Building for Product Channel Fit 🚀
Why PMF is the wrong focus for startup founders
👋🏼 Hey friends, this post is part of a series on Product Market Fit! I’m going to go over how to use Growth Marketing to build for PMF and common mistakes founders make along the way.
Previous Post: [Playbook] How to determine if a startup has Product Market Fit
Q: I have strong PMF signals but I’m struggling to grow at scale, how will focusing on Product Channel Fit help?
If you are a founder, investor, or working on an early stage product you should actually be trying to create/evaluate Product Channel Fit, not Product Market Fit.
The issue is that the term “market” is too broad, it doesn’t actually accurately measure anything, and it leads people away from focusing on major channels like Facebook & Google.
Here are 6 truths about Product Channel Fit. 🙏🏻
There is no product that has ever been created, that has reached scale without a strong channel.
There is almost always a power law of distribution. A single channel will drive ~80% of your users.
There are a fixed number of channels that exist within the world.
Channels change over time, arbitrage within channels change over time.
New channels give birth to new companies & products. You can ride a strong channel to massive distribution.
Channels are rigid. Your product must be built for a channel, you cannot mold a channel to your product.
Product Channel Fit is the hard skills version of Product Market Fit. Building for PMF you hear stories about how the product is pulled from the market, that there’s just so much demand for something, you simply build what your users ask for.
Inspiring, but how do you measure market pull?
Product Channel Fit however, is extremely easy to measure. You run a Facebook ad and can judge the CTR. You send 1,000 cold emails and can judge the open rate. There are 100 different keyword tools which will show SEO search volume. Even viral network effects are measurable.
Product Channel Fit is cold hard reality, it’s the direct measurement of a good market.
Channels are a requirement for scale.
Let’s say we’re building an iOS app for addiction. A quick Google search tells us that there are 21 million people in the US who struggle with at least 1 addiction. A standard slide on a pitch deck would translate this into a 21M market size.
But what happens when you actually “go to market”?
Do we hire an army of door to door sales people who knock on peoples door telling them about our amazing new app? Do we purchase a super bowl ad targeting beer drinking alcoholics?
Our app might have strong word of mouth, but unless 1 user drives 2 more users, we need a channel to drive users to our product.
Turns out for iOS apps, door to door sales & super bowl commercials don’t work really well. What DOES work well however is the iOS app store search, both paid and organic.
In order for our app to achieve distribution we must build our product so it thrives within the app store.
We must optimize how we ask for reviews, so it is highly reviewed.
We need to build something visually striking so the previews have a strong click through rate.
We must have a revenue model (read: annual subscriptions) that can survive the take rate from the iOS store.
We must create notifications that bring users back into the product because the app store rankings are strongly based on usage.
Product Channel Fit for our addiction app means that our product thrives within its top channels of distribution.
What happens if we can’t compete on the iOS store?
It means we have to rely on some other channel. Purely word of mouth, or maybe expensive Facebook ads. It means our competitors who have stronger PCF will absolutely murder us. It means our profit margin is going to be much weaker.
And if word of mouth doesn’t work because it’s an addiction app and people don’t talk about their addiction, and Facebook ads don’t work because we’re trying to monetize with display ads instead of annual subscription revenue, then we just simply can’t grow at all.
It doesn’t matter that we were #1 on our Product Hunt launch and the founder of Twitter said we had PMF, we’re dead in the water.
There are a fixed number of channels.
Channels are almost like laws of nature. It is extremely difficult if not impossible to create new channels, we can merely try to identify channels that exist and then leverage them to accomplish great things.
There are only so many ways to drive users, especially at scale.
Network effects
Word of mouth
Facebook/social media (organic + paid)
Google Search (organic + paid)
Cold email
Sales prospecting (cold calling)
Direct Mail
Radio
Partnerships
There are more channels than this, and there are actually a “lot” of creative and different kinds of channels, but channels are not something you create, they are something you discover.
In the context of venture backed companies, there are only a handful of channels that will allow you to reach complete market domination of a giant market. If you have a D2C product and Facebook + Google don’t work for your product, you are likely at a serious disadvantage.
Different channels work better for different products. Linkedin & cold email is great for high ticket B2B products. Facebook & social is great for many consumer products. Google search is essential for developer tools.
This is where the key differences between Product Market Fit and Product Channel Fit come into play.
If you have PMF, you have an amazing product that gets lots of organic growth. Twitter is blowing up, people are referring their friends, and users love your product.
But this doesn’t mean you have Product Channel Fit. :(
If you have a D2C product, but you can’t scale the strong D2C channels, you have no way to actually achieve market domination. Going back to our iOS app for addiction, we need to be able to scale the channel of Apple Search Ads & the iOS organic rankings - no amount of Twitter hype will save us from bad performance across our main channel.
The power law of channels.
For almost all products, there is an 80/20 rule for channel. Usually there will be 1 major channel that drives the bulk of your users, and 2-3 support channels that help support the main channel.
This Substack for example is driven through ABM cold email, that is the #1 channel. Then when people discover content they love, it gets shared on Linkedin & Twitter, social is the #2 channel.
80% of the growth comes from the major channel, and the second one merely supports the first.
Why is ABM cold email my channel? Because it’s the best fit for a paid newsletter subscription. 🤯
My product almost perfectly fits my channel, and this has allowed me to scale from 0 - 1000+ Substack subscribers (now over 3,000) within 21 days. Other writers who are honestly drastically more talented than me have taken years to build 1,000 subs, because they didn’t have alignment between their product & channel.
The goal of building for Product Channel Fit is to deeply understand what is or is going to be, your #1 channel of growth. Then, it’s to create a product that perfectly fits that channel.
There have been so many amazing examples in the past of companies who have adjusted their product for their channels.
Airbnb leveraged Craigslist as a channel by automatically posting listings.
Facebook created business pages for companies to promote their Facebook.
Rocket Mortgage built remote call centers & a self serve mortgage platform to allow easier conversions from Facebook & Google ads.
Yelps entire product is built around indexing on SEO for every single business listing & category of local business.
Often these tactics get chalked up to “growth hacking” when in reality they are simply aligning their product, with their best channels of growth.
Channels change over time.
While it is very hard for us to create new channels, channels are fluid and will change over time. Facebook organic reach in 2011 is extremely different than in 2021. Even Facebook ads in 2014 went from a ~$4 CPM to a $20+ CPM in 2021.
Organic search on Google has went through thousands of iterations. Local search was created with Google+ pages which died and was rebranded into Google Business Listings.
Even cold email has changed in the last 10 years where there are now different kinds of email filters (promotions, social, etc) in addition to a spam box.
New channels have been created, Tiktok came into play with incredible organic reach, new ad formats have been created, podcasting platforms are gaining popularity.
Nothing stays the same forever, old mediums degrade & new ones are constantly being born.
This is extremely critical to consider when building for Product Channel Fit because it means that your #1 channel that drives 80% of your users can decay over time. Tiktok might be driving the bulk of your business, but what happens when Tiktok organic reach & ads become saturated?
We must build new products that leverage channels with high amounts of arbitrage.
We need to have a multi channel strategy that can adapt over time.
We need to pay attention to the changes in channels year over year.
When old channels deteriorate, companies die. When new channels are created, companies are born. Some of the most incredible startups in the world have been created by taking advantage of new channels that emerge in the world, building an amazing product that perfectly fits the channel, and then riding the channel to market domination.