Having a robust product strategy is important for almost any kind of business. Given the ever-increasing competition, only the most appealing products and services that offer real value propositions succeed over time.
In this article, we will use our experience in the subject to walk you through the importance of product strategy in achieving business goals and help you create a robust product strategy for your business. We’ll also walk you through some real-world examples of successful product strategies.

What Is a Product Strategy?

Product is the first “P” in the four Ps of marketing. A product strategy is a high-level plan that outlines what a business plans to accomplish with its product and how it intends to do so. A product strategy starts with identifying the target market and then coming up with products that would appeal to them while helping the business achieve its strategic goals.

4 p's of marketing diagram

A robust product strategy defines the following

  • Who is the target audience that the product would serve
  • What problem would the product solve for the customer base
  • How the product fits into the business strategy and aligns with the company vision

A successful product strategy would mean that the product solves a problem for the target customers and offers a compelling value proposition that is superior to what’s available in the broader industry.

In simple terms, product strategy encompasses the total product life cycle from ideation to the eventual launch and involves several business functions like sales teams, product development, marketing personnel, as well as logistics and production teams.

How to Build a Product Strategy for Your Business

Now that you know what a product strategy is, let’s dive into how to build one for your business.

1. Understand your customer base and target audience

target audience

The first step in building a product roadmap is to understand your customer base and target customers. The more you know about your target audience, the better you can sell them your product.  The product team should ask itself the following questions

  • What is the demography of our customers?
  • What are the income levels of our customers?
  • What are the needs of our customers?
  • How do our customers spend their money?
  • Where do our customers live?
  • How do our customers behave?

The next step in the product development process would be to create personas which are fictional characters outlining the target customers. These personas would help the company understand the customers better and eventually lead to the development of an effective product strategy.

2. Identifying any problems or unfulfilled needs of customers

The next step is to do customer research and identify any problems or unfulfilled needs. Successful products tend to solve a problem that others in the broader market have either not solved at all or in most cases only partially solved. It would involve intensive customer research and the organization might also take the help of third parties.

It is however important to conceptualize whether the target audience is willing or able to pay for the product and whether it would offer real customer value. Don’t build the highest quality product on the market if it would have to be too expensive for anyone to afford. Try to strike a balance that prioritizes value for your customer.

3. Define a product vision and map customer needs with business goals

Next, the company should define a product vision which is a high-level roadmap of why the company wants to develop the product and how it fits with the strategic goals. While a company might outline several product initiatives it should eventually go with the ones that are an overlap between business goals and customer needs.

By this step, you already know your target audience relatively well and have an idea of a valuable product. Now, you need to work out the specifics that will ensure that your product is the one that your target audience buys. Design what the product will look like and how it will fulfill the audience’s needs to the letter. Continue to optimize until you’re left with a valuable product that will be a breeze to market.

4. Understanding the broader market and doing a competitive analysis

As part of the product development process, the company should also study the broader market and do a competitive analysis. The product should have a unique selling proposition for which an analysis of competitors and competing products is important. You can do a SWOT analysis to gauge how you stack against competitors. The company should strive to build a product that is differentiated from competing products.

swot analysis diagram

The product differentiation strategy should consider the following aspects:

  • Cost strategy: As part of the cost strategy the company should decide whether they want to be the cost leader and offer a low-cost product or choose the premium category.
  • Quality strategy: The quality strategy would entail producing a product with higher quality than the competition. The focus here is more on quality than costs. This quality strategy is eventually linked to the product cost as quality products tend to be priced higher than mass-market products.
  • Focus strategy: The company can choose the focus strategy and build a product for a particular market. This strategy focuses on a niche section of the market which is usually a high-margin but low volume segment.

5. Building a product roadmap and collaborating with different teams

A product roadmap is a high-level summary that acts as a strategic blueprint for the product development process. For building a compelling product, it is important to collaborate with stakeholders across teams and involve product managers, salespeople, marketing teams, and supply chain executives. Communicating the product vision to all stakeholders from the beginning would help in getting different teams on board and eventually lead to seamless product development.

During this step, you can also fix the key responsibility areas (KRAs) for different teams to measure the success of different teams during the product development process.

