Product/Market Fit Variables

7 Key Variables for Product/Market Fit

Successful product development can be a struggle for many startups and established companies. A products success is largely dependent on a development teams ability to achieve the highly sought after product/market fit. With new products it is far more often that the established market champion is the first brand that attains product/market fit and not the first mover. When it comes to finding product/market fit there are 7 product variables that you can fluctuate and iterate on until you obtain an optimal balance. These variables include price, performance, quality, functionality, ergonomics/ease of use, manufacturability, and marketability.


1. Price

Pricing dictates a lot about your product. If priced too low, you risk customers not trusting the quality of your product or losing out on revenue. if priced too high, you risk customers not willing to look past the price tag. Your pricing strategy plays a crucial role in achieving product/market fit.

Existing Markets

For products that are entering existing markets pricing is largely predetermined. Early on in product development you should have a clear understanding of who your target customer is, who your primary competitors are, and what stores your product best fits into. You can find the market price max and min by looking at competitor retail prices. Where you fit within the pricing range will largely depend on your brand, quality, and performance. If you plan on going outside of the established pricing range you will face significant challenges in proving value or reliability.

Note: While researching competitor retail prices there is typically a keystone markup of 2x the wholesale price applied. Using this markup you can estimate the wholesale price should expect to be paid when launching. Understanding your competitive wholesale price helps determine manufacturing cost limitiations.

New Markets

In new markets pricing can be substantially more difficult. When a market has yet to settle upon pricing, it is up to the first startups to discover how much costumers value a product. This process requires substantial research including interviewing customers to understand the value of having access to your solution, understanding your manufacturing costs, offering pre-orders, running a market research survey, and more. Once your product is launched you will want to revisit cost and pay attention to potential customer feedback. Overtime as manufacturing is optimized and more competitors join the market, prices decrease. This reduction in price increases the market size and continues until it reaches saturation and production efficiency limitations. Once a market becomes saturated the remaining competitors fight for market share until a few are established the winners based on who has the best product/market fit.

Segmented Markets

Another common business strategy is to segment an existing market. One example of this is Starbucks®. Not only did Starbucks® want to sell premium coffee, but they also wanted to create a new type of environment where people could meet or work that was in between feeling like a home and feeling like an office. While the coffee market already existed along with coffee shops, Starbucks® added a new market segment by creating a coffee shop that not only sold coffee but provided an alternative work environment.

In order to price a product outside an existing market it is typically necessary to segment the market by providing a new experience that allows customers to view your product as separate from the competition.

How Pricing Affects Product Development

When developing a new product, price plays a major role while making design and development decisions. By understanding your pricing limitations it can simplify a lot of product design decisions that would add too much cost. Understanding your products pricing limitations can also force creative problem solving to deliver performance while minimizing cost.

Tiered/Family Pricing

One solution to product pricing is to offer multiple tiers of a similar product. Each tier delivers varying performance, quality, and functionality for different price points. This allows customers to select the price that best fits their needs, which can significantly expand your potential market. However, while developing an entirely new product it is best to start out with only one tier in order to control risk through minimizing upfront costs of an unproven product.


2. Performance

Product performance greatly affects a customers experience and therefore product/market fit. If a product performs below customer expectations then it will be deemed as an inadequate solution. If a product far exceeds a customers demand then it likely has excess cost built in that exceeds what customers are willing to pay. There is a sweet spot for performance for most products and customer segments where it provides a strong solution while keeping the cost in line with what customers are willing to pay.

Finding the Performance Sweet Spot

Finding the performance sweet spot is a difficult task and requires significant research into your market. You can start researching product performance with potential customer interviews to gain a solid grasp on the problem you are trying to tackle. One option to find the sweet spot is to generate multiple different design options that offer varying price points and performance levels. Once these designs have been generated ask potential customers which solution they would choose if they were available for purchase today. Using the information obtained you can either move forward with one of the designs or further iterate on the design based on customer feedback.

Designing multiple levels of performance and cost options will also allow you to rapidly expand upon your product family should the initial product achieve product/market fit.


