them taste the product and took their feedback to improve and finalize it. Over time, the company grew. In 2015, another customer suggested to Whole Foods Market CEO John Mackey to consider carrying the product at his stores. They then expanded their product line successfully and gained a tribal market that loves the company to succeed. Talk about building brand love and scaling it, right?
On the other hand, startups like this Bangkok Homemade Organic Juice business and Refolo which began without a concrete plan for building their product-market fit and with higher incurred expenses, failed from the get-go.
Refolo, a meal-planning app focused on plant-based eating, was the first product made by Lola, without any food business background but ventured into the business head-on. Basically, you pay a monthly subscription for customizable plant-based recipes. You can also order them through delivery services like Instacart, Amazon Prime, etc. She hosted a meetup for plant-based eaters in Atlanta. Over 100 people joined and it was a testing ground for the site. She also cross-promoted and held virtual events with plant-based influencers on Instagram, but no paying users showed up. In spite of getting into these entrepreneurship programs and collaborating with groups, she couldn't find customers. A few of her takeaways from this experience were to (1) identify where people are already paying can make monetizing a solution much easier, (2) invest to grow a community around the problem you’re trying to solve first, and figure out which products are needed from there, and (3) create small experiments to begin. With this story, it’s easy to say that experience is the best teacher, indeed.
The likelihood of success will increase dramatically for CPG startups that find product-market fit. There are many ways to see if your product fits the market. All you need to do first is understand the process.
The Product-Market Fit Ladder
Obtaining product-market fit is more than just multiple trial runs in a nutshell. You must undergo 8 steps to achieve this.
#1: Looking for the Eureka Moment
Some of the best ideas come out of nowhere and they may even come to you unexpectedly. Trying different healthy food and beverage brands may help you find a gap that you might find interesting or even something that you get bummed out about because there’s just no product for something you’re looking for.
Malcolm X had a similar thought, “Read absolutely everything you get your hands on because you’ll never know where you’ll get an idea from.” Maybe your next product can even improve current products on the shelves out there in the market that are just not doing it right for you.
#2: Probing a Problem Acumen
Now, here’s when you excavate deeper into the problem. You can do a swift market research on the community, see if the problem actually resonates with them and if they’re looking for a solution that they’re actually willing to pay for. A crucial factor in this search is to scan the types of people who need this solution – this could possibly be your niche if you decide to move forward and create a product that could actually pin down their specific pain points.
#3: Market Audit
Once you’ve taken a hunch of who your target customers may be, you have to learn more about them and understand what their needs and wants are. By conducting a little more research through interviews and other quantitative metrics, you’ll be able to test out a minimum viable product that’d be a tad closer to your target customers’ desires– rather than a product that’s not even aligned with what they need. There’s no one-size-fits-all approach but you can definitely do a quick net promoter test through potential customer interviews.
#4: Idea Validity Quantification (IVQ)
Your market data insights become your take-off point in your drawing board. Craft your ideas revolving around the data and build your hypothesis. To help you better solve the equation, here are a few questions you might want to consider:
What type of product would be suitable for them to solve their problems?
What benefits would your product offer?
What raw materials would you need to make these?
Do you have the resources to get these raw materials?
How much would it cost you to make per unit?
What makes your product different from the ones in the market?
What’s your projected sales forecast with the data that you have?
Would this idea be sustainable or just a one-shot superstar in the market?
Does your product have a strong and big enough market to cater to?
Would people really be willing to buy your product within your target price range?
All of these crucial questions are needed before you move on to the next step of creating the minimum viable product (MVP). Delve down into the smallest bits of the feasibility aspects of your product and determine whether it does the job of providing a solution to your market’s problem.
#5: MVP Casting
With your validated idea, it’s time to translate this into your MVP. In other words, it’s you jumping into creating the first few versions of your hypothesized solution. You can do a low-risk production test to bring your products to the market. With this, you can be able to do product iterations and keep on improving the product as you go while you keep on getting feedback from the tests.
Here is a roster of what you can do to get key insights and metrics on your MVP’s performance:
Offer your product to friends of friends and get their buy-in.
Set a heat test using online advertising to a digital ad. Look at the impression and engagement numbers.
Use a 40% metric test. This test determines whether your product is being considered by your customers as a must-have. This can entail questions like the benefits and drawbacks of the current solution (aka your product), how likely are they to buy the product if it were already available in the market, how often would they buy it, and how would they feel if the product didn’t pursue – what are their personal stakes or losses without the solution.
Look at the referral rates from your target customers.
Scan your growth rates such as potential downloads or subscribers if you opt to do a product landing page.
Gauging good word of mouth and increased community exposure, especially from industry experts.
#6: Confirming Product-Market Fit
With all of your data in place from your MVP casting, you’ll be able to really get a sense if your product reached that fit in the space. It can only grow from here. If you still can’t quite get it yet after launching, don’t worry. It roughly takes around six to 12 months to really pin down product-market fit. You’d have to go back to the basics and improve the product more until it piques the community and you get the results that you’re aiming for.
#7: Scaling and Optimization
Now that you have your product with a confirmed fit, focus on building your brand and other elements that could further boost your business and product. It includes pinning down operations, marketing, financials, and the like.
This also is a crucial step since you’ll get to get a feel of your competitors slowly glooming over you and the market. You should be able to create a sustainable battle plan that’s equally adaptive to the market’s demand.
Reaching PMF is not a simple process where you get to simply follow seven steps but these are your starting points. There will be constant trial and error along the way and that is completely normal. If you think about it, it’s really all in the investment of putting out a product that also minimizes the risk of financial failure and opportunity costs by focusing on your target market and starting out small.