Did you know that potato chips were invented by thinly slicing French fries? Did you know that Play-Doh was designed as a cleaning product before children started using it for fun?
It’s true. The products became lucky household items.
Not every successful product is an accident. You can make a product successful by developing a good strategy to guide it.
We’ll discuss what product strategy is, how it can be used to create different types of strategy, and provide some examples from the business world. Then, we’ll give you a template that you can use to create your own strategy for your next product or feature.
What Is Product Strategy?
Your product strategy is the plan that is used to create your product or feature. To achieve your business goals, your team needs to complete all of the necessary tasks. This document will be your team’s guide, and they will refer to it anytime they have questions. 70% of businesses say that the product strategy is the most important thing to consider when making decisions. It is important to create a detailed and thorough strategy to ensure that every task is completed correctly and on time.
The product strategy outlines how the business will benefit from the product. This product will solve the problem of customer frustration and the impact that it will have on the company. By providing a more efficient way for customers to interact with the company, it will reduce the number of customer service calls, which will in turn reduce costs. The strategy should be clear in order to create a product definition, explaining what to build and when. The product strategy is a plan that you will use to measure your success before, during, and after you have produced your product.
A product strategy consists of three major components. Let’s review each one in the sections below.
The market vision is a description of your target market and what opportunity the market presents for your business. It highlights your target customers, how you’ll position your product, and how it’ll fare against other competitors in its space. Your market vision should also include a go-to-market plan that explains your potential customers’ needs and how you plan to deliver a competitive offer.
You can’t create a product strategy without key objectives. What specific goals or metrics do you hope to achieve by building your product? Your development team will be guided by them and you will be helped to measure success once the product is released.
When goal-setting, it’s important to give yourself a timeline for when you’ll accomplish your objectives. This urgency will help motivate you to complete your goals. Adding a time constraint to a product’s success makes it more important to develop the product.
Product initiatives are ideas or plans that are similar to product goals, but they are more abstract and not as concrete. Your new product will have a big impact on these broad ideas or trends.
For example, when HubSpot launched its CRM, its goal was not simply to sell software. The company wanted to share its expertise in marketing automation and help its users find new business opportunities. The product’s impact on the bigger picture helped establish a clear vision for how HubSpot would create and develop its tools over time.
Now that we’ve looked at product strategy in detail, you should know the main elements that go into making a product. The way in which you organize information can be different depending on the product you are making or what management is expecting.
Below, let’s take a look at some of the different product strategies you can use at your business.
Types of Product Strategies
A cost-effective strategy focuses on creating the best product possible while keeping the price low. It reviews the resources used and determines how production can be more efficient and cost-effective.
A useful strategy for low-effort purchases is to buy household cleaning items in bulk. We don’t think too much about these things when we’re buying them because they’re all essentially the same and we don’t have any particular loyalty to one brand or another. If you can create a product that is cheaper than your competitors’ products, it will be a favorite among your customers.
Price isn’t the most important thing when it comes to making your product different. There are many other ways to make your company stand out in your industry. The product might be a luxury item that is made with high-quality materials. It could have revolutionary features that change the way the field operates. This approach focuses on making your product memorable and delightful to customers by giving it a personality.
If your company wishes to create a product that will have high appeal to a specific customer base, then you may want to consider creating a product that appeals to one specific buyer persona. A personalized solution is created for a select group of people that meets their specific needs. This is a great way to gain brand loyalty when expanding your customer base.
If you want your product to stand out from the competition, consider the make and brand. The quality strategy focuses on providing customers with the highest quality product possible. Even though the prices are high, some buyers still purchase the items. Many people will be willing to spend extra money on something they see as a luxurious item if they believe it is a good investment.
Many customers may be looking for a certain product, but the customer service provided by the company selling it will likely be the deciding factor in their purchase. There is a lot of value in having a good reputation with customers when it comes to business. Companies that know how to use this to their advantage can use great services to bring people in. By responding quickly and providing better after-sales service, you can build brand loyalty that will last in any market.
Companies that use proactive product development strategies are more likely to make a technological or scientific breakthrough. Here is what these companies do:
- Invest in market research. Companies that rely on this approach investigate modern market conditions, including customers and their needs, trends, and tendencies, dominant and smaller market players. Such in-depth analysis and research help to gain valuable insights and detect hidden opportunities for new products.
- Invest in research and development. When creating R&D hubs, companies make long-term investments in innovation and technology. This strategy is aimed at making discoveries that can be used in new products to provide its creators with a significant competitive advantage and market leadership.
