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How to Measure PMF: 3 Signs, 4 Metrics & 3 Frameworks

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Updated: 
August 10, 2022
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Product-market fit (PMF) can be described as the moment when your product starts to feel a strong pull from your target market. Startups that achieve product-market fit describe it as an unmistakable feeling that’s hard to miss.

In this article, we’ll go over the signs that indicate you’ve achieved PMF and different metrics and frameworks that you can use to measure PMF.

3 Signs that You’ve Achieved PMF

If you are wondering whether you have achieved PMF or not, you most likely haven’t. As mentioned above, finding PMF is a pretty unmistakable moment — you often just know you have product-market fit when you get there.

If you don’t feel a strong pull from the market for your product or service, keep iterating on it and trying different ideas until you do. Only once you see the strong leading indicators of PMF discussed below, focus intensely on the version of your product that you’re working on now to improve it and grow your business.

Lenny Rachitsky analyzed the PMF journeys of various startups and identified three key signs many startups saw when they found PMF.

1) Sudden and Significant Market Pull

The biggest indicator that you’ve attained product-market fit is a very strong pull from the market that happens all of a sudden.

When this occurs, you experience a moment when your product “clicks” with your target market, and your sales/usage skyrocket without you having to push your product onto anyone. You may feel that you are struggling to keep up with demand when, before, you could barely generate interest.

This sudden demand is typically driven in a major way by word of mouth instead of by expensive marketing campaigns on your end. You might notice a big uptick in chatter about your product on social media and other online communities that is helping drive the demand for your product or service.

You should also notice customers willing to pay for your product, requesting new features, and being upset when your product is unavailable (such as when servers go down). Additionally, you may see that customers are willing to use your product in an unfinished stage or when it has issues/bugs.

Netflix is an example of a startup that saw this sign. After 18 months of struggling to get customers, Netflix finally found the combination of offerings that worked: no due dates, no late fees, and a subscription fee. When they tested this version of their service, they suddenly couldn’t keep up with demand.

2) Gradual but Compounding Market Pull

Sometimes the moment you know you’ve achieved PMF isn’t a sudden market pull but rather a gradual and compounding market pull.

In other words, instead of going from feeling little or no demand for your product to feeling a sudden significant demand, you might see demand grow steadily over time until it reaches a critical mass that feels like an intense pull for your product.

Startups that experience this path to finding PMF describe it as a gradual transition to feeling confident that they have PMF over time, instead of a specific moment when they knew they had PMF all of a sudden.

Grocery delivery service Instacart is one company that found product-market fit this way. As soon as they launched the service, they found PMF with a small subset of their target market who didn’t care what stores their groceries came from. 

As they continued to partner with more retailers, Instacart was able to reach more and more customers who wanted groceries delivered from specific stores, and thus the pull from the market compounded as these people spread the word about Instacart to friends and family.

3) Hitting a Milestone That Proves It’s Working

Another indicator of achieving PMF is hitting a major milestone proving your product is working in real life.

For instance, you might walk into a coffee shop and hear a group of people discussing how they are using your product, or you might land your first major corporate client that switches over their entire company to using your product instead of a competitor’s.

Companies that realized they had PMF by hitting a milestone have described these milestones as seeing their products “being used in the wild.” 

For example, the milestone that made one of Airbnb’s co-founders, Joe Gebbia, realize they had PMF was when his mother booked her first Airbnb. 

One of Canva’s co-founders, Cliff Obrecht, described their PMF milestone as when they started seeing designs made with their templates published to social media.

4 Metrics to Measure PMF

The above signs are great ways to identify whether or not you’ve achieved product-market fit, but there are also different ways to measure PMF using more concrete metrics. Here are some of the best ones:

1) Surveys

Customer surveys are one of the most commonly used ways to measure PMF. Though they can be good indicators of PMF, surveys can also be biased, so they aren’t always the best ways to measure PMF. 

Because of this, you shouldn’t rely solely on surveys to measure PMF, but they can certainly be used alongside other metrics to confirm whether you have PMF or not.

Two types of surveys you can use are a product-market fit survey and a net promoter score (NPS) survey.

A) PMF Survey

A PMF survey consists of several key questions for existing users, the most important of which is: “How would you feel if you could no longer use this product?”. 

People surveyed should be able to answer this key question by selecting from a list of multiple-choice answers that include “very disappointed,” “somewhat disappointed,” “not disappointed,” and “N/A (I do not currently use this product).”

PMF Survey

If you have product-market fit, a larger portion of users should indicate that they would feel very disappointed if they could no longer use your product. 

