What is a Product Strategy and How Do You Create a Good One?

What is a Product Strategy?

A product strategy is a high-level plan that describes what a company wants to achieve with its product and how it plans to achieve it. 

At the strategic level, your product strategy explains the issue that your product will solve, as well as the effect it will have on your customers. 

More tactically, your product strategy is also a roadmap for building your product, feature by feature. 

It serves as a benchmark against which you'll measure your success before, during, and after production, and lists all the product tasks that your team has to accomplish in order to achieve its goals. 

A good product strategy will help you make decisions on everything from pricing models, features of the products themselves, marketing campaigns and so on. In fact, 70% of companies consult their product strategy when making important decisions.

Companies that invest in creating a detailed product plan have more revenue, higher levels of customer loyalty, and an overall better business.

Conversely, if you don't have a plan for your products, then it's highly likely that customers won't show any interest in them –  which means fewer sales and more wasted time spent trying things out. 

An effective product strategy consists of three key points. Let's go over each one of them in more detail:

Product Vision

The product vision explains who will use your product and how doing so will benefit them. In other words, your product vision defines your target market, how you'll position your product, and how it will compete with other products in the same category.

A go-to-market strategy that outlines your consumers' needs and how you'll produce a compelling offer should also be a part of your product vision.

Product Goals

Your product goals are high-level themes that guide the individual tasks in your product roadmap, in order to ensure that you meet your overall business objectives. Typically, these goals will take somewhere between one and five years to complete.

Since these are big goals, the product team should break them down into smaller, more manageable chunks to make them actionable. 

Product Milestones

Product milestones are smaller objectives or benchmarks that you can meet as a result of building your product. They provide guidance to your development team and assist you in measuring success once the product is launched.

When setting milestones, it's crucial to make them time-bound so that you have a sense of urgency about when you'll achieve them. Very often, development teams will aim to complete milestones over sprints that last between one and four weeks. 

Product Strategy Example

Pipedrive is a CRM and pipeline management tool that helps businesses communicate with leads and track where they are in the sales flow. 

Let's take a look at Pipeldrive's product strategy using the three product strategy elements we just outlined: vision, goals, and milestones.

Pipedrive's vision is stated loud and clear right at the top of their website:

They are striving to be a tool that:

• Is easy to use
• Can help businesses close more deals
• Can optimize the flow of leads
• Offers AI and other sales automation

Extrapolating from this, we can say that Pipedrive's customers are:

• Businesses who are struggling to manage their sales flow
• Businesses who have a lot of leads but aren't closing enough

Looking at Pipedrive's pricing page, they serve businesses of all sizes, with an emphasis on SMEs and mid-market companies over massive enterprises:

Pipedrive's tool is divided into multiple elements:

So, it's easy to imagine that developing each of these elements is a separate product goal for Pipedrive behind the scenes. 

For example, I can remember when Pipedrive didn't have project management software as part of their tool; they were just a sales Kanban board with a bit of AI thrown in.

So at some point, the product executives at Pipedrive decided to make a product goal to build and release a project management element.

Since this was a big goal, it was achieved in lots of small steps. Those steps are what we referred to before as product milestones.

For example, Pipedrive's project management section has a file-sharing tool:

This tool itself was created using lots of smaller milestones, such as building and testing various different file types.

Popular Product Strategy Frameworks

Each company's product strategy is unique, but there are three frameworks that are commonly used as the basis of product strategies. There's no obligation to use any of these, but they can certainly give you a good starting point.

The three frameworks are:

• Building your strategy around focusing narrowly on one niche market
• Building your strategy around offering a quality product at the lowest possible price point
• Building your strategy around something that makes your product completely unique

Let's look at each one of these in turn.

Focusing on a niche market

If your company has a broad customer base, you might want to develop a product that caters to a single buyer persona.

This is a successful approach since it focuses on the needs of a specific group of people and develops a tailored solution for them.

It's also often more efficient to try to serve the needs of one persona than it is to spread yourself across multiple personas and use cases, especially in the early stages of your business when resources are scarce.

Offering the lowest price

The purpose of the cost strategy is to create a decent product that you can offer customers at the lowest possible price point.

To ensure this is profitable for you, you'll need to evaluate your available resources and work out where money can be saved during the manufacturing process.

This is a good technique for purchases where the buyer isn't especially emotionally involved, like cleaning fluids. When most of us buy cleaning fluids, all the products look exactly the same, and we don't feel any sense of loyalty towards a particular brand. 

In industries like this, if you can produce a product that is less expensive than your competitors, it will be a guaranteed success.

Making your product entirely unique

When it comes to differentiating a product, the price isn't the be-all and end-all.

There are a variety of other ways to stand out in your industry.

Maybe it's a high-end item made from the finest materials. Alternatively, it could have some ground-breaking features that the market has never seen before.

This strategy, whatever it is, focuses on giving your product a personality that makes it memorable and enjoyable for your customers.

