Product strategy is the plan created by a company to define the vision for a product and identify how that vision will be realized. A product strategy is built with the “big picture” of a product in mind, helping companies justify why their product should exist and how users stand to benefit. A well-tuned product strategy ensures that everyone is working in sync toward the same high-level business goals.
Your product strategy prioritizes the most important aspects of your product such as features and timetables over the course of product development. It keeps your business’ collective product management efforts focused on customer needs, market positioning, and your ultimate business goals. This focus on value enables your team to deliver a product launch with every feature in alignment with your original vision.
- Product strategy is the process of defining why a product should exist, who it will benefit, and how a company plans on developing it.
- Key elements for a successful product strategy often include leveraging a framework, diagnosing the problem, and envisioning the solution.
- There are several models companies can base their product strategies around, including differentiation, quality, cost, and focus models.
What is product strategy?
Product strategy bridges the gap between the conceptualization of a product and creating a set development plan. You may have a terrific idea for the next big product. However, odds are you’d find it difficult to jump straight from “dreamt up” to “drawn out on paper.”
A product strategy outlines the principles that justify the creation of the product and the work required to make it successful. It helps companies answer three essential questions about their product:
- Who is the customer base?
- How will the product address these customers’ pain points?
- How will the product benefit the company?
The answers to these questions will inform the broad-strokes planning of the product. These big-picture strategies include the types of features the product will contain, a general blueprint of product development, and the measurable objectives the company hopes to achieve.
Product strategy is often confused with the product roadmap. However, a roadmap is a timeline of action items that outline how exactly a product will come together. Successful roadmaps require the established vision, timelines, and goals set forth first in a clear product strategy.
Product strategy serves as a reference point as the product roadmap changes throughout development. Deadlines, tasks, and goals are all bound to shift or change altogether during product development in response to feedback, testing, and unexpected obstacles. A company that adheres to a set strategy is better equipped to handle changes and devise solutions in line with the ultimate vision for the product.
The importance of product strategy to your business
Product strategy benefits businesses by keeping a product’s trajectory aligned with both customer and internal expectations. A strategy is so vital to a product’s success that 84% of product managers identify ownership of their product strategy as one of their top responsibilities. A quality product strategy:
Defines your product’s niche
A well-researched product strategy provides companies with a clear sense of what niche their product will occupy when it goes to market. This awareness allows teams to make decisions during development that speak to the product’s niche and thus to its intended audience.
Imagine your product’s niche as a triangle. At one point, you have the customers you want to serve. On another point, you have the profit-minded goals of your company. On the third and final point, you have the various functions and features of your product that differentiate it from the competition.
A product strategy defines each of these points and helps to balance them against each other. You won’t sell a product that has a thousand features but no audience. You also won’t capture an audience by setting goals that force you to charge far more than comparable competitors.
Informs your product roadmap
Your product roadmap acts as the official game plan for developing, releasing, and growing your product. It’s a company’s ultimate resource for task management and helps ensure that deadlines are being met. Hiccups in the development process may change action items on the roadmap, but those changes are visible to and respected by all parties involved.
Product strategy directly informs your product roadmap by setting a sturdy foundation. Your strategy sets high-level deadlines and phases of your product’s development while your roadmap will detail the specific methods for execution. The roadmap you start out with is likely to look much different than the one you wind up with. However, a roadmap based on a clearly defined product strategy is likely to require fewer changes than one based on a bad strategy or no strategy at all.
Provides direction and clarity for internal teams
Your product team won’t be the only people within your company who need to be in sync with your goals. Everyone within your company works to bolster the success of your product. Sales teams need to know how to talk about its value to high-impact prospects. Marketers must develop a plan for marketing your product strategy to the broader public. IT and customer service teams need to understand how it works so they can anticipate the questions they’ll be fielding from users. Internal policies and plans for interfacing with customers should all focus on the points outlined in your product strategy to maintain consistent messaging in communications.
