Highlights
- A formal product strategy acts as a north star for your product development
- It includes a product vision, clear goals, user personas, and USPs
- Learn the four business models that drive product strategies
- Find out how to pair your product strategy with a conversion-optimized marketing strategy
A product strategy is a high-level plan that defines what your product does and identifies who it will serve and how it will benefit them.
Not only does a product strategy define the direction of your product, but it also helps your team stay aligned with the company’s goals and customer needs and explains how your product will achieve those goals across its entire lifecycle.
In this blog post, we’ll take a deep dive into how to craft an effective product strategy, discussing its fundamental components and different business models that support successful strategies.
What is a product strategy?
A product strategy is a blueprint for how the product will fit into the market, what its unique value proposition will be, and how it will evolve over time.
A product strategy defines clear goals, a target audience, and unique selling propositions (USPs) that users will find beneficial.
For example, a product strategy for a company that sells solar panels will outline how solar panels will reduce homeowners’ energy consumption, what impact that will have on the environment, and how much customers can expect to save in costs over time. It would specify the USPs that set this company’s solar panels (or business model) apart from others, such as specialized technology, a green manufacturing process, or a competitive pricing strategy.
Why do you need to have a product strategy?
A product strategy serves as a helpful guide for organizations and is essential for long-term success. Here are the reasons why:
- Gives you alignment across the team: A product strategy provides clarity on the product’s vision, goals, and initiatives for the entire organization. It ensures that everyone, from the product team to marketing and sales, is aligned on the product’s purpose and direction. Without a product strategy, teams may be unfocused and unable to make impactful decisions.
- Prioritizes your roadmap: When resources are limited, it’s hard to decide how to allocate your budget. A product strategy allows product managers to make informed decisions on which features to prioritize.
- Helps with decision-making: Using the product strategy as a reference point, teams can make better tactical decisions throughout the product’s lifecycle. When internal or external changes occur, the strategy provides a framework for adjusting plans while staying true to the product’s core objectives.
- Magnifies customer focus: A product strategy grounded in user research and insights helps ensure that the product is designed to meet customer needs. It also allows the team to develop features that address specific pain points and differentiate the product from competitors.
- Increases likelihood of market success: By defining the product’s unique value proposition, target market, and goals, a product strategy increases the likelihood of achieving product-market fit. It guides the development of a product that resonates with the right audience, solves user problems, and is positioned well against competitors.
Key elements of well-crafted product strategies
Effective product strategies have several key elements in common. The best product strategists accomplish the following:
1. Define your product and market vision: First and foremost, they define a clear product vision about your product’s long-term mission. The vision should be aspirational and static, serving as a guiding light for your team. For instance, a fitness company may have a fitness app with a vision to “empower users to lead healthier lives through tailored fitness and nutrition insights.”
2. Understand your target market: Before developing a product strategy, market research must be conducted to identify and understand your target audience. Gather insights on user needs, preferences, and pain points. Create user personas to connect and empathize with your customers and tailor your product to meet their specific requirements.
3. Set clear product goals: Develop specific, measurable, attainable, relevant, and time-bound (SMART) goals that align with your product vision. Your goals need to address key problems and provide a tangible way to measure progress. For example, a clear goal could be to increase customer retention by 20% year over year through improved onboarding and user experience. These goals not only guide your team but also provide a straightforward way to measure success.
4. Identify unique selling propositions (USPs): Determine what makes your product different from competitors in your space. Highlight your USPs that attract your target audience. This could involve innovative features, a superior user experience, or better pricing strategies.
5. Develop the right product initiatives: Translate your goals into actionable initiatives. These initiatives should be significant objectives that your team can break down into smaller tasks. For example, to improve the onboarding experience and achieve higher customer retention, you might introduce a rewards program or in-app incentives to encourage loyalty.
Product strategy business models
There are various business models that can inform the direction of your product strategy and drive growth and revenue. Companies may use one business model or a combination of two or more.
Let’s take a look at four different business models and the characteristics of each:
Product-led growth (PLG)
In the product-led growth (PLG) model, the product itself is the main driver for acquiring and retaining customers. The focus is on making the product so valuable and easy to use that it attracts users without significant marketing and sales efforts.
Key elements of PLG include:
- A frictionless user experience
- Popular, viral product features that are easily shareable
- Self-service onboarding and learning
- Product improvements based on user feedback
Companies like Dropbox, Slack, and Zoom have successfully used PLG to quickly scale their user bases and revenue.
