Product Market Appetite vs. Product Market Fit

What I’ve learned about product market fit over a decade of working with SaaS start-ups

By Geoff Roberts

Few topics are discussed in start-up land more than product market fit—founders spend countless cycles iterating on their products, trying to find this often enigmatic state where it’s clear that there’s a real market for their new creation. Others focus obsessively on market timing, looking to introduce products that they know will be needed in rapidly expanding markets where they’ll be able to reap the benefits of not just product market fit, but product market demand

But as I reflected on a number of the products I’ve marketed throughout my career, it struck me that these terms only define a minimum viable level of fit and an ideal, best case scenario. There’s absolutely another less often discussed state that I’ve operated in several times now that simply doesn’t have an appropriate moniker. 

Last week I read Justin Jackson’s post Selling Stuff On A Busy Beach which reinvigorated my thinking on this topic—the following quote from Brian Balfour in particular struck a chord:

There are certain companies where growth seems to come easily, like guiding a boulder downhill. These companies grow despite having organizational chaos, not executing the “best” growth practices, and missing low hanging fruit. In other companies, growth feels much harder. It feels like pushing a boulder uphill. Despite executing the best growth practices, picking the low hanging fruit, and having a great team, they struggle to grow.
— Brian Balfour

As a marketer, this is something that I’ve felt early on at nearly all of the companies I’ve worked at or consulted with. At some companies, you “do stuff” and almost immediately start to see results—oftentimes the results are surprisingly good even when your execution is far from perfect. But at other companies you can execute flawlessly, and it still feels like your trying to push that boulder up a hill. So why is that?

How do we get the growth boulder rolling downhill?

How do we get the growth boulder rolling downhill?

I believe it can be narrowed down to two primary factors.

  1. The quality of the product you’re marketing.

  2. Something related to the idea of product market fit and selling ice cream on a hot beach.

In this post I’ll discuss the nuances of product market fit and introduce this new, less discussed state of fit by sharing some specific examples from my career—including the biggest challenge that we’re currently facing at Outseta.

Introducing Product Market Appetite

Most discussions of product market fit begin with some squabbling over its definition—what exactly do we mean when we use this term?

Marc Andreessen defined product market fit as “being in a good market with a product that can satisfy that market.” But what makes a market “good,” and what does it mean to “satisfy” a market? Rather than squabble over definitions provided by others, I’d like to introduce three definitions that have been helpful to me. 

Product Market Fit - There’s a market of buyers for the product you’ve built. 

That’s it. Say your company makes purple markers—you’ve achieved product market fit because you know there are people out there buying purple markers today! Sure, most purple markers are probably sold in a pack that contains other colors as well, although artists might buy individual purple markers from time to time. Either way, you’re producing a product and there’s no question that there’s a market for it.

Product Market Demand - Not only is there a market of buyers for the product you’ve built, but those buyers are proactively seeking out, evaluating, and purchasing the product you offer.

Think about Justin Jackson’s example of selling ice cream on a hot beach. Even if an ice cream vendor isn’t within eyesight, there very well could be people on that beach thinking “Man, it’s hot. I’d sure like to get an ice cream!” The market is demanding your product, which is super powerful—this is when it feels like the boulder is rolling downhill and growth is easier to come by. If you can sell in one of these markets, do it—much of Justin’s writing recently has been around this concept, as he’s feeling it firsthand by selling a product in the rapidly expanding market for podcast hosting products.

But while these two definitions represent a minimal and ideal level of demand for a product, neither speaks to a third state that I like to call product market appetite.

Product Market Appetite - Product market appetite is when a market doesn’t yet recognize that it needs a particular product, but is actually starving for a solution to a problem.

For example, in the early days of Buildium we were marketing a product that helped landlords and small property management companies do things like collect rent and manage maintenance requests from their tenants online. At first our buyers certainly weren’t demanding our product—heck they didn’t even know such a software product existed! 

Our biggest competitor was not another property management software product, but rather landlords and property managers who received rent checks in the mail and fielded maintenance requests in the form of phone calls from their tenants. We had to spend our time educating the market that there was a better alternative, and once we showed how our product was more efficient than the status quo it became clear that there was an enormous appetite for our product. Property managers had been dealing with the same inefficiencies for years—only now there was a solution to their problems!