Additionally, every team within your business undoubtedly supports your product, but they may not always agree on the best way to get there. These teams should refer back to the product strategy when faced with uncertainty or disagreement. Potential decisions should be compared against the product strategy to determine which way forward speaks best to the intent of the product.
Components of a successful product strategy framework
In the simplest terms: write your product strategy down. It needs to be visible to every employee tasked with building, selling, and supporting your product-to-be. When you set your product strategy in stone, you create a resource for teams to refer back to at every stage of development. It also helps keep your product and company vision at the heart of every decision your team makes for your product.
The basic framework for an effective product strategy looks the same whether you’re building an ecommerce site or a crypto trading app. It must consist of more than a few empty platitudes and lofty goals for your product. Product strategy frameworks typically include the following steps:
- Evaluate where you are today. What does your product do now? What are its strengths and weaknesses?
- Define your product vision. What would you like your product to do, and why?
- Identify your target audience and their needs. Whose problems are you solving?
- Perform competitor research. How will we differentiate our product from what’s already out there?
- Analyze market trends. How well are existing options performing? What market changes should you anticipate?
- Set quantifiable goals. What does success look like? How will you define it?
- Create your product roadmap. How will we get there?
- Prioritize your initial actions. What steps must we take to ensure a successful start?
- Set guidelines for product strategy evaluation. Is product development still aligned with your initial strategy?
The use of a product strategy template can greatly aid in fleshing out the steps of a product strategy. Amplitude has developed a three-step product strategy template to help companies jump-start the creation of their own strategies. The template is designed specifically to inform your product strategy with insights from your own data. In it, you’ll find resources for:
- Delighting your customers
- Planning for growth
- Differentiating your product from the competition
3 key elements of a successful product strategy
The details of the final strategy will look different from every other business’ because your company’s values and objectives are unique. However, the foundation for every product strategy should include these elements:
1. Identify your audience
An alarming amount of products go to market without any discernible audience. Companies mistakenly believe that every great idea will equate to a well-received product. They never stop to think about whether their idea addresses the existing pain points of any prospective customers.
Companies must do the research before moving forward with crafting their product strategy to ensure that there’s an actual audience for their product. Research will also identify existing competitors and help you determine how you will need to position your product against them to be successful.
2. Embrace your data
At the heart of product strategy is a single question: “What are customers looking for in a product?” This question is more easily answered by companies well-acquainted with their product data. Behavioral analysis of your product data will reveal what features of your existing offerings provide the most value to your customers. These insights should then provide a basis or frame of reference for defining your new product, user base, and initiatives.
Even new businesses will find data-informed product strategies superior to the alternative. However, many companies haven’t achieved true data democracy. Data is often siloed in different departments, limiting visibility to valuable marketing, sales, or product insights across teams. Since product strategy is informed and adopted by every team in a company, it pays to use a unified data management system like Amplitude for maximum data accessibility.
3. Establish goals
You can’t solve a customer’s problems with a hypothetical product. Goal-setting establishes a timetable for the development of your product and synchronizes expectations for delivery across teams. Companies should start with their long-term goals for the product, like the dates for the official start of development and the product launch. Once these big picture goals have been established, the timetable should be divided into shorter phases so more focused goals and expectations can be created.
Goals are only helpful if they are measurable. As such, you need to have a method of gathering the metrics and data required to determine your progress toward each goal. Your goal for your music streaming service may be to have a million active users by the end of your first year. A data analytics solution like Amplitude would help you track your users from their first visit to your website all the way through the user onboarding process and beyond.
Common metrics and KPIs used by companies to measure product strategy goals include:
Examples of effective product strategy models
There isn’t a single product strategy example that fits every company’s goals. Several models have developed over time that align a company’s vision with the realities of their target market:
This product strategy example works best for unique products compared to existing offerings on the market. Customers are drawn in by special features or capabilities they may not have even known they were missing. The cell phone industry has long been a battleground for companies who have touted everything from wireless charging to bendable screens to differentiate themselves from their competitors.