6. Build and market the product

The next step in product strategy would be to build the product and then start selling it. Of course, this would also involve launching marketing campaigns to popularize the product. The marketing campaign and the types of platforms that you use for advertising would depend on the product, target audience, and brand.

If possible, you can build a product prototype and seek feedback from users – say for instance a free trial download of an app. This would help you adapt the product to better suit the needs of your target audience based on the initial feedback. Even if the product prototype is not feasible you should anyways seek feedback from your target audience or focus groups. This would help in refining the product and also build brand loyalty with the customer base.

Why Is a Product Strategy Important for Businesses?

A product strategy serves businesses by helping in efficient product development. It is important for the following reasons:

  • A well-defined product strategy helps the company develop products that the market needs and increases the probability of the product’s success, leading to better revenues and profits. Also, if the product is developed as per the market needs, the company might need to spend less on product marketing.
  • A product strategy outlines the responsibilities of different teams. It helps in channeling the resources properly and leads to lower costs and better-aligned efforts across the organization.
  • Product strategy helps in the team’s tactical decisions as the process involves collaboration among the cross-functional team. During the product development exercise, product managers should be ready to change the strategy to incorporate tactical ideas from other members.

A product strategy is incredibly important for companies that are operating in industries where there is high competition. Not having an effective product strategy might mean that the company loses out to its competitors.

Key Pillars of a Robust Product Strategy to Keep in Mind

A robust product strategy is quite important for the organization as it not only helps acquire new customers but also builds brand loyalty among the existing customer base. Here are the key pillars of a solid product strategy.

1. Knowing the customer base and target audience

The first key pillar of a product strategy is knowing your customer base and target market. Only by knowing about the customers can the company come up with products that offer the most value to them.

2. Market analysis

Understanding the market is another key pillar of a product strategy. Without extensive market analysis, companies simply might not have the information they need to meet their product goals. Good product strategies tend to be based on solid market research.

3. Market vision and having an understanding of your capabilities

The company should have a market vision before building product strategies. It should have a clear idea of what kind of products it wants to develop and why. Put differently, the product vision should gel with the company vision. The product initiatives should eventually be part of the business goals that the company hopes to achieve.

While building the product strategy, it is also incredibly important to have a clear understanding of your capabilities. While creating a product strategy, the business should weigh it against existing capabilities and consider the pros and cons of adding new capabilities – say a new plant for building the product.

4. Collaboration

Having all teams on the same page and collaboration, in general, are among the key elements of a robust product strategy. The product’s development would eventually depend on the performance of different teams so it’s important to consider the viewpoints of all concerned teams while building product strategies. For instance, in a manufacturing setup, the supply chain and production teams are also quite important to consider as these teams provide insights into the company’s capabilities and are eventually responsible for creating the product.

Product Strategy Success Stories

Now that we’ve explained the key pillars of a robust product strategy and the general steps to build one, let’s explore a few successful examples to help you flesh out your own strategy.

Tesla Shows How’s It’s Done

Tesla’s product strategy template is a great case study for successful product strategy building. The Elon Musk-run company started by selling its high-performance electric car called the Tesla Roadster.

tesla roadster in front of windmills
Original Tesla Roadster

Because EV tech was so new at the time, it was extremely expensive to build decent cars with it. This left only one option for Tesla’s product strategy: to build high-performance or luxury cars because this segment boasts massive margins. A cheap, market-ready EV would have been impossible.

The incredible performance features of the vehicle were also perfectly designed to attract part of their target audience; car enthusiasts. By building a limited version of a high-end product, Tesla followed the niche product strategy and was able to build its legendary brand as an aspirational product.

Its next model was the luxury Model S sedan which it launched in 2012 and was followed by the luxury SUV model X in 2015. These models helped it test the market for electric cars at a time when internal combustion engine cars ruled the market and not many gave a chance to an all-electric vehicle producer like Tesla.

As Tesla scaled up its production capacity and created a market buzz with its cars, it pivoted to budget cars with its Model 3 sedan in 2017. The model helped the company achieve scale and it next launched the Model Y crossover which helped it cater to the demand for budget all-electric SUVs.

tesla cybertruck

To fulfill yet another unfilled customer need, the company is next launching its Cybertruck pickup model. It will be one of the first EV trucks to be mass-produced. The model is an example of a differentiation strategy as its shape is rather unconventional, grabbing the attention of anyone who runs across it.

