A product strategy is a high-level plan explaining the business objectives for a product, the target market, and big-picture ideas of the product’s influence.
Creating a product is far more than just stumbling onto an idea and building it. While there have been world-class products that were the product of accidental discovery, these are more the exception than the rule. The more common path to a high-quality product involves using a product strategy. In this glossary article, we define product strategy and how you can use it to guide your product planning.
What This Article Discusses:
What Is A Product Strategy?
A product strategy is a plan that describes how your business will approach a product. It explains how the product will solve problems experienced by its target market. It further describes the impact which a product will have on this market and your business.
A product strategy doesn’t necessarily dive into the nitty-gritty of product development. It’s not a list of features that you want in your final product. Rather, it’s a high-level overview or roadmap for your product. It helps everyone involved with its development stay aligned on goals.
Types Of Product Strategy
There are many different product strategies, each of which has a unique set of approaches and goals associated with it. Here are some of the more common ones that you’re likely to consider for your product.
1. Cost Leadership
A cost leadership strategy aims to minimize the cost of building a product. This strategy may have various long-term goals. You might be trying to reduce production costs to offer the product at a lower price than your competitors, for example. Alternatively, you could invest your cost savings back into your marketing efforts to increase brand awareness.
This strategy works very well for markets where products are mostly identical in price and performance. Exemplary dishwashing liquids and laundry detergents can be named. One example of a cost leadership strategy is in the AmazonBasics line of products. Amazon’s approach is to study its competitors’ prices, then source materials at the lowest cost possible and launch cheaper alternatives.
A product development strategy based on differentiation involves finding different ways (other than lowering costs) for your product to stand out amidst the competition.
For example, one way of differentiating is to offer more features or better performance than other products on the market. Another is to present your product as a premium brand.
One example of this strategy is designer handbag maker Hermès. It differentiates itself as a luxury brand through the use of high-quality materials and the fact that the fashion house exclusively manufactures its products with handmade processes.
Focus product strategies involve targeting a niche, sub-niche, or specific buyer persona within a larger market. If you’re pursuing a focused approach, your product development strategy should aim to personalize products to appeal to these niches or personas’ unique needs. With this approach, your product can gain a loyal customer base, even if you’re launching a product in a large market with lots of big competitors.
A B2C focus strategy involves designing products that appeal to various attributes. Such as geographical location, gender or age demographics, and users looking for particular features. A B2B focus strategy instead takes into account the needs and priorities of your target buyer persona.
For example, TaskRabbit gained significant traction by targeting busy mothers as its initial niche market, then vertically expanding to appeal to a broader market.
Focus strategies can be further grouped into cost focus and differentiation focus strategies. Depending on how you want your product to stand out within the niche you’re focusing on.
How Do You Create An Effective Product Strategy?
Creating a product strategy is important because it prevents any guesswork when it comes to product development. It also gives your entire product team (development, marketing, and sales) a guide that helps keep them aligned on activities and measure progress towards shared goals.
An effective product strategy typically includes three key phases, which we outline briefly below.
1. Set Your Goals
Your product strategy should include concrete, quantifiable goals for your product teams to work towards. During this phase, you can also set milestones to provide an overview of your progress using Gantt charts and decide on key metrics and key performance indicators (KPIs) which will be used to track performance.
2. Identify Your Market
A good product strategy also includes an overview of your target market. This includes identifying target customer profiles or buyer personas, understanding their needs and pain points, and explaining how your product will address them. During this phase, you should also conduct in-depth competitor research and develop a product positioning strategy that takes all of these insights into account.
Many products fail because their makers fail to have a clear understanding of the target market. This means that products end up becoming solutions in search of a problem, rather than the other way around. In other words, they didn’t achieve “product-market fit”.
A robust market analysis grounded in user research and interviews can improve your product’s chances of success by ensuring you have a product-market fit before actually taking a product to market.
3. Develop Your Initiatives
Product initiatives should be built around your long-term, high-level goals for your company. For example, your high-level goal might be to achieve market leadership or disrupt your industry. This big picture will inform the smaller, product-level goals you set to reach those objectives, and the types of initiatives you develop to get there.
For example, if your company goal is to increase revenue by 10% this year, your product goals might include acquiring 1,000 new users by the end of Q1. Your product initiatives are the actionable steps you’ll take to achieve that goal, such as gathering user feedback to identify new opportunities or developing new features based on user feedback.
What Is A Product Strategist’s Role?
Developing a product strategy is similar to the process of creating a business development strategy, only its focus is solely on the product, rather than the organization as a whole.
Product strategists analyze their company’s performance in the context of the market where they plan to launch their product. They can also identify new markets and niches where a product might perform better. To do this, they also need intimate knowledge of the target audience or buyer personas and may conduct user research and interviews to get this information.
Product strategists work closely with product managers, ensuring that they and their team clearly understand the product and business goals. They’re also constantly on the lookout for new opportunities or potential competitive threats which need to be accounted for to maintain product growth in the long term.