How To Create A Good Product Strategy

Every product is unique, so it's difficult to create a one-size-fits-all guide to developing a product strategy.

That being said, there are some general principles that every business can follow. So, without further ado, here are nine tips to help you develop a good product strategy.

1. Identify your target audience

One of the most common reasons for a startup failure is a lack of product-market fit.

Too many businesses expect to figure out their strategy after releasing a product to the market. This rarely works out successfully. 

Sadly, it's not uncommon to find thousands of launched products on the market that are still searching for customers. Usually, these products were created to solve problems that did not exist.

To avoid becoming one of these businesses, it's essential to make user research an important part of the product design and development lifecycle so that you can understand what your potential users need.

For example:

• To better understand who your customers are and what they want, conduct a series of field studies and user interviews.
• Use this information to create personas, which are model characters that represent different user types based on the most relevant information collected from different target users.
• Personas that have been well-researched can serve as proxies for users.

2. Understand the problem

You must not only define the problem you're solving, but also determine if it's worth solving in the first place. 

In other words, does your target audience really need a solution to this problem? Are they willing to pay money for it?

You can work this out by talking to prospective customers and getting them to define their pain points in their own words. Don't focus on selling your product at this stage – focus more on understanding the problem and seeing if it's worth solving.

3. Define your product vision

Product strategy defines a product’s journey. And as with any journey, you must have a clear idea of where you want to go, so that your entire team knows what you're aiming towards. 

Here are a few things to have in mind when defining your product vision:

• Establish your company's long-term goals. When you have an inspiring long-term goal, it's easy to create a vision (i.e., what the product will look like in 2 or 3 years).
• A vision should be motivating and it's crucial to get emotional buy-in from your team members when it comes to motivation. 
• Make sure that everyone on your team is on the same page. Many companies use a video for this purpose because it's much easier to communicate a message this way.

4. Define the current state and target condition

For many companies, there are two states that can be defined:

1. Current state: the current state of your product experience
2. Target condition: the ultimate user experience that you're striving for

By focusing on exactly what you need to create, you can plan your route to the target destination. Your route will be broken down into several milestones since it's much more motivating to see progress towards a short-time milestone than it is to track progress towards a goal over multiple years.

Before your team begins working on your project, it's also important to spend time quantifying challenges that lie between the current state and the target condition and thinking about how you will overcome those hurdles.

5. Define product design principles

There's always an element of uncertainty in any product strategy — simply because there are a lot of unknown unknowns in the future. One way to deal with those unknown elements is to come up with product design principles and then commit to sticking to them when things get difficult. 

“Direction over choice,” for example, is one of Medium's design principles. During the creation of the Medium editor, the Medium design team applied this principle. They intentionally traded guidance and direction for user interface (layout, type, and color choices).

6. Stay in sync with other departments

It doesn't matter how good your product concept is if no-one else on your team knows about it. Your product strategy should be formulated as a result of cross-functional collaboration between the core teams within the company, such as design, development, marketing, and sales.

Here's a good heuristic to know if you're doing this properly. If you ask other people in your company what you're building and why, you should expect to get the same answer from everyone – regardless of what department they're in.

7. Stay focused on one use case

Don't make the mistake of trying to add too many features at once. This is called feature creep and will jeopardize the user experience, rather than making your product more valuable.

Instead, stay focused on the main features that solve the main problem your product is aimed at addressing.

For example, when Apple released its first iPhone in 2007, it had just a few features, but they were well-implemented.

Incredibly, copy and paste, one of the most important features today, was omitted by designers in the first edition of the iPhone. Since the copy and paste feature did not reach the team's minimum expected experience, it was not included.

Rather than releasing a buggy feature, they released the iPhone without it and only added it once it reached their standards for the user experience.

8. Define success metrics

Setting direction alone isn't enough; you still need to keep track of how quickly you're moving towards the goal.

Metrics allow a team to track their progress and measure their performance.

I suggest starting with Objectives and Key Results, or OKRs, if you're looking for practical advice on how to choose the right metrics. Under this model, the objectives are what you want your business to achieve, and key results are how you intend to measure progress towards those objectives.

9. Execute the strategy

I've seen businesses fail because they waited until they had all the information they needed in order to get started with implementing their product strategy.

This is a mistake. It's impossible to have all the information you need to hand, and even if you did have 100% information, the world is changing so quickly that who knows if that information would still be accurate a year from now.

A far better approach is to make the best plan you can over a few weeks and then jump in and get started. You'll be able to pivot and adjust as you go.

Conclusion

Remember: The user experience is shaped by product strategy.

When it comes to making customer experience choices, product strategy should be your primary tool. Put another way, any product design project should begin with a definition of the experience you want your customers to have with your product or service.

If you get your product strategy right, you'll deliver the right features with the right experience to the right people at the right time. 

And if you want to grow your business, there's no better way forward than that.