To define product-market fit, we must first specify its components. Let’s start with the market, for it is the more contentious conversation of the two.

Defining the Market

The general practice is to define markets around products and verticals. Some examples are the retail market, hospitality market, consumer goods market, knowledge sharing market, and financial services market. The common denominator is a product or service focus—it is the product (or service) which defines the market. Product teams gravitate toward this definition, given the consensus that customer needs are vague, latent, and unknowable.

The alternative is to adopt a customer focus. Given the reason for existence of a product is to serve customer needs, that appears a wiser definition. Nevertheless, product teams are hesitant to assume this perspective, for the vagueness of customer responses to the question “What is it that you want?” The flaw is in the question—it still is product-focused. A customer-focused question would be: “In turning to our product (idea), what are you ultimately trying to get done?” Here are some example answers:

• Meal delivery service: Prepare a meal for consumption.
• Espresso maker: Prepare a hot beverage for consumption.
• Crypto: Intermediate the storage and exchange of value over time.
• Quality Assurance: Test applications for reliability, usability, and accessibility.
• Hashnode (reader side): Advance development skills.

While these answers are not customer needs, and therefore, in and of themselves are not actionable—more on that in How Do Customers Evaluate Success?, they constitute precise customer objectives. Moreover, these customer objectives are stable over time. Take consumers wishing to intermediate the storage and exchange of value over time. That is a century-old customer objective. It is also shared globally. The random variable is the solution: seashells, precious metals, paper money, digital money, crypto. Consequently, in defining markets—and to tame complexity toward product-market fit, it is advisable to make the customer objective the unit of analysis.

Markets are groups of people who share in a functional objective.

Defining the Product

The above customer-focused market definition also lays bare the danger of defining markets around products. Products (solutions) merely are the temporary means toward customer objectives. Markets are stable. Products (technologies) change. No wonder, then, products make for terrible units of analysis. Products are moving targets by nature.

Products are temporary means toward customer objectives.

Defining Product-Market Fit

Putting it all together, we can define product-market fit as the offering of a viable solution to serve a group of people toward their shared functional objective. In pursuit thereof, as a next step, let's talk about the building blocks of a market.