Slack became a go-to tool for businesses and organizations by offering a user-friendly, feature-rich platform with a seamless onboarding process. Its success stems from a product-led approach, allowing users to explore most features for free while ensuring that large enterprises still receive hands-on support from Slack’s sales team when making big decisions.
Product segmentation
Product segmentation involves tailoring your product into different versions to satisfy specific user personas. Doing so allows you to optimize each version of your product to meet the unique needs of those specific customer segments.
Key elements of product segmentation include:
- Identifying different, specific user personas
- Tailoring product features for each segment/user persona
- Offering customized pricing models
During the pandemic, Zoom’s targeted segmentation helped it thrive by catering to diverse groups, from individuals and SMBs to large enterprises, education, and healthcare sectors. Its seamless integration with third-party apps made it a vital tool for remote work, virtual classrooms, and maintaining business productivity.
Freemium Model
Offering a free basic version of your product, also known as a freemium model, is a popular strategy for driving adoption, especially for software-as-a-service (SaaS) companies.
It’s a way to attract customers to your product without risk. Users will get value from a basic version of your product and will be incentivized to upgrade to paid plans with premium features.
Many, many companies have used the freemium model to grow their user bases and convert free users into paying customers – a few examples include Spotify, Dropbox, and Slack. This model is best suited for products where the incremental cost of adding a user is low.
Since its launch in 2008, Dropbox reached 100 million users in just four years. Today, it boasts 700 million users and generates $2.5 billion in annual revenue. Dropbox’s pricing strategy, centered on the freemium model and a customer referral program, fueled its growth in the SaaS industry. By offering a free plan with generous storage, Dropbox attracted millions of users and turned them into advocates through word-of-mouth referrals, driving rapid user acquisition and brand growth.
While the freemium model attracted a large user base, Dropbox’s tiered pricing plans helped monetize and retain customers by offering different features and storage capacities.
Bundling
Bundling is a model where you package your product with complementary offerings to create a more compelling value proposition. Using this model can increase customer value, encourage cross selling or up-selling, and help you reach new audiences.
Key elements of bundling include:
- Identifying synergistic products or services
- Offering a discounted price for the bundle
- Ensuring that the combined offering creates a 1 + 1 = 3 effect for customers; in other words, the bundle should add value for the customer
You can bundle hardware with software or multiple software products together. For example, Microsoft bundles its Office 365 productivity suite with cloud storage, video conferencing, and other tools to drive awareness of and adoption of its broader ecosystem.
Previously, Windows was the go-to platform for running Office, but now users want flexibility to work on any device—whether Android, Mac, iOS, or the web. Microsoft’s focus has shifted to offering a cloud-based ecosystem through Microsoft 365 (M365), which combines management, security, and productivity features using Azure Active Directory. M365 also integrates with third-party solutions, managing devices like iPhones and Androids, while securing data with tools like Azure Information Protection.
Market your product strategy with conversion-optimized landing pages
Once you’ve created a solid product strategy, you’re ready to go to market. One of the most powerful ways to market your product strategy is through conversion-optimized landing pages.
These pages should be tailored to specific ad campaigns and should clearly and captivatingly highlight your product’s key benefits, USPs, and features.
If you start an ad campaign offering 10% off your product, you’ll want to link to a dedicated landing page with similar messaging and imagery to elaborate on the value of your product and make it easy for users to sign up. A well-designed landing page can significantly boost conversions.
Instapage is a leading landing page builder and is popular thanks to its drag-and-drop builder, intuitive interface, pre-built templates, powerful A/B testing, and plenty of customization options.
With a 14-day free trial, you can dive right in and see how easy it is to design conversion-optimized landing pages and increase leads. Start a 14-day free trial of Instapage today.
FAQs
1. What’s the difference between the product strategy, product roadmap, and product backlog?
A product strategy outlines high-level visions and goals for the product. A product roadmap breaks down a timeline for the product’s specific features. A product backlog is a list of tasks and improvements that the development team will work on.
2. How can product managers build effective product strategies?
Product managers need to invest time and research into building effective product strategies by understanding customer needs, defining clear goals that align with the company’s overall vision, conducting market research to understand the competition, building user personas, and involving cross-functional teams to ensure buy-in.
3. What should a product strategy include?
A product strategy should include the product vision, target audience, key goals and timelines, unique selling propositions, and actionable initiatives to guide the development of the product.
4. What are the different types of product strategies?
There are different business models that inform product strategies, including product-led growth (PLG), product segmentation, freemium models, bundling, and more. Teams can choose to use one business model or a combination of two or more.
