For offline businesses, apps are a great way to enter the online market and get more customers. However, it can be difficult to come up with an idea for an app that will conquer users’ hearts, both when you're only planning to build a business or already have one. Only 0.01 percent of the 100,000 apps added to Google Play last month have turned out to be commercially successful.
But that doesn’t mean you should give up on building your own app. Instead, we suggest using a tool to help you build a product or service that meets customers’ needs: the Product/Market Fit Canvas. In this post, we talk about what the Product/Market Fit Canvas is, what benefits it brings, and how to find product / market fit for your application.
What is the Product/Market Fit Canvas and why do you need it?
This ”canvas” is actually a table that’s divided into two columns: customer and product. The customer column helps you with the initial analysis of your app’s target audience. The product column helps with analysis after your app goes live, when you’re trying to understand how your app fits the market you’ve chosen.
Building a product-market fit canvas strategy, you can:
Focus on the unique solution offered by your product so you can build your MVP
Take your app from a raw concept to a real business opportunity and generate sales
Outline the strengths and weaknesses of your idea so you can enhance your app later
Identify metrics that are the most important for your app to see how well it satisfies customer needs
When is the best time to use (and how should you use) the Product/Market Fit Canvas?
If you know how to determine product / market fit in your industry, you know how to create a successful app. That’s why we recommend using the canvas at the pre-launch stage and during beta testing. Let’s see how to apply the Product/Market Fit Canvas at each stage.
During the pre-launch stage, you can use the canvas to build a buyer persona for your app to understand:
Who your users are
How they can be grouped
How they can use your app to solve their problems
At this stage, you can also analyze all possible customer interactions with your application to discover your app’s competitive advantages.
Let’s imagine you’re building an app to get more customers for your travel agency. In this case, when you complete the first part of the canvas template, you’ll end up with a table that looks something like this:
Aged 21–37, iPhone users, frequent travellers
Problems and needs:
Want to find the best travel offers and last-minute deals
You can see that at this stage you won’t fill out the whole table. Of course, you can make assumptions. But to get actual information for analysis, you’ll have to launch your app.
Once your app is out on the App Store, it’s time to use the canvas to:
analyze the application features and come up with ideas to improve them
find out who your main competitors are and how to do things better than them
Think about improvements this way: every characteristic of your product should fulfill a need or tackle a specific aspect of a problem your users face.
As a result of the market analysis, you’ll get a table like this:
Aged 21–37, iPhone users, frequent travellers
Airbnb, Booking.com, TurnKey
Problems and needs:
Want to find the cheapest travel offers and last-minute deals
Cheap tour booking, last-minute deals, in-app payments
You can discover listings of cheap tours and last-minute to easily book and pay for
find tour offers and last-minute deals
book tours and share them with friends or family
pay directly in the app and split payments with family and friends
schedule tours and synchronize them with their calendars
Customer acquisition cost
Cost of tours sold
Once you’ve finished with the template, you’ll see what market your product fits in and how strong the demand is. This is how you can avoid costly mistakes that happen when you overestimate the initial demand for a product.
How to check if you’ve developed an app that has product/market fit
Before we list the main approaches to measuring product/market fit, we should say that there isn’t a one-size-fits-all solution for all business models. You can be trying to discover a B2C or a B2B product-market fit, or even striving to build products for the government. That's why you’ll need to consider the market segmentation and your business specifics, take a look at all of the current approaches to measuring and adopt the one that is suitable to your industry. To make things easier, we’ll give the pros and cons for each of the approaches.
Net Promoter Score
The first and easiest way to know if your app has product/market fit is to request user feedback. There are different ways to do that, from a pop-up form in your app to an email survey. However, the most popular is to use the Net Promoter Score (NPS).
An NPS is obtained using a survey that asks users to rate an app on a scale from 0 to 10, where 0 means they would never recommend this app to family and friends and 10 means they would definitely recommend the app to family and friends. You can add some extra questions to such a survey to let users explain what they like and dislike about the app.
You can identify your app promoters and use them to reach new users.
Some users can share ideas on how to improve your software.
There’s a high risk that you’ll only get quantitative user feedback rather than a detailed description of what users like and dislike about your app.
It may be difficult to interpret NPS results and decide what to do next.
The 40 percent rule
Sean Ellis, who founded GrowthHackers, suggests using the 40 percent rule to help you learn if users actually like and need your app. The idea is to ask people how they would feel if they could no longer use your app. Possible answers should include:
A little disappointed
Already not using the app
If 40 percent or more of surveyed users say they’d be really disappointed, you’ve done your job right. To get the most accurate results, Sean suggests surveying only users who have experienced the core value of the product (like booking a tour in the example above). For that, you’ll have to form groups of users who either have already used your app twice or have used it within the last two weeks.
You get a definite KPI for your app and can set it as a goal.
You survey loyal customers only, so you don’t know what other users think about your app.
Andrew Chen, the former Head of Growth at Uber and a general partner at Andreessen Horowitz, says that it’s better to rely on the active user rates (daily active and monthly active users, or DAU/MAU) to measure your app’s success. He believes that apps for which 20 percent of users are daily/monthly active users can be called successful, while apps with 50 percent or more are “superstars.”
This approach provides you with a definite and more accurate benchmark compared to the 40 percent rule.
The rates of active users can easily decrease without changing your app’s functionality. Say you’ve run a good marketing campaign and have gotten more app installs. In this case, the DAU/MAU rates will likely go down.
The percentage of active users will be different for different kinds of apps. You wouldn’t expect to have the same percentage of active users for Uber and Telegram.
It takes time to figure out what good active user rates are for your business.
Alex Shultz, VP of Growth at Facebook, has his own criteria to measure if an app has product/market fit. He focuses on the retention rate; when it remains stable for a certain period of time or even keeps growing, you’ve achieved product/market fit.
You have a definite metric to focus on based on your business specifics.
You can understand if you need to improve your app’s functionality. If you don’t have a stable retention rate, it’s time to update your app.
You can predict your app’s growth.
It will take time before you realize what a good retention rate is for your company.
Why do you need to learn about product/market fit at the very beginning of the app development process? Knowing how to achieve product/market fit will give you a solid understanding of the direction your business should be moving in. Moreover, you’ll be able to iterate and adjust according to the needs of your target audience.
Even though finding market fit is vital, you should keep in mind that it’s just an intermediate point for your company. Once you’ve got product/market fit, you’ll have to stand up to other challenges like, getting investors, finding distribution channels for your app, and developing a marketing and a product strategy.