The key elements of a successful product strategy
Building a successful product is like walking a tightrope—on one hand, your goal is to meet user needs. But at the same time, you’re also under pressure to support business objectives and keep multiple departments aligned. Finding the right balance isn’t easy—but with a data-driven product strategy, you can guide your teams’ decisions effectively.
Key takeaways
To create a successful product, you need to find market opportunities, understand target audiences and find ways to solve problems for them.
It sounds simple in theory—but in reality, it’s a complicated process that involves a lot of coordination. What’s more, product teams must be ready to adapt and change gears as the market itself evolves.
In this blog, we’ll explore how you can use a product strategy to:
Keep your teams aligned with your product vision, based on an understanding of your market and user needs
Tailor product development around your business and product, while being flexible enough to adapt to changes and new information
Use data to understand which digital engagement norms to follow, how to differentiate your product from competitors and how to de-risk when taking a new approach
Translate your product strategy into an actionable development plan by setting clear goals, defining KPIs and creating goals for your teams
Let’s jump in!
What is a product strategy?
A product strategy is a plan that incorporates your user needs, market opportunities and overall vision. It gives everyone in your business a clear picture of what you’re building—along with how and why you’re building it.
This plan isn’t just an idea for a product. It’s a high-level guide that supports the entire process of product development, from early planning to launch.
So what should your strategy include? The answer will vary from company to company, but it makes sense to start with a product strategy framework.
What is a product strategy framework?
A product strategy framework outlines the information, objectives and processes you need to consider when making product decisions.
It ensures you’re considering all the different moving parts involved in building a product, such as:
Market analysis
Product vision
Target market
Business objectives
User needs
Distribution channels
Development resources
Pricing strategy
Product roadmap
Metrics/measuring success
By formally documenting these aspects of your product strategy, you can make better decisions and ultimately create a higher quality product.
For example, imagine that you’re making decisions about a dating app you’re building:
A market analysis reveals that over-40s are underserved by dating apps
Research into user needs shows that over-40s want to spend less time swiping irrelevant profiles and more time talking to like-minded people
You therefore create a product roadmap that focuses on building AI capabilities that “match” app users based on personality traits
You know that over-40s are less likely to use social media, so you build the app to be available through other distribution channels, such as content marketing
This is obviously a very simplified example—but it shows how different aspects of the product strategy come in handy when making decisions.
Product strategy framework vs. business model
It’s easy to confuse product strategy frameworks with business models because they’re both concerned with how a product will serve customers.
However, a business model is a much broader perspective on what the business does. It considers the overall business strategy, how the business delivers value to customers, and what its different services and products entail.
Your product strategy is actually a sub-component of a business model. It’s concerned with the development, positioning and management of an individual product or product line.
A product strategy framework focuses on:
Defining your product's unique value proposition
Mapping product capabilities to your target audience's needs and preferences
Identifying opportunities to differentiate the product from similar products on the market
On the other hand, a business model outlines:
How the company is structured and staffed
How it generates revenue delivers value to customers through products and services
Which partners, resources and channels it uses to reach customers
The overall strategic direction of the business
Both of these are important. However, most companies will have a business model planned (or already functioning) before they create a product strategy.
The importance of having a product strategy
An effective product strategy helps your team make product decisions that reflect your resources, user needs and overall product vision.
It’s vital for keeping teams aligned and ensuring that the product meets your business goals—even as the market changes.
Let’s go back to the earlier example of a company building an over-40s dating app. Imagine that, during the development process, a new AI technology becomes available that would improve the app’s matching capabilities.
The company can look at the product strategy to decide whether the technology:
Is affordable according to the current pricing strategy
Meets the user needs identified
Can be deployed in the app without disrupting the product roadmap
With a product strategy in place, the company has an effective framework for making decisions like this throughout the product lifecycle.
7 benefits of creating a product strategy
1. Team alignment
Product strategies enable collaboration throughout the project. They ensure that everyone involved, from marketers to engineers, has a shared vision of the product’s value proposition, target market and differentiators.
