All we hear is the increasing rate of new products being built and introduced in the market. But do all of them succeed?
According to a survey by Harvard, 80% of new products fail every year. There are many reasons like no market need, lack of customer understanding, and so on, causing them to fail.
If you dig deep every reason, all of them will bring you to one particular point— ignoring product strategy.
To develop a product, introduce it in the market, and ensure its continued success, product strategy plays a key role.
Here, we will see how to create an effective product strategy for your product success.
What is product strategy?
Product strategy is the plan that defines how your product should be developed to achieve the business goals. Not all plans can be called a strategy. For a plan to qualify as a strategy, it should be able to deal with the contingencies that pop up during the journey.
Product vision— > Product strategy— > Product roadmap
While the roadmap and strategy are both plans in general, they have a very big difference. The plan in the roadmap will be for building a feature, while a plan in the product strategy will be for attaining the company goals.
A good product strategy should translate goals from the vision that can be executed using the roadmap. To know the scope of the product strategy, let’s look into what questions it answers.
- Who your customers are?
- How will your product solve their problems?
- What makes your product stand out among the competitors?
- What are the goals the product needs to achieve in its entire lifecycle?
Why do you need a product strategy in place?
Now that we know what a product strategy is, we should jump on to the question “Why do you need one?”
Let’s explore some of the reasons here.
- 1. Make better decisions
- As you start developing a product, unprecedented challenges arise along the way. During such times, you might need to alter the plans accordingly. Uncertain times bring chaos and that’s when your product strategy comes into play.
- Referring back to the strategy document will help you clear the doubts, re-examine the goals and regain the clarity to make better product decisions.
- 2. To avoid distraction from unwanted things
- Product strategy defines business objectives and actions to fulfill them. So when you create a product roadmap, you will have a clear picture of what needs to be done. Moreover, it will help you distinguish between necessary and unnecessary actions.
- This saves the time that might be wasted on unwanted tasks. Product strategy will keep all the functions adhered to the goals.
- 3. Aligning workflows
- As a product is being developed multiple teams are contributing to this whole process. Every team has an individual set of tasks and goals.
- These are the derivative of the business objectives. In addition to knowing the individual goals, all the team members should be aligned to the big picture. This way, a smooth and proper process is ensured.
To help you in bringing the teams together towards a common vision, product strategy will be of great help.
Elements of an effective product strategy
The taste of food depends on two things— the ingredients and the cooking process. Similarly, for the product strategy to be good, it’s important that you add the right ingredients and cook it up (build) properly. We’ll discuss the ingredients, i.e. the elements that make up a strategy.
The product vision defines the future of the state of the product. To be more clear, it conveys what the company wishes to accomplish with the product in the future.
Target Market and Competitors
Market analysis will help you identify the different user personas, their purchase behaviors, lifestyle choices, and needs. This will help you tailor your product for different customers.
Another part of market research is competitor analysis. A detailed study on who your competitors are, how their product is sought in the market, and gaps in their offerings. Studying the competition will also provide great insights into product positioning and market trends.
A product is created to solve the problem of your target users. But there is another purpose the product needs to fulfill— the business goals. A product must not only benefit the users but also the business. The business benefits can be revenue, brand establishment, etc.
Product features and differentiators
It’s the features of your product that determine the success of your business. From marketing and acquisition, to retention, all your efforts to grow your business, rely on the product and the value it provides.
So it all comes down to the features your product contains and how they stand out in the market, amongst the competition. Determining the features that will effectively solve the user problems is crucial.
Steps in building a successful product strategy
Now that we have seen the elements, it’s important to know how to develop each of them and consolidate them together to come up with an effective product strategy.
- 1. Define your product vision
The strategy, roadmap, and backlog all trace back to the product vision that acts as a foundation. Down the line, everything is based on the vision and so you must define it with consideration.
Let’s see the example of a vision statement from Google
“To provide access to the world’s information in one click”.
To define the vision statements there are a few templates.
For (target customer) who (statement of need or opportunity), the (product name) is a (product category) that (key benefit, a reason to buy).
Unlike (primary competitive alternative), our product (statement of primary differentiation).
To [verb: empower, unlock, enable, create, etc.] [persona] to [benefit, goal, future state].
But there isn’t a predefined way to write your vision statements. You can adhere to the way you like.
