So you’ve got an idea for a new product. But do you have a solid understanding of how it fits into the market? Are your competitors making something similar? Do you have confidence that your audience actually wants or needs this product? These are all questions to answer before going into production. What emerges from your answers is the first step toward a product strategy.
What is product strategy?
A product strategy is a plan that answers the questions “what,” “why,” and “how” a company will sell their product over a period of time.
- What products will a company create?
- Why does the company believe these are the right products for its audience?
- How will the company bring those products to market?
Product strategies apply to both a company’s product portfolio as whole and to individual products. The objective is to create a unique value proposition—a compelling reason for the target audience to buy the product.
Product strategy can encompass every aspect of the product development process, including:
- Research and development
- Quality control
- Pricing and sales
- Customer service
Five types of product strategies
Different product strategies emphasize different elements of the development process. A successful product strategy might focus primarily on one of these categories, such as low prices (cost strategy) or reliable supply chains (turnaround strategy). However, companies can also pursue multiple strategies at once, such as winning new customers with unbeatable prices while promoting brand loyalty with responsive customer service.
1. Cost strategy
A cost strategy attracts customers by offering the best prices in a product sector. That might mean offering the lowest prices, perhaps by charging 5% less than the next-best competitor. A cost strategy may also entail offering more significant value than other products of similar quality.
Warby Parker, for example, which sells glasses, has built a strong reputation for offering high-quality products at a fraction of the cost of traditional brick-and-mortar retailers by cutting out the middlemen and selling directly to consumers through their online store.
2. Quality strategy
You can win market share with a quality strategy by delivering a unique, reliable, well-designed product. Your product roadmap might involve passing higher prices on to customers with the understanding that the steeper cost is worth it. For instance, consider the quality difference between a pair of handmade leather shoes and those made in minutes on a mass-production assembly line. The value proposition of the handmade leather shoes might be that they’re more comfortable and last longer.
3. Service strategy
A service strategy gives priority to responsive customer service. You may ask your customers to compromise on price and selection in exchange for first-rate interactions with your company. Think of American Express. Although its credit cards can be pricey and fewer retailers accept them than leading competitors, AmEx maintains its customer base by offering impeccable cardholder service and perks.
4. Differentiation strategy
In a differentiation strategy, you offer products and features that no other competitor offers. Think of a lawnmower with a proprietary mulching blade, or a cooking spatula with a patent-protected nonstick coating.
5. Focus strategy
With a focus strategy—also known as a market-oriented strategy—you gain leverage by developing product and marketing campaigns targeting a specific audience. Though your products may not appeal to the general public, they can win over the narrower markets you select.
As a reference point, think of Manscaped, which offers grooming products specifically for men. Its focus strategy cuts out more than half the population, including women and nonbinary people. However, it allows the company to explicitly cater to the grooming needs of people who identify as men and effectively communicate with its target audience. For instance, the company advertises heavily on sports podcasts with primarily male audiences.
Three ways a product strategy can help your business
Solid strategic planning turns good ideas into success stories. It keeps new product initiatives focused and helps development teams set realistic expectations. Here are three key advantages of committing your business to a product strategy:
1. Win a target market
No product can be all things to all people. By honing in on a specific market vision and tailoring the offering to meet particular needs and preferences, you can focus your product development on winning a specific group of potential customers.
2. Make the most of your resources
Whether running a small business or a giant corporation, you’re bound to find yourself competing for resources, from supply chains to human talent. A coherent product strategy lets you maximize the resources you have. That way, materials, machinery, and human capital go toward the product initiatives that show the most potential.
3. Understand your product
You learn more about a product by trying to sell it. Insights that may not have occurred to the engineers who built the product may instead come from the marketing teams and sales teams that are offering the product to the general public. As your team members study the product and its target users, everyone learns more about its strengths and weaknesses. This knowledge will help you craft a strategy roadmap for making improvements, devising marketing campaigns, and pricing the item appropriately.
How to create a successful product strategy
A successful product strategy requires a vision and goal-oriented tactics that align with your product roadmap. A clear, focused product strategy can ensure you stay on track and meet your goals. Otherwise, it can be easy to become sidetracked or to spread resources too thin, which can lead to ineffective execution and ultimately hinder the success of your plan.
Elements of a good product strategy
Here are four elements that often set a sound product strategy apart from an ineffective one:
- Clarity. The most effective product strategies are rooted in a clear understanding of what the product or product line does and does not offer. They also have a clear plan for bringing the product to market and what will constitute success.
- Specific and measurable goals. A strong product strategy sets goals for a product’s growth and development. As a baseline, your product strategy should have specific, measurable, attainable, relevant, and time-bound (SMART) objectives that align with your overall business strategy. You might aim to capture a particular share of a target market, reach an annual sales target, or expand to specific regions, states, or countries.
- The right tactics. A successful strategy hinges on execution with the right tactics. To achieve a strategic goal of reaching a new market segment, you might deploy tactics such as influencer marketing campaigns or buying new search keywords.
- Adjustments. Product strategy requires a degree of humility and an ability to adjust your process according to real-time data. On a macro level, you must continually assess whether your target audience views your offerings the same way you do. On a more granular level, you may have to tweak product designs, prices, or marketing campaigns to meet the goals you laid out earlier in the process.
Product strategy FAQ
What is an example of a product strategy?
Imagine an entrepreneur who believes their scissors could dominate the world of office supplies, thanks to superior design—a quality-based product strategy. Furthermore, they decide that while their competitors make many types of office supplies, they will exclusively manufacture scissors. This is a focus-based product strategy. By coalescing around these two strategies—quality and focus—the company has a clear plan of attack to win market share.
What are the different types of product strategies?
Five popular product strategies are:
- Price strategy
- Differentiation strategy
- Quality strategy
- Focus strategy
- Service strategy
Each identifies a specific way to stand out from the competition. You may combine these strategies, such as offering the lowest price and the best customer service.
What are the four major elements of a product strategy?
The four major elements of a product strategy are:
- Establishing a vision
- Setting goals to achieve your vision
- Implementing initiatives that pursue those goals
- Making adjustments to improve the process