When it comes to product strategy, there is so much conflicting advice that getting started can be confusing. Some companies’ strategies are so generic that they could mean anything, or nothing at all—as perfectly illustrated in this product strategy madlibs, which fills in the blanks with buzzwords and jargon and calls it a strategy.
Besides being vague or gimmicky, another common product strategy pitfall is to list tactics as an overall strategy. Instead, your product strategy should be a framework centered around providing value to your customers that helps you decide which tactics to explore.
Ultimately, product strategy is a big-picture idea of how you will advance your product’s mission. Think of product strategy as a hypothesis to be tested. If you pursue your strategy and hit your KPIs but don’t get any closer to your mission, change course and try again.
While there’s no one-size-fits-all template for building an effective product strategy, be sure to think through these five factors as you develop yours.
1. Product Mission and Vision
A product vision is the big-picture “why” of your company. Why does this product need to exist? What problem are you trying to solve with your product? What value are you offering? It should inspire your team to create a better future. A product mission, on the other hand, is what your company is trying to achieve—it should motivate your team and drive clarity on your objective. When your teams are aligned around the mission, this becomes the driving force to make your product vision a reality.
Your product vision describes the world that your company wants to create. It depicts where your team will take your business and product in the future. It paints an aspirational and inspirational picture of an end-state you want to realize, not how you get there—that’s the job of your product strategy.
Your product strategy answers the question, “How are we going to achieve our vision?” You can have more than one strategy operating at once to achieve that vision.
For example, Netflix’s product vision is “becoming the best global entertainment distribution service.”
- Mission: stellar service, valuable partner, sustained profitable growth, huge impact.
- Vision: being the best, around the world
Therefore, the product strategy (or strategies) Netflix employs should illustrate how they plan to be the best entertainment distribution service, and how they plan to reach customers around the world.
Companies should have a defined product strategy for their product suite but also a distinct product strategy for each product. Netflix has a distinct product strategy for each of its products—its streaming product strategy (this is the platform we all know and love when we think about Netflix) will be inherently different from the product strategy for Prodicle, which is Netflix’s production-facing tool used by film and television crews.
With Prodicle, “We’re not aiming to disrupt the industry, but to remove the operational and administrative overhead so our creators can focus more on what they care about,” noted Director of Product for Production | Studio Product Innovation, Amie Tornincasa. As Tornincasa shared during her Product Summit 2020 presentation, the product strategy for Prodicle fits into Netflix’s overall product strategy and drives the company’s mission.
One part of Netflix’s strategy is to make their product as easy to use and access as possible. In its early days, that meant offering next-day DVD delivery and no late fees. Today, its entire catalog is available for instant consumption. Though their tactics and product initiatives changed over time, they still fed into the same strategy, which served their singular product vision of becoming the best global entertainment distribution service.
Dave, a personal finance app, has the mission to “change people’s lives by building approachable financial products,” helping the four in five Americans who live paycheck-to-paycheck achieve financial stability. When it was time for the product launch, Dave’s product strategy focused on helping customers budget and access money to cover immediate expenses. From there, Dave expanded its product strategy to include helping users build credit and find work—all funneling up into their product vision. And as you’ll see below, product analytics played a major role in how Dave made that decision.
2. Business Goals
A product strategy works toward long-term business goals (emphasis on “long-term”). Avoid pursuing short-term “hacks” with your product that might bring in a spike of revenue in the near-term but are ultimately unsustainable.
Of course, long-term bets can take a while to show results. Consider Amazon. For years, Amazon’s strategy was to prioritize its goal of growing market share over increasing revenue. In the beginning, and in the short-term, margins were thin, but today it is extremely profitable. Amazon CEO Jeff Bezos has explained that the company’s present wins are the result of its long-term strategy. At a talk in 2019, Bezos said:
“We’ll announce our Amazon quarterly results, and [people will say], ‘Great quarter, congratulations!’ And then I say, ‘Thank you.’ But what I really think about is [how] that quarter was kind of baked and done 2 or 3 years ago, and right now the senior executives at Amazon are working on a quarter that’s going to happen in 2021, 2022.”Jeff Bezos
Another example of tying a strategy to business goals comes from Le Monde, the most esteemed newspaper in France. As online subscriptions became an increasingly important share of Le Monde’s revenue, in 2018 the paper defined its strategy so that its digital product became an effective channel for significant subscription revenue. The newspaper needed to make sure that the website would entice users to subscribe, provide consistent value for paying members, and retain lifetime subscribers and supporters of Le Monde. By using Amplitude’s behavioral insights to drive its product strategy, Le Monde increased online subscription revenue by 20%.
