Product strategy

Last updated January 27, 2024

Product strategy defines the high-level plan for developing and marketing a product, how the product supports the business strategy and goals, and is brought to life through product roadmaps. A product strategy describes a vision of the future with this product, the ideal customer profile and market to serve, go-to-market and positioning (marketing), thematic areas of investment, and measures of success. A product strategy sets the direction for new product development. Companies utilize the product strategy in strategic planning and marketing to set the direction of the company's activities.^[1] The product strategy is composed of a variety of sequential processes in order for the vision to be effectively achieved. The strategy must be clear in terms of the target customer and market of the product in order to plan the roadmap needed to achieve strategic goals and give customers better value.

Goals of product strategy

Product strategy aims to provide context for what the product and business intends to achieve, the target customers and market, and the work to accomplish.

Vision provides the big picture of what the company is trying to achieve. Without vision, it will be difficult for stakeholders to understand its direction and it will lack connection to a broader picture.

Execution is defined by the product roadmap. While the product strategy outlines the elements of the product and the company's target market, the product roadmap explains how the vision will be executed

Big picture context provides the background of each feature and how it relates to larger goals. It also include details in which certain features will be built, and in what order.

Initiatives are the high-level efforts that help achieve goals. For example, performance improvements and expansion of markets.

Elements

Design - What is the target product market? What design feature(s) will be added that makes it stand out from other companies? For example, attractive product design draws more customers towards the product.
Features - What features will be added to increase the benefits offered to the target market? How does the product differ from the other competing companies products? "Marketing is not about providing products or services, it is essentially about providing changing benefits to the changing needs and demands of the customer" Product features differentiate amongst competitors.
Quality - A product's quality should be consistent to make sure that the product meets the expectations of their target market. Thus, strengthening the firm's reputation.
Branding - Brands have the power of instant sales and they convey the message of confidence, quality and reliability to their target market. It is also used a tool for companies to differentiate itself from their competitors.
Target Market - Identify who is being sold to. Who should the product appeal to? How will customers view the product in the marketplace? "The organization's marketing task is to determine the needs, wants and interests of target markets and to achieve the desired results more effectively and efficiently than competitors, in a way that preserves or enhances the consumer's or society's well-being."^[2]
Positioning - How does the company plan to position its product in the market? Different factors will need to be considered when the product is positioned in the marketplace as it will impact consumers perceptions about the product and brand. For example, how to price the product and the quality of it.^[3]

Process

Generating - Using SWOT analysis (strengths, weaknesses, opportunities, threats) and current market trends to generate ideas. The company may want to develop several different roadmaps to suit different types of projects along with risks management involved.
Screening the Idea - Set specific criteria for the product ideas in terms of if it should be continued or diminished. Will customers in the market benefit from this product?
Testing the Concept - Using quantitative or qualitative responses to assess consumer responses to the product idea before introducing the product to the marketplace.
Business Analytics - A detailed marketing strategy will be included in terms of whether the product will be profitable in the marketplace. This will also include the reactions from the target markets and product positioning to evaluate if there's demand from the market.
Marketability Tests - Prototype product will be introduced followed by a test of the product along with the proposed marketing plan. Modification can be made when necessary.
Technicalities and Product Development - Prototype will be created in the marketplace allowing exact and real life investigations, product specifications and any manufacturing methods. This stage also includes the process of logistics plan, supplier collaboration, engineering operations planning and quality management.
Commercialize - Product will be launched into the market alongside advertisements and other promotions.
Post Launch Review and Perfect Pricing - Review of the market performance in order to assess the success of the project on the entire product portfolio. This stage will also include product costs and the forecast of future profit and revenue, differing price and using competitive technologies for competition in the market. Value chain analysis will be useful for this stage of the process.