It’s generally agreed that if 40% or more of respondents answer they would be “very disappointed,” then you’ve found PMF. The higher this percentage is, the stronger your PMF is. 

Including space for open-ended responses alongside your multiple-choice questions is also a good idea. 

For example, you could place a box for people to type in at the end of the survey that says, "Please tell us a little more about why you would or wouldn’t be disappointed if our product went away.”

Besides asking how disappointed people would be if your product disappeared, other examples of great questions to include in a PMF survey are:

  • “What alternative would you/do you use to our product?”
  • “What is the biggest benefit you have received from our product?”
  • “Have you recommended our product to anyone?”
  • “What type of people do you think can benefit most from our product?”
  • “How can we improve our product to better meet your needs?”

These follow-up questions can help you determine what value your product is providing to people and, more importantly, can give you insights on how to reach PMF if you aren’t quite there yet.

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B) NPS

A net promoter score survey informs you how satisfied your customers are and how likely your users are to recommend your product to someone else.

To conduct an NPS survey, you should start with the key question: “How likely are you to recommend our product to a friend or colleague?”.

Instead of multiple-choice answers, respondents should be able to indicate how likely they are on a scale from 1-10, with 1 being “not likely at all” and 10 being “extremely likely.”

You can then follow up the main question with open-ended questions, such as “What is the main reason for the score you have given?” and “What could we do to improve your score?”.

Anyone who answers the main question with a score of 9 or 10 is considered a promoter of your product, and anyone who answers with a score of 1 to 6 is considered a detractor. Scores of 7 and 8 are considered passive and do not factor into your NPS.

To find your net promoter score, use this equation: NPS = Percentage of Promoters - Percentage of Detractors. A score of 30-70 is considered a great result and may indicate PMF.

NPS

The follow-up questions you include after the main question can help you determine how to improve PMF if you aren’t sure you have it yet.

It’s important to remember that these surveys may generate false positives, as people who aren’t happy with your product may not even bother to fill them out. That’s why you should always use some of the other metrics mentioned below alongside surveys to measure PMF.

2) Usage Data and Retention Curve

A good metric to look at alongside survey responses is usage data or data for active users of your product. It’s important to distinguish active users from registered users because user registration doesn’t mean anything concerning PMF.

To measure product-market fit with usage date, you will need to plot the percentage of active users over a period of time to get a retention curve.

You are looking for a curve that levels out after a period of time, indicating good user retention and potentially PMF. If your percentage of active users doesn’t level off and continues to drop, you do not have PMF.

For example, say there are two different products, and you measure their usage over three months. Product #1 experiences a drop in active users for the first month, but then usage levels off into a straight line for the remaining two months - It has PMF. Product #2 experiences a continuous drop in active users for all three months - It doesn’t have PMF. 

Retention Curve

3) LTV:CAC Ratio

Lifetime Value (LTV) of customers along with customer acquisition cost (CAC) are two other metrics that can be measured to get a strong indication of whether or not you have achieved product-market fit.

To quantify PMF this way, start by defining what it means to be an acquired customer. For example, it could be anyone who has paid one or more months of online subscriptions to your product/service.

Then, calculate the LTV of an acquired customer using this equation: LTV = Average Purchase Value * Average Number of Purchases * Average Customer Lifespan.

Next, find the CAC of each acquired customer with this equation: CAC = (Cost of Sales + Cost of Marketing) / Number of New Customers Acquired.

Finally, divide your LTV by your CAC to find the ratio. If your LTV:CAC is 3:1 or higher, this is considered a benchmark for successful growth and can show that you have achieved PMF. 

LTV:CAC

In short, finding PMF can result in cost-effective customer acquisition, which is why this formula works as a metric of PMF.

4) Exponential Organic Growth

Organic growth is the final metric you can use as an indicator of PMF. If your product is really good and there is a strong demand for it, you should be able to attract customers organically, largely through existing customers referring new ones by word of mouth.

Keep in mind that, as with measuring user retention, you need to look at the organic growth of active users, not just of user registrations.

It’s important to note that organic growth is not always a sure sign of PMF. You should always look at multiple metrics to determine whether you have a strong product-market fit.

3 Frameworks for Measuring PMF

Over the years, founders have used the above metrics to create different frameworks for measuring product-market fit. Here are three of these frameworks:

1) The Trifecta (Balfour)

Brian Balfour, Founder/CEO at Reforge and Venture Partner at Long Journey Ventures, discusses a framework for measuring PMF called “the trifecta” on his site.