This product vision statement should have underlying motivations (here, driving the team towards bringing as much information as possible online), achievable, and concise. It must be linked to the business goals.
- 2. Describe your ideal customer
You need to have proper knowledge of the market you are targeting and the customers your product will be serving. A product might address 2-5 user personas whose needs and expectations differ.
To describe your ideal customer you need to be aware of the following:
- What are Customer characteristics?
- Demographics (age, location, etc.)
- Psychographics (Lifestyle & activities)
- Behavioral nature (purchase decisions)
- What are customer problems and challenges?
- What are customer expectations?
- What according to them is value?
When you fill out the answers, you will have a clear picture of your ideal customer and what you will need to do to satisfy them.
- 3. Identify your business goals
Having clear business goals in place can only help you measure success through defined metrics. An example of a goal can be “Increase the number of customers by 50% in 3 months” or “Improve brand awareness in a particular region by the end of a quarter”. These goals affect various functions related to product development.
How to identify or define your business goals? Here are the steps to do it.
- Conduct a SWOT (Strengths; Weaknesses; Opportunities; Threats) analysis. This helps you analyze the present condition and identify the areas to improve.
- Come up with goals based on the SWOT analysis.
- Review them with your team and select the best ones.
- Make goals SMART (Specific; Measurable; Attainable; Relevant; Time-bound)
- Define KPIs to measure their success.
- 4. Come up with Initiatives
Product initiatives are the large objectives in conjunction with the product goals. They need to be implemented to achieve the business goals.
Initiatives are broken down into smaller actionable items which are used in Roadmaps. These initiatives are anything related to features, products, and platforms.
Let us consider your product goal is to improve the quality of the learning environment, an initiative associated with it can be, “Provide faculty with best training and technology”.
- 5. Set key differentiators
The market is filled with competition. For any product, there are 4-5 alternatives. “What makes your product stand out?” To know this you must define the differentiation factors. These factors govern your value proposition and unique selling point.
Product differentiation shows the potential customers what you can offer them that your competitors can’t. One important thing about differentiation is that it is effective when spoken in terms of benefits to users. Here are the general types of differentiations
The product offerings are the same and the choice is based on personal preference. For ex: Coca-Cola vs Pepsi
Differentiation happens by considering one factor. For example, if two products have the same quality, the choice is made based on the price.
In this type, differentiation occurs considering a number of factors combined.
You can set your differentiators based on one of these factors that mainly contribute to differentiation.
- Product quality
- Customer service
- Channels of distribution
- Marketing efforts
- 6. Evaluate
Now that you have a defined product vision, goals, and a clear understanding of the target users in place, you have to work on framing the strategy. This must be done in collaboration with the teams. When your product strategy is ready, you can use it for creating the roadmap.
But this implementation cannot happen instantly. You will have to evaluate it to find if it’s clear enough. Also, you need to keep reviewing your strategy from time to time.
Types of Product strategy
Product development is a process that spans from ideation to marketing. This process poses a variety of risks. To reduce and tackle them, development strategies are used. Development strategies can be used for
- Developing a new product for existing markets
- Improving an existing product
- Developing a new product for a new market
Product differentiation is making your product unique to the eyes of your customers. The differentiation strategy defines the approach you will be taking to make your product distinct and notable. Your product differentiation strategy can focus on either the functional aspects (developing them) or the way is it marketed. Sometimes, they both go hand in hand.
Differentiation Strategy comes into the picture when you decide the features of your product and develop your value proposition. You can also adhere to it when you are planning for product positioning in the market.
A good product differentiation strategy focuses on the target market and should put forth what the customers think. The customers should be able to resonate with it. It must enable you to create a competitive advantage in the market. Your strategy should be able to match what you put forward to distinguish yourself and how your customers will perceive it.
How much you charge for your product has a big say in your product adoption and success.
Price is influenced by some factors like business goals, target market, demands & trends, competitor pricing, etc.
Without a strategy in place, it gets difficult to determine the right prices for your product. Product pricing strategy helps you in deciding a price where you can attract customers without compromising on your profit margin. There are several predefined pricing strategies like penetration pricing, skimming pricing, etc, that you can choose from.
A method for identifying potential niches followed by understanding the needs and users to come up with a product suited for them. This strategy usually advocates market segmentation based on geographical location, type of customers, or product line. Businesses that wish to become product leaders without too many competitors, can try venturing or expanding into a niche.
