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How to Effectively Measure Product Market Fit?

Published On
February 27, 2023
Read Time
Jay Magdani

Product-market fit is a significant aspect for businesses because it identifies whether their product will find a market before moving on to the production stage. Therefore, it is a waste of time and resources to spend money on creating items that no one wants or that are inferior to those already on the market.

Startups need to evaluate product-market fit, which means you must use market data to create a plan to provide good results for your expanding firm over the long run. After achieving product-market fit, consider making more aggressive investments in sales and marketing. 

Let's look at a few methods for determining product-market fit and ensuring you're moving in the correct path.

What Is Product Market Fit?

Product-market fit directs to a condition in which a company's target customers are purchasing, utilising, and recommending the product in sufficient numbers to support the product's expansion and profitability.

You've achieved product-market fit if you provide a service that people will pay for. It is successful because a sufficient number of those customers are satisfied with it to continue paying monthly.

How Is the Product-Market Fit Estimated?

Any organisation can decide whether it has achieved product-market fit using a simple set of indicators. To measure the product fit for your business, follow the steps mentioned below:

  • Identify the Total Addressable Market and Work Backwards From There

No market could ever be wholly delighted. Therefore, a vital component of any SaaS strategy is identifying potential customers who would buy your product and recommend it to others. Your ability to assess product-market fit will be aided by your knowledge of your target market's size and demographics.

First, you have to figure out the Total Addressable Market (TAM). Then, evaluate the market size (and the potential income it may generate) that you are targeting using the total addressable market statistic. You may calculate the percentage of your TAM who are clients once you've identified your TAM.

The percentage of TAM you cover will rise over time as you approach product-market fit. Additionally, if you find very little TAM, this is a sign that you should reach a larger audience to build a solid business claim.

  • Serve Your Target Market With a Specific Focus

While it may be discouraging to learn that not every person with an Internet connection will need your widget, attempting to please everyone at once will only lead to failure. Instead, you may invest in features and enhancements they enjoy, attracting new customers who share those first fans' interests by focusing even more on the customers who love your product.

When it comes to a SaaS company that depends on recurring income and satisfied customers to stay afloat and expand, becoming a crucial resource for millions of people is a better conclusion than being a take-it-or-leave-it choice for billions.

  • Walk a Tightrope Between Luxury and Necessity

People purchase many different objects for numerous reasons. They do it occasionally out of desire and occasionally out of need (or at least feel like they need it). This is what sets a luxury good apart from a need. A luxury could make a customer happy, joyful, or satisfied, and life would still be good without it.

In contrast, a need is something a customer can't live without or wouldn't want to give up. There are several product categories where comparable items may fit into one of these categories. Although there is a market for both items and paying customers, only one has a viable product/market fit.

  • Set Reasonable Goals

Once you understand your target market and its size, you must apply reality to the circumstance. Then, decide how much of that market you can grab. Early goal-setting will help you avoid future panic attacks and disappointments.

It's important to initially focus on the Serviceable Addressable/Addressable Market (SAM), which refers to what is within your scope, before determining the Serviceable Obtainable Market  (SOM) because TAM is valuable but abstract in regards to what you will capture. Your SOM, often known as "how much of the pie" you'll receive, is the percentage of the SAM that you can attain.

SOM is far more of a guess than it is based on concrete, undisputed evidence, in contrast to TAM and SAM. The following aspects should be considered when estimating SOM for your business:

  • How much of the SAM will desire to purchase your goods? 
  • How much of the SAM can you reach through your marketing and distribution plan and channels?
  • The intensity and demand of your competitors. 

Since you won't have all your customers the first day, month, or year you offer your goods, your SOM will likewise increase with time. 

Most importantly, you need to communicate this internally so that ambitions aren't set too high based on the massive TAM statistic. Early goal-setting will help you avoid potential extreme anxiety and disappointments.


Scalix can help you discover new needs, change the target market, identify patterns of discomfort, and modify your company's message and communication strategies to help scale up your budding business. Optimising the startup process is the primary goal of Scalix. 

Using Scalix's various services and programs, you can ensure that your business is continuously adjusting to meet goals and protect its position from rivals. The top business mentors from every sector are included in our curriculum to assist you in rising and taking the lead to achieve growth and profitability along with effective product market fit for your business.

Contact us for detailed information!