Chapter II

Product Strategy

A product strategy draws from the ultimate vision of the product. It states where the
product will end up. By setting a product strategy, you can determine the direction of
your product efforts.

Similar to making effective use of a map, you first need a destination, and then you can
plan your route. Just as a business has a strategic vision of what it wants to be when it
grows up, the product has its own strategy and destination.

The product strategy forms the basis for executing a product roadmap and
subsequent product releases. The product strategy enables the company to focus on a
specific target market and feature set, instead of trying to be everything to everyone.

Elements of a product strategy

When defining your product strategy be sure to answer the following questions.
Note that each question below links to an article that further develops the topic, so make
sure to review the linked articles as you create your strategy.

Who are you selling to?

Define your target customer or market. Identify whom you are selling to, and what that
market looks like.

What are you selling?

Describe how potential customers will perceive your product compared to competitive
products. Understand what makes your product unique in the market.

What value do you provide your customers?

Determine what problems your product solves for customers. You cannot be everything
to everyone within a particular market, but you can help to solve specific problems.
Create a value proposition to position the value you provide and the benefits that
customers will receive with your solution.

How will you price your product?

State how you will price the product. Include its perceived value and a pricing model.

How will you distribute your product?

Describe how you will sell your product, and how your target market will acquire your
product.

Creating your product strategy

To create your product strategy, start with identifying the market problems you would
like to solve. This includes interviewing your target market, understanding the
competitive landscape and identifying how you will differentiate yourself.
Your product strategy will change over time as you learn more about your market, and as
(if) you decide to enter different markets. Listening to your market and developing your
product strategy is a circular process; as you learn more, you will evolve your product
strategy and the problems you solve.

Example: Product strategy

Here is a brief example of a product strategy. Your product strategy will vary, and will
probably be longer, but should follow the theme of the five questions above.

 We build quality kitchen hardware for residential kitchen customers.

 Our customers are young North American families who want kitchen hardware
that can stand the wear and tear of young children. They are interested in
materials that are safe for children and eco-friendly.
 We sell our products through a retail channel.
 Our products are priced per unit, and are considered “high-end” hardware
solutions.

Power of the product strategy

The power of a product strategy comes from what you define as well as what you
exclude. By identifying a particular target market in your product strategy, you are also
excluding other markets. This helps your company to understand which projects fall
outside the product strategy and distract from strategic goals.

Summary: A product strategy outlines a company’s strategic vision for its offerings

by stating where the products are going, how they will get there and why they will

succeed.

s part of your startup’s strategic planning, you will need to work on your
product differentiation strategy. Product differentiation is the singling out of the one
element of your product that creates its benefit and makes it unique, and which has
relevance for your customer.
To succeed with your product differentiation strategy, you need to understand the type of
market in which you will compete. Startups entering or re-segmenting an existing market
need to differentiate their product from those of their competitors. Startups creating a new
market do not need to do so as they will not have immediate category competition by
definition—at least not in the early days.

Strategic planning: When to start work on your product differentiation strategy

Commence the initial work on your product differentiation strategy in the early stages of
your startup as you develop your value proposition, protect your intellectual property (IP)
and design your product. During this strategic planning process, you should consider
what your target customer wants from your product that is not offered by competing
products.

Later, when are ready to launch your product, you need to feature your product
differentiation in your messaging to your market. This is part of the product process.

For startups following Steve Blank’s Customer Development Model, product

differentiation takes place during the customer creation stage, after you have completed
the customer discovery and customer validation stages.

Product differentiation strategy in an existing market

Startups looking to compete in an existing market need to identify how they will position
their company. Once this element of strategic planning is done, you are ready to
differentiate your product from your competitors. In The Four Steps to the Epiphany,
Steve Blank writes that product differentiation in an existing market can take one of three
forms. The product differentiation strategy can focus on:

1. Differences in product attributes (e.g., cheaper or more powerful)

2. The appeal of its distribution system (e.g., delivery straight to the customer’s door
or having customers be able to access the product directly online)
3. The nature of the service you offer (e.g., a lifetime warranty)
In an existing market, customers will already be familiar with the type of product you are
offering. With this knowledge in hand, customers will recognize the characteristics on
which you differentiate your product. Part of your success will depend on whether your
differentiation resonates with customers.
The strategy canvas: A strategic planning tool for product differentiation

The strategy canvas is a useful tool for strategic planning around product differentiation.
You can use it to visualize the competition in your market and to see where the
opportunities for differentiation occur.

Product differentiation strategy in a new market

In a new market, product differentiation is broader and less effective, as the market does
not yet exist and nor do your competitors. Rather than differentiating, it is more effective
in a new market to focus your positioning on the overall customer problem and the
unique value your solution offers. Bear in mind that in this environment, customers will
not yet have the background knowledge to comprehend the differentiating value of the
singular characteristic(s) of your innovation.

Product differentiation strategy in a re-segmented (low-end or niche) market

Startups who redefine an existing market into either a low-end or a niche market need to
shape their positioning and product differentiation strategy for a blend of both an existing
and a new market. While you will be competing in a newly created market (i.e., the one
you have just re-segmented), the type of product you are offering will be familiar to
customers and so the background knowledge will exist for customers to understand your
product differentiation.

In essence, the creation of a re-segmented market happens through a significant

differentiation process.