3. Market Landscape
Simon Wardley, inventor and former CEO of Wardley Mapping, found inspiration on strategy in Art of War by Sun Tzu, which describes five aspects of competition: purpose, landscape, climate, doctrine, and leadership. “Landscape,” Wardley writes, “is a description of the environment that you’re competing in. It includes the position of troops, the features of the landscape and any obstacles in your way.” Just as the physical terrain—open fields or dense woods, desert sand, or mountaintop—would affect how a general sends her troops into battle, so too should you account for the business landscape in your product strategy.
The market landscape includes factors such as competitors, technological changes, shifts in consumer behavior or consumer technology adoption (for example, the digital disruption brought on by COVID-19), and the economy.
Take the New York Times. The business landscape once included plunging revenue from print advertising as more and more consumers traded their morning paper for morning phone-scrolling. A strategy it could have pursued, as many Times competitors did, would have been to ramp up digital advertising while keeping online content free. Instead, the 168-year-old publisher, with a reputation for being stuffy and resistant to change, pivoted its strategy to focus on driving revenue from digital subscriptions. The payoff was huge. As Times COO Meredith Kopit Levien noted, “We have the largest and most successful pay model for journalism in the world,” keeping the company relevant and solvent in the digital age.
4. Product Analytics
You may have to start your strategy with gut instinct and personal experience, particularly when you don’t have users yet. But as soon as you acquire users, insights from product analytics should inform and measure your product strategy. In fact, studies show that data-informed companies are 30% more profitable. If you want to learn more about how product analytics empowers teams to measure their product strategy, check out our North Star Playbook.
Using product analytics can help you identify what experiences are the most valuable to customers, and what aspects of your product make you stand out from your competitors. Or, like Dave—the personal finance app discussed above—product analytics can help you steer a strategic product launch.
When Dave was considering adding a checking account to their product offering, they used product intelligence from Amplitude. Dave gauged product-market fit by identifying their most successful customers and surveying whether they would be interested in this feature. After confirming demand, Dave tested which potential features of the product resonated most with different user segments, such as increased paycheck advances, overdraft protection, and faster services. Product analytics informed every step of Dave’s product strategy, from exploring what product to add to determining the product’s central value proposition to iterating on beta tests and improvements.
5. Customer Insights
Customers are at the core of every great product strategy. A recent Zendesk report shows that 76% of customers expect personalized experiences. But how do you do that? Through customer insights. Customer insights will help you develop a deep understanding of your target customers—their personas, their behaviors, their motivations. These data should inform your strategy by uncovering how to add value for different kinds of users. An effective product strategy is grounded in creating more value for your customers.
One way to gain customer insights is to leverage cohort analysis, a kind of customer analysis that breaks customers into different groups (cohorts) based on shared behaviors and characteristics. You can use cohort analysis to identify different user segments and test strategies on each group. From there, you can prioritize your strategies for your most valuable users. For example, Mexican airline Volaris used cohort analysis through Amplitude to find which routes and users were most likely to get seat upgrades, and then deployed targeted campaigns. This grew seat selection upgrades by 25%. If you want to learn more about how to create more valuable customers, check out our blog post on milestone analysis.
Intuit’s QuickBooks team used customer insights to discover a segment of users that were not converting through a key workflow. Specifically, they were not paying invoices on time with the QuickBooks invoicing product. Digging deeper with Amplitude, they learned more characteristics this group had in common and developed a personalized invoicing system for them. The result: this cohort doubled the number of invoices paid on time and their associated revenue.
If you’re stuck while building your product strategy, talk to your team! Building product is a team sport—you need to work together to win. Facilitate a discussion with your team on each of these five factors, and see what starts to emerge. Everyone at your company is responsible for the customer experience and creating value for them. Talk to cross-functional teams to get a diversity of perspectives. The best strategies will account for multiple factors at once. You’ll know you’ve hit on something good when the strategy helps you set priorities and decide what not to do just as much as it tells you what to do next.
Most importantly, remember that strategies should change as you grow and acquire more users. Here at Amplitude, we changed our North Star—the metric that helps align our product vision and strategy—as our business evolved. Be flexible, test your hypothesis, listen to your customers (at scale with data and in person during interviews) and change course when it’s not working.