The trifecta is a framework that, according to Balfour, can be used to say with almost 100% certainty that you have achieved PMF. It consists of the following three metrics:

  1. Non-trivial growth
  2. High user retention
  3. Meaningful usage

These three elements of the trifecta framework can be measured in different ways, depending on what type of product you are selling.

For example, Balfour references Snapchat, which knew they had achieved PMF when they had 200K+ downloads (non-trivial growth), 50% of users who downloaded the app active on it daily (high user retention), and users sending an average of 10 snaps a day (meaningful usage).

You can’t use only one of them to know if you have PMF. However, looking at all three of these metrics together gives you a very strong indication that you indeed have PMF.

2) Superhuman’s PMF Survey (Vohra)

Raul Vohra, founder of the lightning-fast email service Superhuman, created a framework to measure the company’s product-market fit using a PMF survey and improved the PMF score by segmenting users based on that metric.

At the time, Superhuman only had 100-200 users who were using a core version of the product, which hadn’t been released to the public yet. Vohra wanted to survey this small user base to see whether they had PMF yet before officially launching Superhuman.

As we mentioned earlier, to achieve PMF, at least 40% of your users need to say they would be “very disappointed” if they could no longer use your product.

After sending out the first survey, Vohra learned that only 22% of their users would be very disappointed if Superhuman was no longer available, which showed that they didn’t have PMF yet.

Superhuman included some follow-up questions in the survey that allowed them to start optimizing the product to achieve PMF. These included:

  1. What type of people do you think would most benefit from Superhuman?
  2. What is the main benefit you receive from Superhuman?
  3. How can we improve Superhuman for you?

To optimize Superhuman, the team focused on the answers to these questions from the people who answered that they would be very disappointed if they couldn’t use Superhuman anymore. Essentially, they narrowed down their target market to make their product even better for those who represented a specific type of user.

By doing this and incorporating the feedback into further development, Superhuman could convert people on the fence about the product into dedicated supporters.

They then continued to survey and segment their target market and iterate on Superhuman until they achieved an impressive 58% of users saying they would be very disappointed if Superhuman became unavailable. This meant that they had achieved PMF according to Ellis’ benchmark.

Superhuman's PMF Framework

3) Y Combinator’s Measurement (Alströmer)

Y Combinator’s framework for measuring product-market fit revolves around a few engagement metrics representing customer value.

YC Partner and growth expert Gustaf Alströmer states that the first step toward measuring PMF is to identify the metric that best represents the value your users get from your product. The second step is to measure the repeat usage of that metric over a certain period of time.

For example, a company like Airbnb would use the number of bookings/stays as the metric that best represents the value provided to users. Then, they would measure how many bookings/stays there are per user annually, since travel is not something that most people do all the time.

In this example, Airbnb would plot the data on a line graph with the number of bookings/stays on the vertical axis and the time period in years on the horizontal axis.

If the line is straight over a period of several years, it means that Airbnb has a good user retention rate, and thus they likely have PMF. If the line goes down year after year, it means users are not staying with the service, and they don’t have PMF.

This framework can be applied to many different types of companies, as long as you identify the appropriate value metric and time period to measure it over.

Here are a few examples from Alströmer of value metrics and the ideal frequencies for measuring them:

Y Combinator’s Measurement

3 Bad Metrics for Measuring Product-Market Fit

Now that you understand what metrics are suitable for measuring PMF and how you can use them in different frameworks, let’s take a look at a few metrics that are bad for measuring product-market fit.

1) Registered Users

You should never use the number of registered users to measure PMF. This is a “vanity metric” because it doesn’t tell you anything about who is using your product or what your user retention is.

You can have tons of users signing up for your product/service, but if they are all churning, they are not getting value from your product, and you have to work on improving it to achieve PMF.

2) Conversion Rate

Conversion rate is another misleading metric because it’s much easier to get someone to try your product than to continue using it.

You might have a great landing page and great marketing, which results in a high conversion rate, but if you have a terrible product that isn’t providing value to your customers, they aren’t going to stick around.

3) Free Usage

As we discussed, one way to know when you have PMF is when users are willing to PAY for your product. So, if you offer a free and a premium paid version of your product, and free usage is high, but paid usage is low, this is not an indicator of PMF.

If this is the case, you need to add more value to the paid version to get people to pay or try a new idea and find a new market of people willing to pay for your product.

Wrapping Up on Measuring Product-Market Fit

Considering that 34% of the failed startups we interviewed for one study cited lack of PMF as the reason for shutting down, measuring your company’s PMF is something you definitely can’t overlook.

Every startup is unique, and the best way to measure PMF for yours is something you will have to experiment with, but the metrics and frameworks discussed in this guide are a great place to start.

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