Finding PMF by Narrowing to Retained Users
"Early launches with a 'loose fit' aren't failures but reconnaissance missions to find the specific sliver of users who retain and are willing to pay," startup advisor Peter Harten argued. He suggests that narrowing focus to these segments allows for building purpose-built products that can lead to "overnight" conversion changes.
- The advisor quoted, Peter Harten, is a Strategic Revenue Architect who specializes in guiding climate tech startups from their seed stage through Series A and B funding rounds. - This strategy is exemplified by the email client Superhuman, which measured what percentage of its users would be "very disappointed" if the product disappeared. Initially at only 22%, they focused on this passionate user segment, and by catering to their needs, increased that number to 58%, surpassing the 40% benchmark for product-market fit. - The security company Snyk also found success by initially focusing on a narrow market, exclusively supporting developers in the Node.js ecosystem. This allowed them to build a passionate user base before expanding to support other programming languages. - Focusing on retained users has a significant financial impact, as research from Bain & Company shows that a 5% increase in customer retention can lead to a 25% to 95% increase in profits. - Repeat customers are more valuable over time, with one study showing they spend 67% more than new customers. - This "niche-first" approach is common in consumer apps; Netflix, for instance, initially targeted younger millennials and Gen Z with annual incomes of $50,000 or less. - Similarly, Spotify's early user base was heavily composed of millennials and Gen Z, who together still represent over 70% of their global users.