2. Clear prioritization
A well-defined product strategy enables your team to focus on the most crucial aspects of your product. It allows you to create a product roadmap that supports your goals and user needs, so you can allocate resources effectively.
3. Improved decision-making
Product strategies act as a foundation for making decisions in line with long-term goals, helping the company to avoid short-term distractions.
Many businesses will build product strategies around data they gather on user behavior, or gather feedback on customer desires and preferences. This can help you make better decisions around feature prioritization, marketing strategies, pricing and more.
4. Enhanced customer focus
Research shows that over six out of 10 businesses attribute the success of their top projects to the integration of customer feedback in their decision-making process.
Product strategies typically outline the needs and profiles of the target audience. This assists the company in developing features that address specific pain points and fills gaps left by competitors.
5. Greater competitive advantage
Product strategies provide a framework for differentiating the product from competitors. By assessing existing products against user needs, businesses can find opportunities to differentiate their features. And by establishing a unique selling proposition that positions the product strategically in the marketplace, businesses can stand out from the competition.
6. Improved ability to manage risk
Businesses often need to switch courses when developing their products or services, reacting to industry trends or evolving customer demands. With a well-developed product strategy, they can make informed decisions on how to adapt without increasing the risk of failure.
This is because product strategies involve analyzing the market and gathering data around customer needs, preferences and pain points. By doing so, businesses reduce the risk of developing products that don’t resonate with their target audiences.
7. Increased likelihood of market success
Product strategy guides the business in developing a product that solves user pain points and is positioned well against competitors. This helps the business to achieve product-market fit and ultimately create a product that wins customer loyalty and satisfaction.
Key components of an effective product strategy
Let’s explore the essential elements that contribute to building a powerful and well-rounded product strategy.
Product vision. Your product vision outlines who your product is for and what problems it solves. Write a unique value proposition (UVP) explaining why your product is the best possible solution for your ideal customer.
Target market. By targeting a specific market, you can perform the right research to understand user needs, preferences and decision-making processes, along with the competitive landscape.
User needs. To build a user-centered product, you need focused insights on user needs, preferences and pain points. Gather this data via usability testing, product analytics and voice of customer (VoC) programs.
Competitive analysis. Research other products in the market to find out what their features are, how customers perceive them, and how you can position your product against them.
Business objectives. Ideally, you should set specific business goals relating to the product. For example:
Gain a market share of 10% within two years
Acquire 1,000 active users within six months of launch
Achieve monthly recurring revenue of $10k from the product
Pricing strategy. Do you want to charge a premium fee for your product or a lower fee that offers better value than competitors? Consider value delivered, competitor pricing, customer willingness to pay and your profitability goals.
Distribution channels. Your distribution channels will determine how you reach customers after launch. The channels will also affect your marketing strategy, and potentially, the platforms and products your product integrates with.
Marketing strategy. Your marketing strategy will be intricately linked with the product you create and the audiences you want to reach. Your product strategy should therefore include a basic strategy for promotional activities, marketing activities and product messaging.
Development resources. Your development capabilities will be determined by the time, personnel and budget you have available. Quantifying your available resources will allow you to make informed decisions when considering changes to your strategy.
Product roadmap. After your initial launch, you will want to continue adding features, capabilities and integrations to your product. Your roadmap is a sequence and timeline for development, prioritizing the features based on user needs and your available resources.
Performance metrics. To monitor progress toward your business objectives, you need to track key performance metrics. For example, this could include user acquisition rate, retention rate, or monthly recurring revenue.
Check our blog on essential product metrics to find out which ones will be most relevant to your goals.
What is the difference between a product strategy and a product vision?
The product vision is your destination—the “what” and "why" of your product. It's the impact you want to make in the market or the change you want to bring about with your product.
The product strategy, on the other hand, is the roadmap that gets you to that destination. It's the "how"—the specific steps and tactics you'll use to realize your vision.
The product vision is usually stable and long-term, while the product strategy can evolve as you learn more about your market and customers.
Types of product strategies
Businesses can choose from a variety of product strategies based on their market, their product and their company's strengths:
Differentiation strategy: This involves creating a product with unique features or benefits that set it apart from the competition. For example, Tesla differentiates its electric cars with cutting-edge technology and sleek design.
