What’s your product? Who is it for? Why have you built it?
These are the three questions that every successful product lead and c-level executive would answer in a few short sentences right away. At the end of the day, these are the questions that describe your product strategy. The question is “would you answer them right away?”
What is a Product Development Strategy?
Product development strategy is the process of translating a vision into a roadmap and bringing a new product to life for customers that need it. Of course, various companies, depending on their size and level of expertise, may understand and execute it in a slightly different way.
However, all c-level executives at all companies, big and small, must know how to briefly explain what their product is, who it’s for, and why they have built it. Key Components of a Product Development Strategy
Every company has a vision which is set by the CEO which explains the impact the product will have on the world. It’s the product strategy that turns the vision into a roadmap with all the features required to succeed and how to build them.
After you’ve answered the “what, who, why?” questions, it’s time to the vision, carry out an in-depth customer research and establish a clear business model. We recommend this simple product development strategy template for your project, so that you won’t miss the key elements of the process in bringing your product to life. All you need to transform your ideas into great products is to follow these 4 key components yourself. We described them below in a form of a guideline so that you can really use it for your own project
- Customer Research,
- Business model,
- Market research & macro environment.
Listen to your customers
It’s safe to say that every successful business simply knows what lies at the heart of their customer needs. Which is why the product strategy should first define who your customers are. You have to be prepared for changes throughout the product lifecycle as you get feedback from your customers.
For instance, share your prototype with someone and arrange a user-testing session. You can sit down with that person and ask questions about the product, such as: “What do you think will happen next when you click on that button?” or “How would you find a specific piece of info on the page?”.
If you have a product that’s in its beta phase, you can arrange interviews with users to collect as much feedback as you can. If you have a ready product that’s already used by users, you can set up a community. A community creates a shared space for users where they can exchange ideas about the product, make feature requests or even report bugs.
Know your competitors
Make sure to set a value proposition that sets you apart from your competition and always puts you one step ahead. Your product strategy describes what your product offers to your customers in comparison with similar products or services on the market. Take the example of Airbnb. With Airbnb, you can live like a local anywhere you go, whereas all the major hotels provide a consistent experience across the world.
You can even create a competitor analysis by using a SWOT analysis tactic. SWOT is the shortcut for Strengths, Weaknesses, Opportunities, and Threats. Use it to analyze your own product and the products of your competitors to learn how they are surviving in the market
Identify your business model
Companies are expected to make money and meet ROI (return on investment) goals. Your product strategy should describe in what way your product or service will earn that money and achieve business goals.
Facebook, Twitter, Instagram are consumer products that have monetized their business models by selling ad space to other brands. LinkedIn, apart from selling ad space, also sells Premium subscriptions to customers, offering a Freemium account and charging for the Premium account.
That’s why you need a well-defined business model so that everyone on your team understands how the product facilitates it. A business model in other words, is a critical element for any startup success. It is a high-level plan for profitably operating your business in its marketplace. It should cover startup costs and sources of financing, the target customer base for the business, marketing, a review of the competition, and projections of revenues and expenses.
One of the most popular business models is the hidden revenue business model. The best examples of it is Google or Facebook that offer free apps by monetizing user data. When you google a phrase or like a post on Facebook, the company will get you profiled. Your data, later on gets sold to businesses that use it for advertising.
Carry out a proper market & macro environment research
The macro-environment or, in other words, all the economic, technological, political, and cultural factors that may affect your product and industry, both long and short term. That’s why you should include the following factors in your product development strategy:
- New markets where your product may attract new audiences
- Emerging technologies that may influence your users or customers
- The economy with all its factors that can impact your customers’ budgets
- The ever-changing customer needs and behaviours
If you don’t have that kind of product development strategy, it’s easy to lose focus on what’s most important to your customers and your business. The Benefits and Risks of a Product Development Strategy As we all know, building products is rather a bumpy road than a bed of roses. In an ideal world, it should increase revenue, profitability, and help you stay ahead of competitors – all at once. However, when planning the strategy with all its bits and pieces, be careful make sure to minimize the risk of costly mistakes:
Make Sure to Turn all Benefits to Your Success
From constant feedback from customers to overall improved performance of your product, take a look at the bottom-line benefits that come along with a well-planned product development strategy.
Staying in touch with customers
One of the greatest things about having a product strategy is that you can stay in touch with your customers, act upon their feedback and respond to their needs as they change. Make your product development strategy customer-driven and include customer surveys to gain more insights to help you guide your strategy in the right direction.
