Lack of product/market fit is commonly known to be the biggest SaaS product killer of them all - a fact I can attest to based on personal experience.
Given such intimate knowledge, I thought I would share my story in the hope that you may learn a few valuable lessons about product/market fit without spilling the blood and treasure I did.
But before I dive in, just what is product/market fit?
According to Andreessen Horowitz co founder Marc Andreessen, who first used the term in 2007, it simply means “being in a good market with a product that can satisfy that market.”
My Favorite Failure
In 2011 I created what I believed to be the most robust, technically advanced website monitoring software available.
Like its competitors, HasUptime checked for outages, recorded failures and delivered system alerts via email and SMS. But what really made it special was its ability to eliminate false positives by using a number of geographically redundant systems on separate provider networks, to confirm that a site was actually down before sending notifications.
If you've ever been responsible for a web site or application, you may have been awakened in the middle of the night with one of these alerts, only to stumble to your laptop and find that everything's fine on your end.
Obviously a system that did away with such a nuisance would fly of the shelves, right?
Well, not so much.
But why? Clearly there was a need for SaaS products that monitor server uptime. The number of established, successful competitors in the space validated that. And the ability to eliminate false alarms was a valuable feature that no one else offered.
Gap in the market / market in the gap
It turned out that the combination of what it would cost to maintain and improve the robust product we had built, and a highly competitive marketplace, pushed the cost of acquiring a new customer (cost per acquisition) beyond their average lifetime value (LTV). So while we might have been able to satisfy the market from a features perspective, we couldn’t stay afloat at a price point that the market found acceptable.
Essentially, we had identified a gap in the market, but at our price point, there wasn't a market in the gap.
The most important thing I would have done differently is avoid falling in love with the technical aspects of the product. While being a founder who also has technical expertise has many advantages, the tendency to do this is a potential pitfall, because it can distract us from the important considerations beyond the inner-workings of the application.
If you're going to be in the technical weeds of your product, it's best to have someone like a product manager and/or user experience designer, whose job it is to be on the outside looking in.
In this case, geeking out on the technical awesomeness of what I had created blinded me to the reality of the marketplace. Had I focused more on business fundamentals and less on technology, I may have done more research on the competitive landscape, included marketing metrics like average cost-per-click (CPC) and cost per acquisition (CPA) for competitors' pay per click campaigns; as well as surveys, focus groups or customer/prospect interviews addressing satisfaction with current tools, and what people would be willing to pay to eliminate things they didn't like.
It's also worth pointing out that, even though problems with product/market fit ultimately spelled the end for HasUptime, there are several viable approaches to fixing product/market issues like ours, including :
- increasing the value of the offering to the point that buyers can justify the cost
- lowering the cost of acquisition through more effective marketing strategy
- increasing LTV by improving customer retention
While shuttering a SaaS product you've poured your heart into is never a particularly happy experience, I can't say that I regret it. This was, indeed, my favorite failure. It made me much better at what I love to do. Not to mention, we use hasuptime to provide superior SaaS application monitoring on our hybrid cloud hosting service, and we've baked elements of it into other platforms we've developed.
So, while it may not have been the commercial success we hoped for, the application and the experience we gained creating it has helped us deliver greater value to our customers - and at the end of the day, that's what we're here for.