Cost strategy: Cost strategy is about intentionally pricing your product in a way that differentiates it. For example, if your business targets small business owners, you might intentionally choose a low price point that offers more value than competitors.
At the other end of the spectrum, you might charge a higher price, positioning your product as a premium option.
Quality strategy. Products can often stand out in the marketplace by offering a similar feature set to other products, but with a higher quality standard. For example, guitar brand Paul Reed Smith is known for its hand-made instruments, made with the finest quality woods and electronics—and a high price point to match.
While following a quality strategy may be harder for digital products, it’s still possible. Many SaaS platforms position themselves as high-quality through their marketing, support services, and integration of AI technologies.
Focus or niche strategy: This strategy involves targeting a specific segment of the market. For instance, Ramp, a business credit card and SaaS platform, has carved out a niche by focusing on the unique needs of startup founders and business people. With no late fees, foreign transaction fees, or card replacement fees, Ramp is designed with the financial realities of startups in mind.
Service strategy: Businesses offering similar products to other companies can appeal to customers by offering a superior service. For example, an e-commerce company might offer live chat, fast delivery and free returns.
Product strategy examples
Let's look at some more real-world examples of product strategies. These companies have each taken a different approach, but all have found success in their respective markets.
Apple: Apple's product strategy focuses on differentiation and quality. With its focus on innovation, simplicity and high-quality design, Apple’s products are almost considered status symbols.
Walmart: Walmart's product strategy is centered around cost leadership. They aim to offer a wide range of products at the lowest possible prices, attracting customers who are looking for value.
Amazon: Amazon uses both cost and service strategies. The company is known for great prices, fast delivery, great customer support and an effortless purchasing process.
10 effective product strategy frameworks and models
Leveraging a proven framework can streamline the execution of the product strategy. There are a plethora of popular frameworks available for companies to use.We've rounded up 10 common product strategy frameworks and models below.
1. Lean startup methodology. The lean methodology is considered an efficient and hyper-practical strategy for developing processes. It centers on building a minimum viable product (MVP), testing it with customers, gaining feedback and improving the product in iterations.
2. Kano method. The Kano method is named after business consultant Noriaki Kano. It helps businesses build user-centered products by categorizing customer requirements into five categories: basic needs, performance needs, excitement needs, indifferent needs and reverse needs. Businesses can use this system to understand customer desires and prioritize feature development accordingly.
3. OKR method. The OKR method was created by Google and stands for objective and key results. It involves setting objectives for the project and then tracking how development progresses through smaller milestones toward those objectives. By following the OKR framework, teams can stay aligned on project goals while objectively evaluating their results and processes.
4. Ansoff model. The Ansoff model, often referred to as the product and market expansion grid, is used to help companies identify growth and expansion opportunities while analyzing associated risks. It offers four strategies that support this: market penetration, product development, market development and diversification.
5. The Boston Consulting Group (BCG) matrix. Also known as the growth/share matrix, the BCG matrix is designed to help with long-term strategic planning and decide where to invest for the future. Companies use it to evaluate the growth potential and strategic importance of different products and features within a product line.
6. The SWOT analysis. A SWOT analysis is extremely valuable for product managers who are looking to evaluate and improve their products and features. This framework looks at the strengths, opportunities, weaknesses and threats. A SWOT analysis gives product managers a comprehensive understanding and helps identify areas for improvement. By regularly conducting a SWOT analysis, product managers can remain competitive and stay ahead of the competition.
7. Product lifecycle. The product lifecycle framework helps companies understand the different stages that a product goes through. The lifecycle consists of the following stages: development, introduction, growth, maturity and decline.
8. Working backward (the Amazon method). Amazon is credited with developing the working backward method, where product managers are encouraged to start at the final step of releasing a product. The product team’s first step is to write an internal only press release announcing the product. This helps teams determine if the product is worth building. Using this method also helps product teams package the product idea up to present it to leadership, the DevOps team and eventually customers.