Pros

Basis - The product strategy forms the basis of implementing a product roadmap. It allows the company to manage and measure for success, minimize the risks and to focus on a specific target market. ^[4]
Creates value - A strategy that focuses on specific target markets highlights the cost and durability of a product compared to other products, which adds on value towards customers and potential customers.^[5] It can also win businesses with improved performance, thus increasing reputation and revenue.^[6]
Non-price competition - Allows businesses to compete in other areas other than price. For example, taste and design.
Customer-centric approach - The company will be able to keep up with changes in the marketplace as it approaches to targeting customers. Thus, the company will know how to advance products tailored to a way that it satisfies consumers expectations.^[7]

Cons

Marketing and Sales Demands - Tailoring products to certain target markets requires increased administration efforts, thus a higher number of staffs required.^[8]
Higher Costs - Cost to customise and research into certain products in terms of a certain target market is expensive, as well as the increase number of staffs hired.
Consistency Challenges - If the company fails to provide an efficient and effective product to a certain market, there may be a negative damage to the brand's image. Thus, the company needs to maintain a consistent standard of quality of its product.
Product-Centric Focus - The company can get too focused on a certain product's research and development aimed towards a certain market and fail to response efficiently to changes in customers demand and interest.^[7]
Risks - Market and customer research may not be sufficient, leading to product development that do not meet the needs of potential customers. Thus, failure in delivering benefits of the product to customers.^[6]

Example

Product differentiation occurs when companies have to distinguish a certain product in the marketplace when competing for a product that bring about the same need (e.g. tea) amongst different firms.^[9] In order to do so, the aim is to make the product more attractive to the marketplace compared to other competitors. This does not only include price, but also features of the product, quality, packaging, benefits and services.^[10] Successful product differentiation creates a comparative advantage for the firm.

As an example, a companies competitor in the market sells Tea A but they sell Tea B, so the company will then have to focus on producing Tea B so that consumers find their product to be more appealing (in terms of price, taste and services) compared to their competitors.

Product Life Cycle Concept

The product life cycle concept consist of 4 stages: introduction, growth, maturity, obsolescence.^[11] It outlines the stages the product was first introduced into the market until it is finally removed from the market. The length of the life cycle, duration of each stage and the shape of the curve vary widely for different products. Not all products reach the final stage and some may continue to rise or even fall. ^[12]

Introduction

Critical Factor - Product Development and Design
Researching, developing and launching the product.
Product passes through a low volume introduction phase where unit profit margin is low and sales volume starts to rise.

Growth

Critical factor - Advertising and Distribution
Sales increasing at a faster rate.
Volume and profit both starts to rise.

Maturity

Critical Factor - Marketing Effectiveness
Unit profit margin at its highest but the rate of sales volume is slowing down. For example, there are now new competitors in the market.

Decline

Reducing sales
Constant cost
Reducing profits.

Obsolescence

Critical Factor - Cost Efficiency
Sales and profit began to fall.
Declining volume pushes costs up until all profits are eliminated.
This may be due to the need of disappearing or a better and cheaper product has been developed in the market.^[11]

To extend a life of the product, techniques include advertising, price reduction (attract new customers), adding value to the product (new features), explore new markets (selling the product overseas) and new packaging (freshen up old packaging).

Product Platform Strategy

Beyond individual-product strategy is platform strategy, where the focus is on multiple products. There are two very different types of platforms: digital platforms in technology, and physical platforms in other fields.

A digital platform is an ecosystem designed to enable different groups to co-create value through “plug-and-play” capabilities. The technology infrastructure of the platform touches customers and developers beyond the firm's boundaries. LinkedIn, Facebook, Google and Amazon—in fact most technology businesses—have platform-based business models.

Physical platforms in other industries refer to product family or product portfolio platforms intended to reduce manufacturing and development costs for new products. In this case a platform is a common architecture, collection of assets, component designs, subsystems, or other elements shared by several products. Given that the components and subsystems have already been debugged and tested, the resulting products should have higher quality. Since platform development occurs less frequently than product development, major platform decisions do not need to be made as often. This has the potential to foster lean product development. However, there are downsides: high upfront costs, risk of platform obsolescence, risk of platform recall affecting numerous products, and potential duplication of effort.^[13]

Related Research Articles

Marketing is the act of satisfying and retaining customers. It is one of the primary components of business management and commerce.

Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product.

A marketing plan is a strategy or outline created to accomplish a marketing team's objectives. A marketing plan is often created together by marketing managers, product marketing managers, product managers, and sales teams. A marketing plan falls under the umbrella of the overall business plan.

In marketing, market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on shared characteristics.

Marketing management is the strategic organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's marketing resources and activities.

In business, a competitive advantage is an attribute that allows an organization to outperform its competitors.

Competitive analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling combines all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.

