The myths of product market fit

Actually, it’s quite the opposite: I want to make sure Intercom and our support products grow and don’t die.

Many smart people believe the key to doing this is getting product market fit. In fact, they think it is the single most important thing your company can do. They also believe companies die because they can’t find their fit, or perhaps they had it and lost it. That’s what all the Medium posts, conference talks and best-selling books suggest anyway, so we thought we should share our thinking on the topic. I actually spoke on this topic at the Inside Intercom World Tour last year. If you’d like, you can listen to the talk on our podcast, watch the video at the end of the post, or keep reading below.

Most of you are probably pretty familiar with the term “product market fit.” Marc Andreessen coined it and defined it as:

“Being in a good market with a product that can satisfy that market.”

There’s not a lot to go on there, but at a high level it makes complete sense. If you want to have the best chance of succeeding you need to go after a big market, and your product needs to solve a critical problem for that market to be successful.

Andy Rachleff, the CEO of Wealthfront, teaches courses at Stanford on this and goes even further than Andreessen:

“Once a company has achieved product market fit, it is extremely difficult to dislodge it, even with a better or less expensive product.”

That’s pretty bold. Although I’ve cherry-picked this quote, I feel it’s representative. People think product market fit is some sort of magical thing akin to achieving business enlightenment.

But back to our situation: Why was I thinking about death in the first place? Intercom is doing well. We have thousands of customers. We’re still growing fast. So why all the doom and gloom?

The reason is that early last year, we noticed some troubling patterns with our support products:

• Our current customers (who are mostly small companies) were consistently requesting we build the same features over and over.
• Another segment of our customers (who used to be small) had grown into successful larger businesses, but they were leaving us for our upmarket competitors.
• Our own support team was hacking our products just to be able to support our customers.

They were the symptoms of an illness, but what was the cure? What did we need to do to address them? As we tried to apply our learnings about product market fit to these problems, we found some myths – along with one notable omission people often leave out of the conversation.

Myth: Product market fit is a moat that will protect you from competition

I actually disagree with Andy Rachleff, our friend at Wealthfront whom I mentioned earlier. Markets are constantly changing (especially in tech), and having product market fit doesn’t change that. You need to be like a shark. You can’t stop moving. If you do, you will be eaten.

For instance, last year we were a clear fit for smaller companies, which we define as having 50 people or fewer. Our smaller customers made up more than 99% of our support customers. But we were hearing the same product frustrations over and over again from them. This was an important signal that we needed to take seriously. Our fear was that these customers’ expectations were changing. This is extra scary if you are SaaS company, because it’s so easy to switch products.

For us, listening to our customers and aggregating their feedback is our best tool for taking the pulse of a product. Every quarter our research team does a customer voice report where we can rank our most-requested-features stack. We can then reference them against older customer voice reports to find patterns.

If we let these problems become patterns, they’ll turn into customer frustration, which grows and gets worse. Eventually, our customers will start looking to our competition for a solution. Failure to see this cycle happening is what kills established companies.

The fact that we once had product market fit – and maybe even still do – won’t stop this cycle.

Brian Balfour, former VP of Growth at HubSpot, sums this up nicely:

“Fortunately for startups, large companies lose sight of this never ending process (PMF). They either don’t move with the market, or as they expand their target audience, they assume product market fit and end up pushing a product that ultimately fails. This creates an opportunity for disruption and startups.”

History supports this. Many companies that once had a stranglehold on their market are now dead and gone. The markets they served are still there, and they’re still big. But these companies were eaten because they stopped innovating and stood still.

“Failure to see this cycle happening is what kills established companies”

Remember Blockbuster?

Blockbuster started in 1985. It became the undisputed leader in video rentals by 1992. It had its IPO in 1999. There were 9,000 stores by 2004. And it was effectively dead on the table in 2010.

Chomp, chomp! The internet, iTunes and Netflix had arrived. The story goes that Reed Hastings decided to create Netflix after getting a $40 late fee for a movie. I remember being gouged by them, too; it was super frustrating. Your problems don’t age well.

The takeaway is that product market fit is not much of a moat. It’s temporary, and you need to constantly be looking for signs that your market is changing. The best way we’ve found to do that is to regularly survey our customers and track their feedback over time. If you aren’t doing this today in a structured way, you should make it a priority.

Myth: Getting product market fit means you will be a fit for the whole market

Marc Andreessen’s definition is too vague to be useful for most of us, particularly those of us who haven’t invented a dominant platform like the web browser. For mere mortals like us, I’d suggest you start by focusing on a niche for two reasons:

1. Huge markets are daunting, and you need to focus to be effective.
2. Deeply understanding your market is key to providing the right solutions, and even in a big market there are distinct tiers that have their own needs requiring unique solutions.

Intercom was a fit for smaller customers who needed a more personal way to help their customers. But at a certain scale of customer conversations, we broke.

We saw this both by looking at our own support team’s struggles and by watching our most successful customer leaving us when they got bigger. As a result, only 400 of our support customers met our definition of larger business. If we were going to keep these customers, we needed to establish a new fit.

We had to be honest with ourselves. We lacked a bunch of things that larger businesses obviously needed. For example, these business had processes and best practices they had developed over years of experimentation. We lacked even the most basic workflow flexibility for them to match their processes to our product, so we needed to build things like snooze. Some of these gaps showed up in our customer voice report, but others only surfaced when our research team when interviewed larger customers to understand what they were looking for in a support product.