Wistia is another company that I think is in a position to capitalize on product market appetite. The company recently announced that it would be transitioning it’s product to focus on helping companies deliver binge-worthy content series that build brand affinity. I think many early adopters in the marketing world are beginning to clue into the brand building benefits of content series, but the market isn’t yet demanding software products to support episodic content series. Wistia is now well positioned to capitalize on a rapidly growing market appetite for products like theirs, and is working hard to educate the market to accelerate the pace at which product market appetite transitions to product market demand. 

Examples of Product Market Fit, Appetite & Demand from my career

With these definitions in mind, it has been helpful to me as a marketer to reflect on some the companies I’ve either worked for or consulted with. Product market fit is so often talked about as if it’s something you either “have” or don’t, when in reality there’s so much nuance specific to each product and market. Here are a few examples from my career to illustrate that point.

Buildium - As I mentioned, small property management companies were starving for a product like Buildium—they just didn’t know it yet! Product market appetite was very strong—we just had to educate the market that there was a better solution than the status quo. That’s not easy to do, but as we did it growth came relatively easily—I tried new growth experiments and many of them worked, fairly quickly. We hit growth plateaus from time to time but were almost always able to find new ways to break through them. The boulder was rolling downhill.

Roambi - Roambi is perhaps the most interesting example from my career. The company made a business intelligence tool that made it possible to visualize large data sets on a mobile device like an iPhone or iPad. Roambi’s founders came up with the idea for the product shortly after the first iPhone came out, realizing the screen of the iPhone had the potential to display data much more effectively than the other mobile phones available at the time. Roambi was legitimately ahead of its time and market—the company began building a business application for the iPhone before Apple even released its software development kit for iOS.

Investors love companies positioned to take advantage of new market opportunities, which led Sequoia to pony up $30M to help Roambi capitalize on that first mover advantage. There was strong product market appetite for what Roambi was offering, and as buyers realized the unique capabilities of the iPhone’s display that transitioned into product market demand for business applications built specifically to take advantage of them. Roambi rode this position and grew very quickly, particularly when the App Store was released and became a distribution channel.

Bizness Apps - Like Roambi, Bizness Apps was able to ride on the back of a growing market. When apps first became available they were a hot new thing that brought an entirely new set of possibilities to mobile phone users. Bizness Apps recognized that there wasn’t an easy way for small businesses to build their own apps, so they introduced an easy to use app builder that allowed small businesses to build their own apps for a fraction of the price.

At first there was strong product market appetite, followed by product market demand that helped the company grow phenomenally quickly—the company was #58 and #91 on the 2014 and 2015 INC 500 lists, respectively. But as apps became more commonplace and better understood the market changed and that product market demand began to dissipate as many business owners recognized that stand alone, native apps often aren’t a great fit for small businesses. 

Qualified - Qualified is a developer assessment platform that was founded by the creators of Codewars, a community where developers can train by completing coding challenges. Realizing that Codewars had helped them develop a strong methodology for assessing coding ability, the founders then pivoted and turned that same assessment methodology into a platform that companies use for hiring software engineers.

Almost all tech companies struggle mightily to attract and hire great developers, so there’s enormous product market demand for any product that can help with technical hiring. The challenge at Qualified is not the market fit or the pain point being solved, but instead combatting the notion that coding assessments are sometimes unpopular with developers and educating the market on why Qualified’s assessment methodology is the most effective way to assess engineers. But as that case is made, the market pull for the product is enormous.  

Bringing it back to Outseta and our biggest challenge yet     

When Dimitris first reached out to me and pitched the idea for Outseta, I was initially hesitant. Selling to start-ups is tough, and SaaS companies themselves are particularly demanding buyers. Both markets segments are over-served and highly competitive.   

Beyond that, the scope of the product Dimitris was proposing was significant—we wouldn’t just be building a CRM, or a subscription billing system, or a set of customer messaging tools… in order to deliver on our value prop, we’d have to deliver an awful lot of product.

Ultimately we felt comfortable embarking on building the product because all of the functionality that Outseta includes represents software categories that are already well known and adopted in nearly every single SaaS business. Said another way, we don’t need to validate that our target market needs a CRM or a subscription billing system—we just have to show how a platform that integrates all the core tools that a SaaS start-up needs is more powerful than the status quo of buying, integrating, and maintaining a tech stack consisting of 5-10 different point solutions. 

