Product-Market Fit: How Substack Did Better Than Most Startups
How an unexpected AI addition to newsletter tooling made me realize what I wanted
"Product-market fit means being in a good market with a product that can satisfy that market." -Marc Andreessen
A chrome-plated metal behemoth of a coffee machine sits on my office’s kitchen counter, waiting patiently to carry out orders.
The flimsy plastic Keurig machines nearby shake in fear in it’s presence.
Engineers and baristas worked for years in tight coordination to create a well-calibrated coffee-making machine, the Aguila 220.
Metal valves open to precisely-calibrated positions. A boiler forces steam through coffee pods. Pumps froth cold milk.
All to produce a single drink on demand.
It makes exactly what almost everyone in my office wants. It satisfies the craving for coffee perfectly.
Good job—great Product-Market Fit.
What is Product Market Fit?
Product-Market Fit (PMF) represents the alignment between a product or service and the needs, preferences, and demands of a specific audience.
A PMF analysis would tell you NOT to invent another Pet Rock.
When a product has found:
a market where it’s needed
where it’s wanted
and where it’s users are satisfied
then that product has a good PMF!
With a good PMF you can create a customer relationship that lets you take money from customers begging you for your product.
Instead of fighting to sell your product, a great PMF will give you a crowd of easy customers.
A Great Example of PMF
I use Substack to host my newsletter.1
I picked this as an option because it makes most of my decisions for me. Instead of fretting over the exact font to use on the site, I’ll pick 1 of 5 options and get back to writing.2
Their value prop is "you can build a media empire in minutes”. Substack can advertise that because it’s so easy to set a blog up. Of course, this ease comes at the cost of infinite customizations—for me, a worthwhile sacrifice.
Substack Business Summary:
Audience: Independent creators
Motivations: Simplicity, Ease, Efficiency
Vendor Stickiness: Low: Easy for writers to switch to another service
Because it’s so easy for Substack customers to leave the platform, they need to focus on constant improvements that surprise and delight.
And adding more fonts to the system won’t cut it.
Recently—without a big announcement—Substack added an AI quote-picking feature for published posts.
The platform already generates social media-ready thumbnails for each post. For my last article, they added a new thumbnail option with the most ‘interesting’ quotes picked.
This feature is great!
Readers find different things interesting than I predict—as shown by the Year In Review post.
Having a third party view into what might be interesting takes a mental load off writers while maintaining engagement.
If Substack had used the same engineering effort to add more Word Art features3, it would show they don’t know their market well.
Because of this feature, I’m more committed to Substack.
A good PMF is a great sign that a product will drive real results.
But PMF isn’t always a positive.
A poorly thought-out or unconsidered PMF can ruin the market for your product.
For example, the exact same coffee machine from before also has a bad example of Product-Market Fit
The Aguila misses the mark in its more niche features.
The designers didn’t consider the Product-Market Fit for any features beyond the core coffee functionality.
The engineers added the ability to reuse certain buttons to flip through specialty coffee. This feature is only for drinks that don’t have buttons on the front of the machine.
Deep into menus only legible on the tiny LCD display—suddenly the “ristretto” button becomes “cancel”, and espresso” becomes“accept”.
A red light behind one barely nudges you in the right direction. It feels like they made navigating these menus as confusing as possible.
I’ve seen one person work it correctly.
The engineers designed a product that doesn’t fill a real need satisfactorily.
They should not have spent the time and effort to build that feature set.
How do you know if you have a good product market fit?
Key characteristics and indicators of Product-Market Fit include:
Customer Satisfaction: Customers are not just using the product but are genuinely satisfied with it. They find value in the features and benefits provided.
Market Demand: There is a clear demand for the product within the target market. This demand is not forced but arises organically due to the product meeting a real need.
Retention and Engagement: Users are not only acquiring the product but are also sticking around. High retention rates and active user engagement are signs of a good fit.
Word of Mouth: Satisfied customers become advocates. When people start recommending the product to others, it indicates that the product has resonated well within its market. (I am here in this post)
Minimal Competition Impact: The product's success is not solely based on a lack of competition but on its unique value proposition and ability to stand out even in a competitive landscape.
Scalability: The product has the potential for scalability without compromising the quality of the user experience. As more customers are acquired, the product should still deliver value effectively
Companies that successfully achieve Product-Market Fit are better positioned for sustainable growth and long-term success. But finding a good product-market fit requires getting to know your customer—warts and all.
I don’t want a comprehensive accounting of all possible ligatures in my platform. People made do with ASCII for decades, limited only by imagination. Substack knew to match the feature to the user.
Don’t be afraid to get your hands dirty and talk to your customers. You might be surprised by what you find when you get to know your buyers.
It’s much better to be surprised during research than by an unexpected failure.
A Scout [Marketer] is never taken by surprise; he knows exactly what to do when anything unexpected occurs.
-Robert Baden-Powell, British General
Thank you for reading!
For a more mature media company, the font and typography is important—the New York Times has maybe the most iconic typeface. For anyone else early on, it’s not.
Word has too many features for things like this.
The Nespresso Aguila 220 is the most intimidating piece of hardware in the office!