Tesla’s success is an example of how a company identified an existing customer need that competitors ignored. While other automakers have tried their hands at electric vehicle models long before Tesla, none gave it the kind of attention that Tesla gave.

Tesla didn’t just build another car but with an EV drivetrain instead of a combustion engine. It carefully built a product strategy around its target audience and the results are obvious as they are the largest automaker in the world by a large margin.

The Greatest Product Strategy of All-Time: the Apple iPhone

When you’re looking for valuable insights from successful product strategy examples, you have to look at Apple’s product strategy for the iPhone. Apple exploited an unmatched opportunity when it realized that it could be the first company to bring a viable product to the market that would combine the capabilities of a traditional cellphone with that of a computer operating system.

original iPhone
Original iPhone

Apple was able to target customers effectively and show them the value of the new product clearly. The iPhone was an instant hit with 1 million units sold in just 74 days of its launch.

iPhone has followed a premium product positioning and is often the gold standard for many other smartphone brands. Like Tesla, Apple has also kept the product strategy quite simple, and instead of launching multiple models, it refreshes its familiar iPhone every year. Every new upgrade adds new capabilities to the product and makes the value proposition even better for the users.

All Apple products conform to its vision, which is to “bring the best user experience to its customers through innovative hardware, software, and services.” It has chosen to be a quality leader rather than a cost leader and the results are reflected in its financials. While Apple iPhone accounts for just over 28% of total global smartphone shipments, its share in total industry profitability was 85% in Q2 2023 up from 82% in the previous quarter.

apple smartphone market chart

Higher iPhone sales fit into the broader business strategy of Apple as the company’s installed base is now over 2 billion. Through the iPhone, Apple has managed to increase its customer base which is now a captive market for cross-selling other products.

Netflix and the streaming strategy

Netflix is another example of a successful product strategy as the company fulfilled a customer need. The idea for Netflix came up when its cofounder Reed Hastings had to pay a $40 penalty for being late to return the Apolo 13 DVD to Blockbuster. Along with Marc Randolph, he started Netflix in 1997 wherein users could order DVDs by mail.

netflix dvd mailers

In 1999, the company changed its product strategy and moved to the subscription model as it realized that returning the DVDs was still a pain point for customers. Under this model, the users could keep the DVD for as long as they wanted and then replace it with another one.

In 2000, the company came up with a new product strategy wherein users could rent an unlimited number of titles a month – four DVDs at a time. It also did away with the penalty for returning the DVDs late – a strategy which was a hit among users. It offered a better product compared to rival Blockbuster which eventually shut down as it could not evolve its product strategy in line with the changing market dynamics.

netflix on a TV with someone holding a remote

In 2007, the company finally launched streaming and to test the product, it offered the service to only select users initially before later expanding to all of its customer base. International expansion followed soon and Netflix now has over 238 million subscribers across 190 countries. The company also started offering original content which has now become a key driver of the product’s success.

The company hasn’t yet lost sight of its target audience and after years of advocating ad-free streaming, last year it added an ad-supported tier to cater to customers who are not averse to ads if it means a lowering monthly subscription price.

These examples of product strategies show that it’s important to build the best product strategy from the beginning as possible but they also reinforce the importance of constant optimization.

Is a Comprehensive Product Strategy Imperative for You?

A comprehensive product strategy is imperative for businesses of all sizes. The world has come a long way when in 1909 when referring to the pathbreaking Ford Model T Henry Ford said “A customer can have a car painted any color he wants as long as it’s black.”

Since the customer is now split for choices, having an efficient product strategy helps your business compete efficiently with others and come up with products that the customers desire which would eventually pay back in terms of higher sales and profits.

While the scale of product initiatives would vary based on the scale of the business, most companies should have a product strategy that can be quite basic for a small organization to a well-laid-out long-term market vision for bigger companies.

There could be some exceptions, especially in industries where there is little to no product differentiation – say in the mining, chemical, or general medicine industries. In such industries, the companies should instead focus on being the cost leader as they can then not only command higher margins but also survive any price slump much better than their peers who have a higher cost structure.

To sum it up, a strong product strategy makes perfect sense for most companies as the time and efforts would eventually pay back in terms of financial returns.