🔆 Degrading product market fit.

NRR is a complicated beast because it has so many components.

The downfall of NRR can be a result of

  1. Degrading Go-To-Market fit (GTMF)
  2. Degrading Product-Market-Fit (PMF)
  3. A combination of both.

For example, Imagine you’ve just sold a new SaaS deal. You’ve onboarded your new customer successfully, but somehow, the value and stickiness of your product are lower than expected. 

The question: Is this due to a loss of GTMF or the lack of PMF?

Often, it’s a combination of both. But for this post, let’s zoom into product market fit.

In a nutshell, Product market fit focuses on what products and features resonate with customers. 

But as with everything, this is a moving target.

  • Your customers’ ambitions change every year (or more often).
  • External pressures change for your customers (economy, regulations, competition, their customers’ expectations)
  • With that, targets and priorities change in every layer of the organization.

And as such – where yesterday your product market fit was perfect, it can be entirely off today.

So, how do you prevent this from happening? Here’s my top 5:

  1. Be ultra clear about what business you’re really in. Remember, that’s about an outcome, not a product category. 
  2. Get AND keep the definition of the problem crystal clear. Remember, the evolving nuances matter.
  3. Continuous feedback loops with your ideal customers AND prospects. Remember, prospects can be more honest than your customers.
  4. Create resourcefulness to be able to anticipate market shifts early enough. Remember, nothing is so frustrating than not being able to adjust.
  5. Balance – Define guardrails to focus your resources for short- & and long-term impact. Remember, short-term stuff is tempting, but don’t ignore to address what your ideal customers expect in 2 years.

There are more factors – like data-driven decision-making, but these five factors give you the framework to act with focus and continuously improve.

 

In short:

NRR depends on solid product market fit

Not only to bring revenue in but, more importantly, to keep it.

 


Question for you to reflect upon:

Critically assessing churn in your company, is it because you sold the right product to the wrong customer, or is product fit degrading with the right customers?


 

Be Remarkable

 

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About the author

Sales Pitch

Ton Dobbe is a former B2B software product marketer who's on a mission to save mission-driven SaaS CEOs from the stress of 'not enough' traction. He's the author of The Remarkable Effect, the host of the Tech-Entrepreneur on a Mission podcast, and writes a daily newsletter on the secrets to mastering predictable traction.