Market penetration refers to the successful selling of a good or service in a specific market. It is measured by the amount of sales volume of an existing good or service compared to the total target market for that product or service. Market penetration is the key for a business growth strategy stemming from the Ansoff Matrix (Richardson, M., & Evans, C.. H. Igor Ansoff first devised and published the Ansoff Matrix in the Harvard Business Review in 1957, within an article titled "Strategies for Diversification". The grid/matrix is utilized across businesses to help evaluate and determine the next stages the company must take in order to grow and the risks associated with the chosen strategy. With numerous options available, this matrix helps narrow down the best fit for an organization.

Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship". It often occurs in imperfectly competitive markets because it exists between two or more producers that sell goods and services at the same prices but compete to increase their respective market shares through non-price measures such as marketing schemes and greater quality. It is a form of competition that requires firms to focus on product differentiation instead of pricing strategies among competitors. Such differentiation measures allowing for firms to distinguish themselves, and their products from competitors, may include, offering superb quality of service, extensive distribution, customer focus, or any sustainable competitive advantage other than price. When price controls are not present, the set of competitive equilibria naturally correspond to the state of natural outcomes in Hatfield and Milgrom's two-sided matching with contracts model.

An advertising campaign is a series of advertisement messages that share a single idea and theme which make up an integrated marketing communication (IMC). An IMC is a platform in which a group of people can group their ideas, beliefs, and concepts into one large media base. Advertising campaigns utilize diverse media channels over a particular time frame and target identified audiences.

A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. Pricing strategies and tactics vary from company to company, and also differ across countries, cultures, industries and over time, with the maturing of industries and markets and changes in wider economic conditions.

The target audience is the intended audience or readership of a publication, advertisement, or other message catered specifically to the previously intended audience. In marketing and advertising, the target audience is a particular group of consumer within the predetermined target market, identified as the targets or recipients for a particular advertisement or message.

A point of difference is a factor of products or services that establishes differentiation. Differentiation is the way in which the goods or services of a company differ from its competitors. Indicators of the point of difference's success would be increased customer benefit and brand loyalty. However, an excessive degree of differentiation could cause the goods or services to lose their standard within a given industry, leading to a subsequent loss of consumers. Hence, a balance of differentiation and association is required, and a point of parity has to be adopted in order to allow a business to remain or further enhance its competitiveness.

In marketing, a customer value proposition (CVP) consists of the sum total of benefits which a vendor promises a customer will receive in return for the customer's associated payment.

Revenue management is the application of disciplined analytics that predict consumer behaviour at the micro-market levels and optimize product availability, leveraging price elasticity to maximize revenue growth and thereby, profit. The primary aim of revenue management is selling the right product to the right customer at the right time for the right price and with the right pack. The essence of this discipline is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment.

Value-based price is a market-driven pricing strategy which sets the price of a good or service according to its perceived or estimated value. The value that a consumer gives to a good or service, can then be defined as their willingness to pay for it or the amount of time and resources they would be willing to give up for it. For example, a painting may be priced at a higher cost than the price of a canvas and paints. If set using the value-based approach, its price will reflect factors such as age, cultural significance, and, most importantly, how much benefit the buyer is deriving. Owning an original Dalí or Picasso painting elevates the self-esteem of the buyer and hence elevates the perceived benefits of ownership.

In marketing, a company’s value proposition is the full mix of benefits or economic value which it promises to deliver to the current and future customers who will buy their products and/or services. It is part of a company's overall marketing strategy which differentiates its brand and fully positions it in the market. A value proposition can apply to an entire organization, parts thereof, customer accounts, or products and services.

A target market, also known as serviceable obtainable market (SOM), is a group of customers within a business's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service.

A go-to-market strategy, or GTM strategy, is the plan of an organization, utilizing their outside resources, to deliver their unique value proposition to customers ("go-to-market") and to achieve a competitive advantage. The goal is to enhance the overall customer experience by offering a superior product and/or more competitive pricing.

Product Planning, or product discovery, is the ongoing process of identifying and articulating market requirements that define a product's feature set. It serves as the basis for decision-making about price, distribution and promotion. Product planning is also the means by which companies and businesses can respond to long-term challenges within the business environment, often achieved by managing the product throughout its life cycle using various marketing strategies, including product extensions or improvements, increased distribution, price changes and promotions. It involves understanding the needs and wants of core customer groups so products can target key customer desires and allows a firm to predict how a product will be received within a market upon launch.

