The metrics to track product-market fit
You can track product-market fit easier by taking three key metrics into consideration. Over the next few paragraphs, I’ll unpack churn rate, average subscription length, and customer lifetime value. These metrics will tell you whether a product-market fit is on point, or not.
Churn rate is the percentage of your customers that leave your service over a given time period. Is your churn rate SUPER high? If so, your product-market fit may be off. While some churn is inevitable, you want your churn rate to remain as low as possible, and your Net Promoter Score (NPS) to be as high as possible...
Average subscription length
Track customer subscription length. Do customers stay for a few months and then leave? If so, your product-market fit may be off. At this point, it’s not a bad idea to conduct more retention analysis to learn why customers are leaving and set performance benchmarks. Perhaps there’s a feature you could add that will boost retention.
Your lifetime value, or LTV, represents the total amount of money you can expect from each of your customers throughout their time with your product. LTV drives the amount of money you can spend acquiring customers. When examining product-market fit, ask: how big is the LTV of your current customers? The larger the better.
This isn’t a metric, per se, but it goes back to what we said about Rahul Vohra’s product-market fit strategy. During his intense research, he surveyed customers. He asked, “How disappointed would you be if X product stopped existing?” Asking this question will define your target customers. People who answer “not disappointed at all” may not be worth targeting. People who answered a middle-ground response are worth looking into. Asking this question will show what you’re doing right and what you need to add or change.