The key to differentiation strategy is to develop a product that stands out, and there are multiple ways to do so:
- The development of an entirely new feature. The appeal to customers is that no other product offers what yours does.
- The inclusion of as many related features as possible. Products that offer a comprehensive experience save customers from having to purchase multiple digital solutions.
- A focus on increasing a product’s usability. Sometimes existing products are unwieldy, overly technical, and not particularly friendly for beginner users. Some companies approach their products as the “easiest” way to get desired results.
Another example of a specific product strategy is to create the best possible product in terms of reliability, capabilities, and experience. A quality strategy positions your product as the premium option against inferior competition. Apple enthusiasts continue to buy devices from the company because they are accustomed to the high-end aesthetics, OS, and digital ecosystem the company offers with great consistency.
Products built with quality in mind can’t afford to focus on pricing. Hiring the brightest minds and building the best products requires money and resources, and those costs are reflected in the product’s final pricing point. However, a product that delivers on its promise of quality is often positioned against “lesser” products as either a necessity or the first name in luxury.
For example, a data security product could ask customers whether providing anything less than the best digital protection is worth the risk. A company like Lamborghini doesn’t compromise the quality of their cars to appeal to a lower pricing point—which only makes the product even more desirable despite hefty price tags.
Cost strategy focuses on making a good yet inexpensive product. Products built using this strategy are made as cost-effectively as possible so they can go to market at a lower pricing point than competitors. This strategy works best when your new product can’t be differentiated from existing offerings through new features, UI/UX improvements, or other value-centric aspects.
For example, a company in the business of making plastic forks would prioritize making the highest volume of functional forks for as little as possible. Customers are unlikely to nitpick the aesthetics or brand of their forks so long as they work.
Cost strategy works best if your improvements deal largely with improvements to the development process. The cheaper it is for you to develop a competitive product, the lower you can price your product while still remaining profitable. However, a pricing race to be the bottom often elicits bias from skeptical customers. Many believe an inexpensive product can’t be one of high quality and will pay more for something they believe to be of higher value.
This popular approach to product strategy focuses on building a product to appeal to a hyper-specific market. Focus strategy allows companies to dedicate their resources to developing features for a well-defined segment. The end result is a product that performs exceptionally within a niche market instead of underwhelming a broader market with just a little bit of everything for everyone.
Examples of potential product niches include:
- A particular demographic: Your product could target users within a certain age bracket, vertical, or gender.
- A specific geographic area: Sometimes regionality is at the core of a product’s appeal. If you develop a product specifically designed to assist house flippers in Omaha, you should keep your focus on users from Omaha.
- A unique persona: Your product might appeal to a group of like-minded users who don’t fit neatly into demographic or geographic boxes. For instance, a persona-focused strategy would be the choice for a product aimed at tech founders or one built as a resource for new parents.
Focus strategy narrows your field of competition and allows you to focus on satisfying the specific needs of a small group. Consider this: 10% of people are left-handed. However, scissors have been made for right-handed users exclusively for most of human history. The company that released lefty scissors in 1967 went from competing for the whole market to owning 10% of it by focusing on the needs of a single group.
Product strategy over the product development lifecycle
A product strategy is meant to provide stability to the product development process. Constant changes to a strategy undermine its ability to provide consistent guidelines and expectations for your teams over the course of development. You should take time in the initial planning stages to ideate and revise your strategy so that your long-term vision holds up across the product development lifecycle.
That’s not to say that your product strategy should never be evaluated. Even the best-laid plans veer off-course from time-to-time. Quick and routine assessments of how your current product roadmap aligns with your product strategy provide opportunities to correct “strategy drift.”
Additionally, product strategy should always be an iterative process. Your latest product strategy should be evaluated once your most recent product plan has run its course. The insights gained through a careful analysis of what worked and what didn’t will help build even more effective future strategies and thus even more successful products.
Thinking through your next product strategy? Make sure you’re measuring the right goals by following our North Star Playbook.