9. Focus strategy. A focus strategy is an approach to building a product or features to appeal to a niche market. This enables product teams to focus on a specific audience instead of a broader one that tries to appeal to everyone. For example, a bank may choose to provide specialized features on their app to a specific age range about education loans.
10. RICE scoring model. This model helps product managers determine which products and features to put on their roadmaps by scoring the items according to four factors: reach, impact, confidence and effort.
Translating a product strategy into an actionable development plan
Once you've defined your product strategy, the next step is to translate it into an actionable development plan. Here’s how:
1. Set clear goals and tasks: Your development plan should include clear, measurable goals that align with your product strategy. Break these goals down into clear tasks for each team, covering planning, development, launch and post-launch evaluation.
2. Allocate resources and create collaboration procedures. Decide which teams and budget will be allocated to the tasks you’ve outlined. Effective collaboration is key, so create operation procedures that will help your teams evaluate progress and stay aligned on goals.
3. Monitor KPIs: Choose the most relevant KPIs for each team. Pre-launch could include progress toward development milestones. Post-launch KPIs could include essential metrics like annual revenue and daily active users.
4. Evaluate and iterate. Both pre and post-launch, create processes for gathering feedback from users and monitoring the market for changes. Schedule regular evaluation sessions and determine how you can iterate your product to adapt to user and market demands.
A checklist for creating a winning product strategy
Use this handy checklist to ensure that your product strategy maximizes your chances of success:
✅ Understand the market: Start by gathering as much information as you can about your market. Who are your customers? What are their needs and preferences? Who are your competitors, and what are they offering?
✅ Carefully define your product vision: Agree on what problem your product solves, who it’s for and why it’s the best solution for your target audience. Everything else you do will flow from your product vision, so it’s arguably the most important aspect of your product strategy.
✅ Leverage data: Data can provide valuable insights into what pain points they have and how their needs are currently underserved. Digital experience intelligence solutions like Glassbox can help you collect and analyze this data to inform your product strategy.
✅ Align your team: Make sure that everyone on your team understands the product strategy and their role in implementing it. This will ensure that everyone is working towards the same goals and can help prevent miscommunication and confusion.
Remember, a winning product strategy is not a one-size-fits-all solution. It should be tailored to your business, your product, and your market. And it should be flexible enough to adapt to changes and new information.
Transform your product strategy into a winning game plan with Glassbox
Understand your customers' digital behavior, enhance their experiences and set your product apart. Learn more about how Glassbox can help you here.
FAQs
Q: What is a product strategy?
A: A product strategy is a high-level plan that outlines the direction and vision for a product over time. It guides the team from the ideation phase, through development, and to the product's launch. It's a crucial tool in the world of product management—especially in the era of data-driven decision-making.
Q: Why is a product strategy important?
A: A product strategy is important because it provides a clear direction for the team, aligning everyone's efforts toward the same goal. In the context of data-driven product management, it helps in understanding digital engagement norms, differentiating your product, and de-risking new approaches.
Q: What are examples of product strategies?
A: Examples of product strategies can vary widely depending on the company and the product.
Some examples include:
Freemium strategy: This is a cost strategy that involves offering a basic version of the product for free while providing premium features or advanced functionality at a cost. Example: Dropbox offers free cloud storage with limited space and additional paid plans with expanded storage and enhanced collaboration features.
Vertical integration strategy: This is a service and differentiation strategy that involves acquiring or developing complementary products or services. For example, Adobe's Creative Cloud suite integrates various creative tools like Photoshop, Illustrator and InDesign, providing a comprehensive solution for digital content creation.
Q: What is a product strategy that a product owner can use?
A: A product owner can use a strategy focused on solving specific customer problems. For example, in the digital business world, this could involve creating productivity software that helps remote teams stay organized and collaborate effectively.
By understanding the challenges faced by remote workers, the product owner could develop a user-friendly solution that simplifies work processes and enhances productivity.
Q: How do you create a product strategy framework?
A: Creating a product strategy framework involves:
Analyzing the market
Defining your product vision
Setting clear goals and tasks
Allocating resources
Choosing KPIs and evaluating progress
In the era of data-driven product management, this framework would also include a plan for how to leverage data to inform decision-making and improve the product over time.