Listening carefully to what customers say can give you a strong competitive edge. Of course, you don’t want to act upon every single opinion. However, identifying and responding to those that are repetitive can only help you.
Improved performance to win the market
With a solid product development strategy that improves your product, you can easily help your sales team win over competitors that don’t even come close to the new level of performance. Leveraging the quality of your product will also let you charge more for it. On top of that, by carrying out customer and market research, you can spot the performance factors that are most relevant to the market and, based on that, iterate with every next sprint and set measurable targets.
The hype of testing new products
Every time October clocks in, we witness the never-ending lines of people anxious to buy their new iPhone that just came out. This is exactly the kind of attitude consumers have for a brand with a positive product development. People want to test new products of a brand that innovates along with their needs and point of focus.
Beware of the Risks
With all its shiny bright benefits, a product development strategy can also fail to deliver the promised advantages. You must be well-aware of the risks and cons that may come along.
Varying customer Needs and tastes
When collecting to customers’ opinions, take them with a pinch of salt because you can’t respond to all. Also, customers tastes and desires may and most likely will change before you know it. As a result, you may end up with a product that people are no longer interested in. To avoid that, it’s good to shorten the time span for your strategy and get products to market while they are still highly demanded. Also, part of your ongoing strategy would be to constantly observe the changing market to know when a product’s life has come to an end.
Expectations that turn out to be unrealistic
Without sufficient market research and quality benchmarks in place, the product development process can set expectations that simply can’t be met. So a beautiful design that works like the final product or a dozen of cool features that nobody use will not guarantee any real value further down the road. It’s best to come down to earth, set accurate benchmarks and start meeting the expectations of your customers persistently.
Products can fail unexpectedly
Hundreds of lines of code, hours spent on testing and fixing bugs… Sometimes, even if go to great lengths and take every precaution, it is possible for a product to fail unexpectedly. Take MySpace, the place where “web stars are born” and “music and film careers are launched,” that was only overtaken by Facebook and its whopping value as of today. Or, the infamous Samsung Galaxy Note 7 with is exploding battery. These examples only go to show that if a product doesn’t work as it should, the anticipated profits can and will turn into a huge loss.
Types of Product Development Strategies
Whether you want to improve an existing product or create a totally new one from scratch, there are four strategies that use various product development tactics:
- the Market Leader
- the Challenger
- the Follower
- the Niche
With each having its pros, it’s best to find out which is best for your business needs.
Market leaders develop new and innovative products through which they grow a larger market. They invest a lot of money in research and development to build products that simply leave competitors behind. Usually, it is a very expensive strategy, but their ROI is huge. One of the best examples of this is Apple and their market-leading smartphones thanks to their highly successful design processes ever implemented. The key to Apple’s success is to focus only on a handful of projects that are expected to bear fruit rather than work on hundreds of tiny projects. Other market leaders include companies like eBay or Amazon. Even though they are still market leaders today, they face stiff competition ever since they came out.
Just like the market leader, challenger brands invest in research and development to create innovative products. Contrary to market leaders, a challenger’s goal is not to become the number one company in their industry but rather the most ground-breaking one. One of the best examples of this is perhaps the one of Mailchimp partnership with Square to launch shoppable landing pages. As of 2018, Mailchimp users can sell their products directly through landing pages. Before that happened, landing pages were rather used to collect email addresses.
Followers don’t invest heavily in their R&D teams. What they do is follow other innovative companies. As a result, their products come across as derivative instead of the original. However, this doesn’t mean they can’t become leaders. One example of a fast follower that turned into a market leader is Slack. We’ve had so many similar solutions before Slack, yet with its great innovations, they became the market leader. Or, even better – Facebook that followed in MySpace’s footsteps. The example of Facebook really speaks for itself.
The niche pretty much explains itself – it involves developing a product for a smaller audience, usually one that is more conscious about a specific topic. This is the type of strategy that smaller companies follow because of limited resources. A niche product example would be Furbo that produces pet cameras used to watch and interact with pets while you’re not at home.
There is no one-size-fits-all strategy and you must carefully consider all before you take one approach. In this constant race to innovate, introducing new products or improving existing ones, it is crucial to find and maintain your spot in the market. However, in order to distinguish your brand from competitors, you have to go through the research and use all the data you have gathered to build or refresh a product. Remember that product development is a continuous process that requires innovation, attention and a lot of will to become a market leader.