References

↑ "What Is Product Strategy? - Examples & Definition - Video & Lesson Transcript | Study.com". Study.com. Retrieved 2015-10-31.
↑ "Five Alternative Marketing Concepts With Key Elements". YourArticleLibrary.com: The Next Generation Library. 11 April 2015. Retrieved 2015-11-02.
↑ "Marketing Mix (4 P's) : Product Strategies". www.learnmarketing.net. Retrieved 2015-10-31.
↑ "What Is Product Strategy". www.productplan.com. Retrieved 2020-06-25.
↑ "The Advantages of a Product Differentiation Strategy". Small Business - Chron.com. Retrieved 2015-10-31.
1 2 "The Benefits & Risks of a Product Development Strategy". Small Business - Chron.com. Retrieved 2015-11-04.
1 2 "Customer-Centric Marketing: What is customer-centric marketing? | Custora". www.custora.com. Retrieved 2015-10-31.
↑ "Disadvantage of Product Specialization Strategy". Small Business - Chron.com. Retrieved 2015-10-31.
↑ "Product Differentiation in Marketing: Examples, Strategies & Definition - Video & Lesson Transcript | Study.com". Study.com. Retrieved 2015-11-01.
↑ "What is product differentiation? definition and meaning". BusinessDictionary.com. Archived from the original on 2015-12-10. Retrieved 2015-11-01.
1 2 Clifford, Jr. Donald K. (1981). Rothberg, Robert R. (ed.). "Managing the Product Life Cycle". Corporate Strategy and Product Innovation (Second ed.). New York: The Free Press, A Division of Macmillan Publishing Co., Inc.: 26–28. ISBN 0-02-927520-2.
↑ "Marketing: Product Life Cycle (GCSE) | Business | tutor2u". beta.tutor2u.net. Retrieved 2015-11-03.
↑ Gorchels, Linda (2017). Product Strategy & Roadmaps: Product Management ShortRead Series. United States: Tomorrow's Mysteries, LLC. ASIN B01MUGA6LG.

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[1] "What Is Product Strategy? - Examples & Definition - Video & Lesson Transcript | Study.com". Study.com. Retrieved 2015-10-31.

[2] "Five Alternative Marketing Concepts With Key Elements". YourArticleLibrary.com: The Next Generation Library. 11 April 2015. Retrieved 2015-11-02.

[3] "Marketing Mix (4 P's) : Product Strategies". www.learnmarketing.net. Retrieved 2015-10-31.

[:21-4] "What Is Product Strategy". www.productplan.com. Retrieved 2020-06-25.

[5] "The Advantages of a Product Differentiation Strategy". Small Business - Chron.com. Retrieved 2015-10-31.

[:6-6] 1 2 "The Benefits & Risks of a Product Development Strategy". Small Business - Chron.com. Retrieved 2015-11-04.

[:5-7] 1 2 "Customer-Centric Marketing: What is customer-centric marketing? | Custora". www.custora.com. Retrieved 2015-10-31.

[8] "Disadvantage of Product Specialization Strategy". Small Business - Chron.com. Retrieved 2015-10-31.

[9] "Product Differentiation in Marketing: Examples, Strategies & Definition - Video & Lesson Transcript | Study.com". Study.com. Retrieved 2015-11-01.

[10] "What is product differentiation? definition and meaning". BusinessDictionary.com. Archived from the original on 2015-12-10. Retrieved 2015-11-01.

[:2-11] 1 2 Clifford, Jr. Donald K. (1981). Rothberg, Robert R. (ed.). "Managing the Product Life Cycle". Corporate Strategy and Product Innovation (Second ed.). New York: The Free Press, A Division of Macmillan Publishing Co., Inc.: 26–28. ISBN 0-02-927520-2.

[12] "Marketing: Product Life Cycle (GCSE) | Business | tutor2u". beta.tutor2u.net. Retrieved 2015-11-03.

[13] Gorchels, Linda (2017). Product Strategy & Roadmaps: Product Management ShortRead Series. United States: Tomorrow's Mysteries, LLC. ASIN B01MUGA6LG.

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