“More than any other factor marketing/product management’s ability to formulate and execute a clear product strategy will be the most critical determinant of a company’s fate.”
Product strategy is perhaps the most important function of a company. In a highly-competitive market characterized by emerging product categories and innovative offerings, the ability to effectively develop and roll-out a market-driven product strategy is not enough.
Companies that have developed an integrated approach to product strategy and innovation are more successful because they understand how new market drivers will affect long-term performance. As a result, they are able to quickly adapt to changing business dynamics so that they can continue to deliver value to their customers. When an organization introduces a product into a market they must ask themselves a number of questions:
- Who are the target customers?
- What benefits will customers expect?
- How is it positioned within the market?
- What differential advantage are their over competitors?
According to P. Tailor; “Marketing is not about providing products or services, it is essentially about providing changing benefits to the changing needs and demands of the customer”. Philip Kotler in the book “Principles of Marketing” devised a very interesting concept of benefit building with a product where he suggests that a product should be viewed in three levels:
- Level 1: Core product: Core benefits.
- Level 2: Actual product: Branding and differentiators.
- Level 3: Augmented product: Additional non-tangible benefits.
In the article “Product Life Cycles – Developing Your Product Strategy” by Ian Traynor writes: Understanding how markets change and how they react to your own products and services is a vital part of management and marketing strategy. If you understand the ‘product life cycle’, you will be ahead of many of your competitors!
The ‘product life cycle’ is a description of what happens to anything that we produce and sell, and it applies to all businesses, large and small. Understanding it and taking appropriate action is essential if you are to maximize the sales and profits of your business. Products go through a cycle which can be described in 4 stages: Introduction, Growth, Maturity, Decline. Although, it’s possible to defer the decline of a product by a number of strategies:
- Increased promotion.
- Enhancing the product.
- Introducing add-ons and variations.
- Finding new markets.
Inevitably, however, the life of the product ends, and unless new products are introduced, the life of the business is at risk. If your business has a number of products, it is likely that they will each be at different stages of their product life cycle. If you are to avoid a decline in overall sales and profits, the timing of introduction of new products is crucial.
A product life cycle is not fixed for all products – it can vary considerably. For example, computer items tend to have relatively short life cycles, whilst some services, such as the sale of property and real estate, can remain relatively unchanged for many years. But they will change! The key to an effective product strategy and product development is planning ahead…
In the article “New Product Strategy” by Rick Braddy writes: One way to think about “strategy” is it’s the hammer used to drive a tactical advantage you possess into a marketplace, a concept from the book “Bottom Up Marketing” by Jack Trout and Al Ries. The strategy hammer hits those tactical nails so hard, they just get driven into the market much easier and faster than they would otherwise.
Bad strategies often seem good on the surface, until you try to put them into action… Excellent strategies take proven tactical advantages and make them more powerful product strategy consisting of six areas:
- Enable Non-Consumption: Enabling non-consumers to become customers typically involves bridging one or more “gaps” that are preventing consumption, including: Wealth, Skills, Time, Access.
- Nail the Job to be Done: To attract buyers, the product absolutely must get the job done the buyer wants to accomplish. Nailing the job begins with a clear understanding of the buyer’s existing alternatives. For each alternative, we need to understand the intended “outcomes” that occur as a result of taking this approach, and importantly, the “unintended consequences” of taking this approach.
- Delight, but don’t Overshoot: It’s important to delight customers with a few “wow” features (sometimes called “Purple Cows“) and a solid product; however, it’s even more important not to over-engineer a product, which costs more money and time and then makes consumption more difficult on a broad scale.
- Master an Emergent Strategy: Anytime you are entering a market with something new, there are risks and unknowns that cannot be foreseen or planned for in advance. An “emergent strategy” is one in which your strategy and possibly certain key tactics can only be discovered once you are immersed into the marketplace, where the learning process can begin.
- Pricing/Segments: The days of attacking a broad, horizontal marketplace are gone for all but the largest corporations. Entrepreneurs and small-to-medium businesses must choose which segments or niches of a market to target and how best to price the product to compete effectively.
