Product-market fit and deterioration by being disrupted
You need to reestablish everything so you can scale. All the time.
Product-market fit and Go-to-market fit is deteriorating if you don't do anything about it. It can also happen due to internal factors:
- 𝐂𝐡𝐚𝐧𝐠𝐞𝐬 𝐢𝐧 𝐚𝐜𝐪𝐮𝐢𝐬𝐭𝐢𝐨𝐧 𝐛𝐞𝐡𝐚𝐯𝐢𝐨𝐮𝐫 𝐚𝐧𝐝 𝐭𝐚𝐫𝐠𝐞𝐭𝐭𝐢𝐧𝐠. It's natural to want to target more and different people. The bigger your current customer group is the less you will notice the slow erosion. That happens because it's buried in a bigger data set. It's very easy for bad customers to creep back in.
Follow cohorts. Different behavior in engagement and retention are early warning signs that things go wrong.
- 𝐌𝐚𝐫𝐤𝐞𝐭 𝐬𝐡𝐢𝐟𝐭𝐢𝐧𝐠 𝐚𝐧𝐝 𝐥𝐚𝐜𝐤 𝐨𝐟 𝐢𝐧𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧: If you don't evolve your market around you will, you don't want to end up in a red queen effect where you have to innovate to defend your share. It's a very uncomfortable place to be. In the long run, it means you become one of many in commoditized markets and can't scale further.
An indicator in commoditizing markets is your free-to-pro rate going down. While maintaining product quality, your product is becoming too expensive for your markets.
Pricing change or extra product value needs to be delivered.
It's easy for PMF, GTM, or your scaling motion to go out of balance which in the midterm deteriorates the other 2. Especially as you grow, monitoring for warning signals becomes crucial.
While you are small, it's easy to defend your current growth model. There isn't much to defend.
Getting disrupted by Product-Led growth
So what does it look like if you’re being disrupted by Product-Led Growth -a distribution model- sounds like an ominous threat or something that "happens to other people"?
You might actually be in a shrinking market because you can't address the market anymore with their preferred distribution model. (See picture)
It's not just that customers are acquired differently, they also get more choices. In low-touch scenarios, PLG / PLS models will win. They are more cost-efficient and more customer friendly in commoditized markets.
You can look at your market report all day and swoon over the +13.5% CAGR, it might still be shrinking for your growing sales team and you just didn't notice it yet.
You might even know your ICP and have a product-market fit. Still might get crunched on your sales-led distribution.
It's a dangerous world out there. :D
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