Lack of product-market fit is a top reason why startups fail, accounting for over 40% of failures. (Startup Devkit)
And yet, while many founders can fumble through a definition of product-market fit, many are hard-pressed to pinpoint the best way to measure it.
There are many ways to think about product-market fit:
🔷 Your Net Promoter Score (NPS)
🔷 A feeling in your gut
🔷 When 40% (or some other threshold) of your users would be “very disappointed” if you stopped making your product
🔷 Fundraising success (if investors trust you’re on to something, you must be, right?)
While everything above is useful, the single best way to measure product-market fit is what Jeff Chang from the Growth Engineering Blog calls the cohort retention rate. This refers to the percentage of users that stay long-term, given a group of users that joined around the same time.
If that percentage is high, you can shift your attention from improving the product to building scalable acquisition channels. If it’s not high enough and you shift your focus away from the product, you’ll start losing users.
How do you normally measure product-market fit? Please share in the comments. 👇
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