- Place/Promotion: Choosing the places where you will intersect with buyers is another critical aspect of your go-to-market strategy for the product. How best to position and promote the product is equally important to ensure your advertising, landing pages and sales copy resonates with your target buyers.
In the article “Product Strategy Examples” by Christopher Carol writes: Two major product strategies are price-based product strategy and product differentiation. When developing a strategy, strive to answer the following questions: ‘who is the product aimed at; what benefit the product brings; what your position is in the marketplace; and what advantage the strategy will have over those of your competitors’.
When using a price-based product strategy, the product is planned according to such things as cost-plus pricing; value-based pricing; and target-return pricing. Essentially, your strategic angle in a price-based strategy is to set the price in such a way that you get a competitive advantage over other similar products.
Use a product-differentiation strategy when there are competing products that fulfills the same need. In a product-differentiation strategy, your goal is to put distance between your product and your competitor’s product.
There two forms of product differentiation: vertical differentiation and horizontal differentiation. Vertical product-differentiation strategy focuses on improved features that the customers perceive a difference in quality due to your improvements. Horizontal differentiation focuses on your customers’ preferences when the features of your product cannot differ substantially from the features of your competitors.
In the article “4 Way to Create a Remarkable Product Strategy” by Brian Halligan writes: I think of Inbound Marketing as a step-by-step process by which you; (1) create content, (2) optimize that content for Google and social media sites, (3) promote that content through the social media-sphere, (4) you measure the results to make investment decisions, and then you rinse/repeat.
It turns out that this step-by-step Inbound Marketing process works best when you have a remarkable product to sell, so it makes sense to make step (0) be the process of creating a remarkable product or service offering. Here are a few ideas on how you might want to think it through:
- Go Narrow: The internet opens-up tons of potential customers, but it also opens-up tons of potential competitors.
- Boundary Buster: Think outside the box and include not just competitors, but also “alternatives” and innovate across boundaries.
- “Skate To Where The Puck Is Going”: Great marketers think about being ahead of the game.
- Business Model Innovation Is Better: Many companies focus too much on technology innovation and don’t think enough about business model innovation.
“A flawed product strategy is like a bad haircut: you just can’t hide it. Before you design your product, ‘design your customer’. At the root of many flawed products is a simple problem: there is no customer.”
In reality, developing the product strategy is one of the toughest challenges that companies face. Without a successful product strategy process, most businesses will ultimately fail. In its simplest form, this process is a repeatable, measurable methodology for defining and managing the company’s product strategy and product portfolio. Although, firms will often have a ‘product roadmap’ which undergoes annual reviews among a few key executives during which time resources are allocated and priorities are set.
However, having a roadmap does not constitute a product strategy process. A product strategy process must have mechanisms for incorporating the external factors (competitor strategies, new product announcements, market trends, and market forecasts-the “marketing intelligence” function), internal factors (funding, human/ development resources, access to technology, and paths to market) which will impact the success of the product strategy. It’s very important to recognize that “one size doesn’t fit all” when it comes to product strategy.
Depending on the competitive intensity within your industry, the intellectual property landscape, and your internal resources, your product strategy process may be very simple or it may be very complex. The product strategy process must be crafted to suit the needs and abilities of your specific organization. When developing a product strategy process, it’s important to avoid falling into the trap of believing common myths regarding the product strategy process, including:
Myth 1: Product strategy is only for large multi-national companies with massive budgets and “armies” of internal resources! Wrong! you need a product strategy process-regardless of the size of your company. You must be constantly adapting your portfolio to achieve or sustain a competitive advantage.
Myth 2: I have a product roadmap–therefore, I have a product strategy process. Wrong! While a product roadmap is a valuable deliverable from the product strategy process, much of the value of the product strategy process comes from assessing the market on a regular basis, collaborating with the different functions to develop the “best” strategy, and rigorously validating and revalidating your assumptions about the market. You can have a roadmap without having an effective product strategy process.
”Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful.”