3. Quality

The quality that you need to attain can change a lot about your product and processes. Product quality is derived from a combination of materials, manufacturing processes, and design. Improving quality is not always a great idea, as it can quickly ramp up costs. Instead, your goal should be to minimize manufacturing costs while delivering the quality customers desire.

Determining the Quality You Should Strive for

Customer demand for quality varies significantly from product to product and customer to customer. To start researching the quality the market has come to expect look at products that are currently on the market. Product features such as finishing and materials can reveal a lot about what customers expect. Product finishes and materials vary significantly in cost and durability. While you should not directly copy a competitor’s finish and material choice, it can reveal how much cost they are allocating to the products quality.

For example, if the standard market trend is to use carbon fiber in the construction then you can assume that the demand for performance and quality far exceed the customer reluctance to pay for increases in performance and quality. Therefore, to meet product/market fit you can loosen the cost restriction and instead go full in on performance and quality. This along with customer interviews will give you an initial hypothesis to base your products quality on.

Move Forward or Iterate

Once you have initial designs, product specifications, and cost estimates ready you will need to get back out the door and interview customers to determine whether your initial hypothesis was correct and if it is wrong where to go next. Determining the optimal product quality is an iterative process and is heavily dependent upon who your end customer is.

Customer Background Effects Quality Expectations

While determining the optimal quality for your product you will have to keep in mind who your target customer is. A customers willingness to pay more for quality will largely depend on their background. A middle-aged millionaire will likely be willing to spend far more on quality than a young professional who is just getting on their feet. Similarly, someone who spends 30 hours per week of their free time on a competitive hobby will be willing to invest more than someone just starting out in a new hobby.

Perceived Quality vs Engineered Quality

Quality can be a largely perceived product feature. While there are ways to directly determine a products engineered quality such as materials, tolerances, finishes, processes, and more. Instead of adding significant manufacturing costs that add diminishing returns to the quality of a product, many suppliers instead rely on perceived quality. Today’s premium products use a combination of improved engineered quality and perceived brand quality which makes their products status symbols to own. Perceived quality is attained through marketing, product placement, brand messaging, and product appearance. A products ability to gain perceived quality also varies significantly from industry to industry. In the fashion industry, perceived quality makes up a bulk of the difference between a $500 purse and a $50 purse. However, in the manufacturing industry where tools are constantly pushed to their physical limits it is near impossible to gain perceived quality without also delivering improvements in engineered quality.


4. Functionality

Today products are adding more and more functionality allowing for one product to replace multiple. However, instead of trying to squeeze as much functionality as possible into your product, it is better to first learn how much functionality your product really needs at launch. Once you meet initial product/market fit you can always add more functionality with future product iterations. However, for your initial launch you will want to keep your product as simple as possible in order to make it easier for customers to understand and for you to produce.

Discover Your Minimum Viable Product (MVP)

A minimum viable product (MVP) is the simplest form of a product that can meet product/market fit. Your initial goal should be to discover what your MVP consists of. Start by getting out the door and interviewing those who you are looking to develop a product for. During these initial customer interviews, discover potential customers most frustrating problems, favorite products, and what makes them tick. While interviewing people in your target market be sure keep an open mind to discover as much as you can. It is entirely possible that the functions that you thought would be critical to a new product should actually be eliminated, or problems that you thought were major issues have actually already been solved. By learning as much as you can early on from those who are your future potential customers you can save yourself a lot of wasted time and money.

Keep a List

You should start with a list of product functions, features, specifications, and problems that your product is solving. As your discussions with potential customers continue, update this list by removing functions, adding functions, and stating why any changes are necessary. Every feature that is added to your product will need to be heavily defended as being absolutely necessary in the eyes of initial customers. Product complexity adds significant work and cost to your product launch so your goal should be to simplify your initial product instead of making it more complex. After you launch your initial product and gain some traction you will be able to go back and iterate on the design to add the functionality that will allow you to expand your market.