- Support in-house pet projects. This approach is also called investment in entrepreneurship and means boosting entrepreneurial spirit within the team to generate new ideas and approaches to product development. The strategy is actively used by Google, which allows (and encourages) its workers to allocate 20% of their work time to personal projects that may have no relation to what employees do for another 80% of work time. As a result of such an experiment, Google released Gmail and AdSense, which now bring incredible revenue.
- Make alliances. The strategy implies cooperation with companies from other industries. Such cooperation allows partners to create unique experiences for end-users that are very difficult to replicate. If you need an example, think of an alliance between Uber and Spotify in 2014 when Spotify users with premium accounts could listen to their favorite music in Uber.
- Acquire other companies. The strategy is based on detecting promising (often competitive) companies and acquiring them to make a part of their service/product line. This is what happened to Instagram when Facebook acquired it in 2012.
Companies who use reactive product development strategies focus on changing their products to compete with others in the market, rather than responding to changes. Here is what these companies do:
- Respond to customers’ requests. This strategy can be used to improve an existing product or develop a new one based on the customers’ feedback. The strategy helps to keep good relationships with the customers. However, companies that rely on this strategy may come up with a solution too late.
- Defend against the competition. The defensive strategy puts companies in a position where they have to compromise on some aspects of their offers to keep afloat. Usually, they decrease the price, reduce the functionality of their offers (to keep the price low), invest in advertising more, change their targeting, etc.
- Copy competitors. When a paradigm-shifting product hits the market and becomes paramount, competitors copy the idea and flood the market with clones. The strategy can be very promising if a copy is released in a territory where the original product hasn’t been released yet. Thus, the clone could gain more popularity than the original product.
- Position as second, but best. This strategy is similar to the previous one, however, the original product is not copied completely but is improved or modified. The approach allows companies to detect weaknesses in the original product or use opportunities that the first company missed to release a better product.
Reasons to Create a Product Development Strategy
Some startups refuse to develop product strategies and only use roadmaps. Product strategy has numerous benefits that make it a useful tool for development and business as a whole. Here are some of them:
- Better team alignment during the development process. One of the most common issues that emerge during the product development process is reworked due to misunderstandings. To be able to release a product on time, the team must set up efficient communication so that all team members are on the same page and know where to head. A product development strategy, in this case, is a useful tool to remind the team what’s the point of the final destination no matter what roadmap they choose.
- Risk mitigation. With a product development strategy, a team gets more chances to create a product you want and users need. The strategy should be based on in-depth research of the target audience, market, competitors, etc. This way, you eliminate guesswork and rely on true data.
- Resource-saving. As we mentioned before, product development strategy explains what to build and what not to build. The team doesn’t spend resources on increments that don’t relate to the product development strategy and vision of the product. Such laser focus minimizes the time to market your product.
Now that you product development strategy is and you need one, let’s look at the types of strategies you can choose for your product.
Key Steps When Creating a Product Development Strategy
You can’t just create a product development strategy without knowing what the product will be surrounded by. You need to look into the context the product will exist in before you start working on the strategy. Start with:
A study can help you detect slight changes in customers’ moods and behavior, even if you have created a development strategy for an existing product and know who your customers are.
You need to know your rivals’ offers in order to create a value proposition that sets you apart from them and always puts you one step ahead. The study can help you detect weaknesses in your competitors that you can exploit for your own gain.
A SWOT analysis will help you understand your competitor’s strengths, weaknesses, opportunities, and threats. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. You can use this analysis to help you figure out how your competitors are faring in the market and what you can do to improve your own products.
Market and macro environment research
All of the external factors that could potentially affect your product or industry in the long or short run. This includes economic, technological, political, and cultural factors. This research allows you to detect aspects that can influence your product development strategy significantly, such as:
- New markets where your product may attract new audiences
- Emerging technologies that may influence your users or customers
- The economy with all its factors that can impact your customers’ budgets
- The ever-changing customer needs and behaviors
Form your business model
Companies are generally expected to aim for and achieve financial goals such as making a profit and increasing ROI. To create an effective product strategy, you need to have a shared understanding of how your product or service will generate revenue and help to achieve your business goals.
There are many options for monetizing your product, such as subscription, freemium, advertising, commercial partnerships, etc. The choice of business model should be based on the type of product, customers’ preferences, and market conditions. If your product is new, it might be a good idea to use a strategy where users don’t have to pay to use it (e.g., advertising, partner ads). If your product has a lot of users and is generating revenue, you can implement a model where users pay for it.
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