All of which brings us today—our growth boulder is not yet rolling downhill. We’re still scratching and clawing our way to winning new customers. To be fair, it’s gotten easier as our product has continued to mature and it’s still early on—we’ve only had a sellable product in the market for less than a year. But I think it’s fair to say the market never demanded an all-in-one software platform to launch a SaaS start-up. Rather, we lived through the inefficiencies of the status quo and saw an opportunity to offer something better.

This tweet from Mike Volpe, CEO of Lola, recently got me thinking.

MikeVolpeChangeTheGame.png

What do we need to do to change the rules at Outseta? To change the game so that growth begins to feel like that boulder that’s rolling downhill? As of today, here’s my thinking and what we’ve learned so far.

First, much of our messaging to date has focused on the all-in-one nature of our product. We offer a CRM. And a billing system. And customer messaging tools. We save you technical and financial overhead by giving you all the functionality that you need in a single platform—that kind of thing.

I’ve come to realize two problems with this position—first, we’re largely playing the game that everyone else is playing. Prospects come to us needing a CRM, and they immediately evaluate us against the other CRM products in the market. Beyond that, the all-in-one nature of the product often leaves prospects with the perception that we “do too much” and each of our tools must be a not-that-great version compared to the other point solutions they are considering.

Second, a significant portion of SaaS companies and founders simply don’t care about saving technical or financial overhead all that much. People who work in SaaS tend to love software because they are software people—many of them actually revel in the opportunity to assemble the perfect tech stack. Founders sink a ton of time into things like building authentication and subscription management logic on top of Stripe, simply because they can do the work. It’s almost a point of pride with many of them. And beyond that, there’s many, many SaaS companies that literally employ 40-80 different SaaS tools under the mantra “if each tool helps us make even one additional sale, it more than pays for itself.” In an industry obsessed with operating “lean,” there are many more SaaS gluttons than minimalists.

In an industry obsessed with operating lean, there are many more SaaS gluttons than minimalists.

This second point remains interesting to me—you can show SaaS founders a hard opportunity cost in terms of the time they’ve spent building non-core product functionality, and oftentimes they simply don’t care. If you could show a similar time suck and cost for time spent on sales, or marketing, or customer service it would be a catastrophe, but as technologists they don’t perceive time spent managing their technology to be a problem. Oftentimes they even see it as being productive.

While this is the case, we’ve also consistently seen that there is a segment of the market that reacts passionately and enthusiastically to what we’re building at Outseta. It’s responses like these that have kept us going—we feel strongly that we do have evidence of product market appetite, at least with a subsegment of SaaS start-ups. 

OutsetaFeedback.png

The challenge we’re facing now is sure, there’s a market for our product but growth feels difficult. How do we take what we’ve built and change the game so that growth starts to feel easy? We don’t have the answer to that question just yet, but it’s the single biggest challenge that we’re facing at Outseta. 

Here are a few ideas that we’re considering or that have been suggested to us:

  1. Align ourselves with the no-code movement. This movement is undeniably growing at a rapid rate, and is filled with relatively non-technical founders to whom the fully integrated nature of Outseta might be particularly compelling.

  2. Target other markets of non-technical founders, recognizing that SaaS founders have the technical ability to build and integrate their own tech stacks. One where we’ve seen traction without any deliberate effort is individual consultants that sell their services on a monthly retainer. Another idea would simply be positioning Outseta as all all-in-one tech stack for small businesses.

  3. Emphasize speed-to-market instead of our product’s functionality—this is a game that we can win, and we can prove concretely that we can help founders get new SaaS products to market faster than they can using the alternative point solutions. Also, very few companies are really emphasizing speed-to-market so there’s a lot of greenfield opportunity with this angle. This could really resonate with makers or indie hackers who frequently launch new products.

MattWensingTweetOutseta.png

Ultimately we think there’s evidence of product market appetite for Outseta, but we need to continue to educate the market and perhaps reconsider who we are targeting in order to reach a state of product market demand and get our growth boulder rolling downhill.

That’s what we’re currently hacking on—what advice do you have for us?