5. Ergonomics / Ease of Use

While many times ergonomics and ease of use is an after thought for products, it can greatly affect the popularity of a product. When a product is comfortable and easy to use people keep coming back to it time and time again. It isn’t enough to solve an initial problem with a product, you also have to make sure that you aren’t creating another head ache or problem for a customer.O

Observe How Customers Use Your Product

To eliminate customer frustrations with your product you need to first understand how they interact with your product. The best way to do this is to observe how users interact with a product starting with when they first receive it in its packaging. Look for any points at which the user needs to pause, go back to look at the instructions, uses the product in a surprising way, or acts confused. Note down anything you observe as points for improving user experience. Through delivering a solution that is both easy to understand and use out of the box you will win customer praise. Every customer that you win over to your solution can turn into a brand ambassador that convinces others to convert driving affordable exponential growth through word of mouth. The fastest way to product/market fit is through delivering an exceptional customer experience while solving a problem.

Deliver Superior Comfort Through Ergonomics

One quick way to have your product shelved is to have it be painful to use. While designing your product you should follow ergonomic design guidelines as well as run user tests to check for user comfort and fatigue. In order to properly test your product you will need to determine how long users will typically spend using the product in a single session. You will also need to test your product for a wide range of potential user body types in order to accommodate all potential customers.


6. Manufacturability

While designing a new product you need to keep in mind what manufacturing processes will be used to produce the product at scale.

Design Your Product to Accommodate Manufacturing Processes

A lot of design limits including tolerances, volumes, geometries, and material will affect what machinery will be used. In order to reduce product costs, you will want to design components to be manufactured using the most affordable method possible for your desired volume.

Tolerance Limits

Every machine has a tolerance limit. In order to manufacture components to tighter tolerances you can expect the cost of each component to increase in price dramatically. For instance, hot extrusion, milling, plasma cutting, and stamping processes all have significantly different tolerance limits which need to be accommodated by the design.

Low Volume vs High Volume Manufacturing

The most affordable production method is also dependent upon your required volume due to upfront tooling costs. When manufacturing a few prototypes its very likely that the most economical manufacturing method will be different than when manufacturing a 10,000 unit production run. While 3D printing and CNC are common manufacturing methods for prototypes, stamping, and plastic injection molds are more common methods for high volume production. While high volume production delivers far higher throughput and more affordable components at high volumes, the upfront costs are far greater due to tooling expenses. This difference in upfront cost makes high volume production unappealing during the prototyping and design iteration stage.

How Geometry Affects Manufacturing

Product geometry also affects what manufacturing method can be used. The cost of machining a component on single-axis, three-axis, or five-axis machine vary significantly. Also, every time a component needs to be set on a new axis for a cut, the price increases dramatically. This makes designing components to be machined entirely on as few axis as possible desirable in order to deliver significant cost savings.

Material Machinability

Different materials require different manufacturing processes. While materials such as ultra high strength steel may deliver desirable performance properties, they also create manufacturing complications. For instance ultra high strength steel requires the use of a high-cost servo stamping press instead of a standard stamping press. Requiring the use of higher cost specialized machinery drives up component costs substantially. While machining components, the material selection also affects the cut-rate and tool life. When materials are chosen that deliver superior cut-rates and tool life the manufacturing cost is reduced.


7. Marketability

When you’re starting to launch your new product to the market having an exciting feature or capability can do wonders to help your launch take off successfully. By designing marketable features into a product that can be shown off in exciting ways you greatly improve your ability to secure public relations (PR) opportunities. Every time your product is mentioned in the news, on a talk show, or elsewhere you save significant costs in marketing expenses.

Earning Word of Mouth

The most effective and sought after marketing effect today is word of mouth. When there is a unique, enticing, exciting, and relatable feature delivered in a product the probability that potential customers will share it with friends as a form of social capital increases. When a potential customer discovers your product from someone they trust instead of from a paid advertisement their conversion rate increases dramatically. With a successful word of mouth campaign you can become a sought after viral product that leads to exponential sales growth.

Examples of Marketable Features

Features that have driven viral word of mouth campaigns have included anything from a high powered blendtec® blender pulverizing a variety of objects to providing shoes to those in developing countries with TOMS®. In order to turn heads, it requires more than a small improvement to an existing product. You need to take a new unique approach to a problem that shocks potential customers in a good way.


ASR Engineering is a mechanical and aerospace engineering firm that can take can make your product idea a reality no matter how simple or complex it is. If you are in need of engineering support then contact us today for a free quote!

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