One popular real-life example of the ‘focus strategy’ was the coke introducing ‘Diet Coke’ for diabetes patients.
Product strategy example
Product vision: “A cultural platform where professional creators can break free of medium constraints and where everyone can enjoy an immense artistic experience that enables us to empathize with each other and feel a part of a greater whole”
Competitors: Apple, Amazon, Google
Customer need: When people hear a song or tune, they want to share it with friends.
Spotify’s move/strategy: Integration with Facebook(2011) allowing shared playlists, enabling users to see what their friends listen to.
This strategy reduced the friction in the signup process, while also adding competitive advantage and resonance with users. As a result, Spotify gained 1 Million new users, in just 4 days.
Tools for building a product strategy
To ease the creation and validation of strategy, there are several product strategy templates/tools. Let’s have a glimpse of a few of them here.
Created by Roman Pichler (the founder of Pichler consultancy), the product vision board helps you to put the elements of a product strategy together. The board comprises the following sections
- Target group
- Business goals
After filling out the sections, you will be able to compare every component and then draw out your product strategy. You can use this board not just for yourself, but also for communicating your idea to others. In addition to that, you can also use the product vision board for testing your strategies as well. For this too, Roman provides a methodology as seen below.
Product strategy canvas
Designed by Melissa Perri (the CEO of Produx Labs), the product strategy canvas is used for building a product strategy putting together these following elements, instead of the usual ones
- Current condition
- Target condition
This helps you focus on one challenge and the desired solution at a time. So you might need several of these canvases to address the number of issues and framing your product strategy. Product strategy canvas also acts as an effective communication tool.
Strategy Kernel Canvas
This tool is created by Chris Butler, helps in putting down the inputs needed for creating a strategy, and enables you to have a good discussion with it.
This one is a little different from the remaining two. This covers the past, present, and future concerning the strategy. The actual strategy will come in the present area. It’s divided into the following parts
- History- What did the company/product try before? What led them here?
- Diagnosis- The problem analysis
- Guiding policy- The approach to overcoming the problem
- Bets- Proposals that connect the policy and actions
- Action/Process- Steps needed to achieve the policies
- Success/Survival- Metrics and KPI to measure your success. Defining what is a success.
A strategy map is a great tool for communicating the product strategy across teams. A strategy map consists of four perspectives related to the strategy
- Internal Business processes
- Learning and Growth
They are placed on four rows which are for writing the objectives of each. These objectives are then linked together as shown below.
Tips for making your product strategy effective
Include product evolution
A product strategy isn’t something that is kept untouched. A product goes through various stages at different points in time. Sticking to the same initial strategy is not a way to win. What worked during the introductory period will not work for the growth period. Everything from business goals, initiatives to customer behavior changes as you advance in the product life cycle.
Constantly altering your product strategy only will help you secure a good place in the ever-changing market.
Don’t have a fixed mindset
As you work on product strategy, try to generate as many plans as possible. Don’t incline towards the first idea that came up. All ideas and strategies have two possibilities— to succeed or to fail. Assessing them by asking questions like “Will this help us realize our business goals?”, “Will this approach help in creating a satisfying solution for the end-users?” can help you perfect your product strategy.
Don’t be afraid to fail with ideas. If an idea fails, you will come up with more feasible ones going forward.
Focus on problems
An approach that prioritizes customer problems can help you arrive at an effective strategy. When you have the problem as your focus rather than the solution, you will keep looking for better ways to solve them.
Moreover, only when you have clarity on the problem, you can come up with apt solutions.
Collaboration is the key
Product strategy should be relevant to every team in the organization. To achieve this, you need to loop in different teams as you create the strategy. Only with a variety of people, different perspectives come into play.
The collaboration will help you with a 360° analysis of problems concerning the internal teams as well as the customers. This enables you to have better problem visibility.
The product strategy dictates the work of your entire product team.
Every step in product development requires analytical thinking, frequent changes, and improvements. Spending your time checking if it can be implemented (aligning with business goals, customer needs, etc) every time is a tedious task. Product strategy makes this process easy.
All major product decisions are made referring to the product strategy.
With huge power comes huge responsibility. Developing your product strategy needs care and utmost attention. Any loophole in product strategy will cost you a lot.
If you are unsure about doing it yourself, seek help from one of the many digital product agencies present.