Right now, we are in the process thoughtfully and incrementally trying to move our product upmarket and establish a new fit with this segment while maintaining our fit with smaller customers. While we aren’t starting from scratch, we do need to look at this process of moving upmarket almost like starting over again, because that’s really what you’re doing when you move to a new segment.

“Product market fit is usually narrow within a larger market”

Our situation is not unique. There are many clear examples of using a niche strategy to win in other parts of our industry. For example in the email marketing space, there are at least three companies with roughly a $2 billion valuation:

• Marketo (enterprise)
• HubSpot (mid-market)
• Mailchimp (SMB)

They solve the exact same job to be done, but each has established their fit and been very successful by focusing on different tiers of customers.

The takeaway is that product market fit is usually narrow within a larger market.

When you are first trying to establish it, look for underserved groups within a big market. When you are trying to expand your footprint like we are, you can’t assume your product market fit with one tier of customer will apply to another. Trying to serve everyone in a market – or assuming your fit is transferable – will lead you to produce products that ultimately fail.

Omission: Product market fit requires a unique and authentic opinion

Unless you are building a product that creates an entirely new market (which is the exception), you have to displace a competitor to get your fit.

No one is going to switch to your product if you are a copy of what already exists. That means you need find a unique opinion that resonates with an unmet need your market has. For example, Jeff Gardner shared one of our unique product opinions: we believe support should center around conversation and not tickets.

Developing our upmarket opinion was painful. We struggled with it for months. But we had a lot of great information to help us figure out where we needed to go and what we needed to build:

• We had the customer voice report.
• We researched prospective larger customers.
• We could even see what upmarket competitors’ feature sets were.

But those inputs alone wouldn’t differentiate us. They would just get us to a baseline acceptable product that would look exactly like what already exists in the world. Looking like everyone else isn’t good for your business because your only differentiator is price, and that’s a crappy place to be.

“Looking like everyone else isn’t good for your business”

We knew our opinion about upmarket support had to:

1. Be an authentic extension of Intercom’s goal to make communication personal
2. Address a key problem for upmarket customers
3. Be different

The aha moment for us was a dinner in Dublin awhile back. We were having a casual dinner with a couple of support team leads at large tech companies. Basically, we exchanged food and some booze for the opportunity to pepper them with questions about what they felt was wrong with their support tools.

We were getting nowhere; they were pretty happy with what they were using, and they thought the tools were totally fine. Then we asked a different question – not about the tool, but about them and the job of support more broadly. “We’ve heard the support job is really hard,” we said. “Can you tell us more about that?” Then the flood gates swung open.

We learned that they often have to step away from their desks to have a cry during the day. They received coloring books so they could decompress while at work. Their performance and compensation was based on metrics they had no real-time insight into. Some of them were actually given hand clickers so they would know how many calls they had made. And they gravitated towards activities like user groups and special projects to get away from the role of actually supporting their customers.

This dinner made a lot of things click. It made sense that people leave support jobs at twice the rate of any other role at a company. The emotional toll of the job leads to churn.

Churn is a big problem for both small and large companies, because hiring and training is hard and expensive. It also has a negative impact on customer experience, because you are regularly losing your seasoned and fully ramped support staff, which causes a drop off in quality.

Our product needed to be different by focusing on motivating the people working eight hours a day in our tool. This was also a message we weren’t seeing in the industry. Our competition seemed primarily concerned with automating tasks and improving process and efficiency. Those things are important, but in our opinion not as important as having empathy for our users.

By learning about agents’ lives outside of their tools, we discovered our opinion about how we were going to be different. Our job was to make support products that help fix this morale problem and motivate the people working all day in our products.

I want to tell you about the first test of our opinion. It’s only an itty-bitty baby feature that delivers on our opinion about what upmarket support should be. This feature lets you measure the quality of support by sending a survey to a user once a conversation is closed.

This is nothing new; almost everyone offers this. But we added something extra that we referred to as the “inbox of love”, a terrible name we only used internally. When a teammate gets positive feedback from a customer about a conversation, there a little heart flashes in the top of the inbox. When they click it, boom – confetti!

Now, this may seem a little silly, but here is some of the feedback we’ve received from our customers.

Developing your opinion is critical to getting a fit. It helps you focus, because you understand exactly what it is you’re trying to do. It needs to be both authentic to you and different than the way your competition thinks. Taking the time to develop your opinion is essential to finding your product market fit, because without it you’ll just be a poor man’s version of what you’re trying to replace.

Getting your fit and keeping it can be the difference between your company thriving and dying. But this is far from a playbook for success. I hope you remember a few things about product market fit:

• It isn’t a moat that will protect you from a changing market. You need to stay moving!
• Your focus should be a fit within a niche of a large market, and you will need to reestablish your fit with new niches to expand.
• Your opinion will be what focuses and ultimately differentiates you from what already exists in the world.

Above all, the source of truth for getting and keeping your fit is your customers. The most important investment you can make is to get to know them intimately.

If you enjoyed this article, check out our other talks from the 2017 Inside Intercom world tour:

• Brian Donohue’s Builder beware: marketing tension in product-first companies
• Des Traynor’s Lessons learned from scaling a team
• Emmet Connolly’s Design in Interesting Times
• Jeff Gardner’s How to tell your company story
• Sabrina Gordon’s Growing your customer support team
• Matt Hodges’ Aligning product and marketing
• Sharon Moorhouse’s 5 lessons learned from growing a support team