To put it bluntly: You’ll never be able to practice growth hacking if your product is just standard.
This statement doesn’t come from me, although I can wholeheartedly confirm it from my own experience. No, it comes from the innovator of the term Growth Hacking – Sean Ellis, who says it over and over again:
“Growth Hacking only works with products that are damn good.”
But how do you measure a “damn good”? How do you know if your product falls under that category?
Maybe you don’t even have a product yet and want to avoid making mistakes at the beginning, asking yourself too many questions.
However, you ended up here, you’ll learn the following as you continue reading:
- How to determine if your product is damn good.
- What Product Market Fit is – and how it serves as a metric for Growth Hacking.
- I’ll show you how tools like MVP, Business Model Canvas, or similar ones help you achieve Product Market Fit in another article.
With this post, I want to draw attention to the prerequisites for the hype of Growth Hacking.
Because it seems to be a myth that every company can just hack growth.
That’s not the case.
Why many companies fail with Growth Teams
In fact, many companies start to fail by hiring growth teams for a product that is not in high demand in the market.
The result is that, due to a mediocre product, the desired revenue figures cannot be achieved, and ultimately the company fails.
Just ask yourself, does it make sense to hire a team specialized in selling for a product that is not yet optimized for sale?
Are Growth Hackers lazy people bleeding companies dry?
Bullshit, the blame lies neither with the company nor with the Growth Hackers.
The problem is the product.
Similar to how I can’t install my Windows 10 on my eternal old Commodore 64, growth hacking requires certain prerequisites to function.
The most challenging requirement is that you’re working with a product that is in Product Market Fit.
What is Product Market Fit?
Uh, what is that again: Product Market Fit.
The term goes back to Marc Andreessen, one of the founders of Netscape and a current Venture Capitalist.
He describes the term as follows:
“Product Market Fit means being in a good market with a product that satisfies the market.”
As a fan of simple words, let me describe it.
Product Market Fit is the moment when your phone stops ringing, customers break down the doors, and suppliers can’t deliver fast enough. The calendar is so full that the days simply need more hours.
Product Market Fit is the moment when you have a product that solves a real problem for many people who are ready for it.
Analytically determining if we’re in Product Market Fit
This moment can be seen statistically.
David Rusenko shows us how this moment looked at Weebly. Here, we see registered users in relation to the days.
We also see that Weebly had a few highs at the beginning, mostly when they appeared in a press article in well-known magazines, but we also see that the peak usually only lasted a few days.
Until that one moment when it clicked, and the curve steeply rises.
BAM… Product Market Fit.
The 5 most common metrics to determine if you’re in Product Market Fit
To see if your company delivers a fantastic product, you can orient yourself on the following metrics.
- Bounce rate
- Session duration
- Pages per session
- Returning users
- Customer Lifetime Value
Even though I provide a metric or what a good value could be, I want to draw your attention to the fact that it heavily depends on your website and your target audience how high the value should be.
As a rough guideline, you can take the numbers, but it’s logical that a social media platform doesn’t have the same metrics as an e-commerce shop.
Bounce rate
A low bounce rate means that your visitor has found something that provides value to them. By low, I mean less than 30%.
Session Duration and Pages per Session
A high session duration or pages per session value tells you that the user experience for your visitor is very satisfying. Which, in turn, shows that you are delivering value.
A good benchmark for session duration is more than 2 minutes, and very good pages per session are more than 3.
Returning Users
Many returning users reflect the influence your product has on the lives of your visitors. Many returning users mean that you are delivering something that brings your customers back. And again, it shows that you are delivering value.
Here, 50% is pretty good. It shouldn’t be much more; you want to acquire new customers as well as keep existing customers happy.
Customer Lifetime Value
With Customer Lifetime Value, you calculate the profitability of how a visitor stands with your company.
At this point, I’d like to leave my personal opinion on profitability for startups before the launch phase. Here’s the thing: When you’re at the beginning of your business, you should by no means worry about profitability.
Yes, I know how that sounds, but let me explain briefly.
What matters to you is whether you have a product that is Product Market Fit capable. If you achieve Product Market Fit, you can still think about ways to capitalize on it.
The problems when you earn money too early are as follows:
Because you don’t have a finished product yet, it’s harder to find people to test your product.
Once you start making money, you’ve made money and it’s on the books. Because you only have a half-finished product, you stand worse.
Imagine you later go looking for investors and have to explain that you do have revenue, but it’s damn low because your product is still in the testing stage.
It’s best to say something like: “It will improve with your money.”
And how that comes across is clear, right? That doesn’t sound good at all.
Something better would be: We have acquired 5000 users in the last 3 months, of these 5000 users, 4517 use our product daily, and these are the opportunities for how we can make money from it in the future.
Sounds quite different, doesn’t it?
In addition to the 5 most common metrics, there are numerous others you can use to find out if your product is in Product Market Fit.
Here it’s all about: Measure what makes sense!
Measure what makes the most sense for you
If your key metrics are different, such as daily registrations, monthly user activity, or something completely different, then take that value and orient yourself accordingly.
As long as it makes sense, there’s no right or wrong.
It makes sense if you deliver value to your customer, and it reflects in the numbers.
The Product Market Fit 40% Rule
Sean Ellis even goes so far as to say you have a damn good product if 40% or more of your customers say things like:
- I don’t want to live without XY.
- XY has made my life easier.
- This is the best thing I’ve bought in a long time.
We call this system the 40% Rule. So, if 40% of your customers would be genuinely disappointed if your product or service were no longer available.
Let’s summarize: Product Market Fit is the moment when customers are rushing to you. But what does that have to do with Growth Hacking?
The thing is, when customers are rushing to you, Growth Hacking helps you appeal to even more customers better.
So, before you can kick off with Growth Hacking, you must have that moment where customers are rushing to you. Every cent invested in growth before that is wasted money.
Conclusion
Now honestly ask yourself, do you have that moment where customers are rushing to you?
Are you pondering? Then the answer is no.
The good answer is, it doesn’t have to stay that way.
There are damn cool tools that help you and your company achieve this state.
Is it easy? Yes. Will it be easy? No.
Here it means tighten your buttocks and stay in the game until it fits.
In conclusion, I’d like to know from you, have you experienced a moment of Product Market Fit? If yes, where and what did the path look like for you?