Beyond the Free Trial: The Real Test of B2B Product Market Fit
I’ll be focused on B2B today, and won’t discuss B2C monetization via (a) subscriptions b) ads. B2B has been on mind recently when pondering whether a free product that has some traction (e.g., a waiting list of business customers waiting to use it, customers using the product being quite satisfied with it, and using it frequently) can be considered to have achieved product market fit.
Product Market Fit (PMF) definition and criteria
With credit to Gemini (free version), here’s the definition and criteria.
PMF is achieved where a “product or service aligns with the needs and desires of a defined market segment. This alignment often leads to rapid customer acquisition, positive word-of-mouth, and sustainable growth.” → seems reasonable, I especially like the “sustainable growth” part. Some criteria (also credit to Gemini) was:
- Customer Validation: The product or service meets a genuine need or solves a significant problem for customers.
- Market Demand: There is a sufficient market size and demand for the product or service.
- Revenue Generation: The product or service can generate revenue, either directly or indirectly.
- Customer Acquisition: The product or service can attract and retain customers efficiently.
So knowing the above, can a B2B product be FREE and be considered to have found product market fit?
Argument for YES
One argument is that if business customer are actively using the product when it is free, it suggests there is ~some value and customer satisfaction. The strategy is then to execute on a “freemium” model, where a product is first free, and then paid options are gradually introduced, with additional product features. Examples are Slack, Dropbox, Zoom, who were able to produce a clear value and path to customers to upgrade from free to paid plans, and hence monetize their products.
Arguments for NO
If a B2B product is free and has traction, I argue that while there are some promising signs of finding product market fit, it is too early to declare it has indeed reached product market fit. Returning to the definitions, while the “customer validation” and “market demand” criteria has somewhat been met, “revenue generation — either directly or indirectly” hasn’t happened yet. If the B2B product free, your customer hasn’t felt the pinch and made trade offs. They haven’t decided “should we spend part of our budget on this, and give up something else that we could have also purchased with that budget?”.
After all, it is easy to talk about a freemium strategy and harder to execute on it. We have survivorship bias and remember the successes like Slack/Zoom, and those companies were impressively able to a) prove their value proposition (e.g., that their product was more than a nice to have) b) justify the ROI of their additional paid features c) communicate (a) and (b) AND have a clear call to action. All this to acquire sufficient paid customers to cover BOTH the acquisition and ongoing support of their free and paid customers.
So, before one plants the winning flag of “PMF achieved”, I believe the product cannot exist only in its free version, but rather needs to either directly be collecting revenue (paid version) or indirectly enabling revenue (e.g., by the upsell of other products and services). Then, by all means, declare that PMF has been achieved.
