Product strategy is among the most important competencies of a company. Product strategy is based on market and customer requirements and takes into account your organization’s capabilities in terms of development, production, and distribution as well as the competition’s products and competitors’ probable moves and responses. Therefore, anyone involved in product strategy needs to know how to conduct and use market research. Yet, this is often one of the most difficult undertakings for many companies.

Many companies don’t have the skills or resources to conduct market research. If that’s your situation, seek help from experts. Some firms tend to rely on their own ideas and instincts. And for truly innovative category-breaking products, customers may not actually be able to give you the insight you need. Users of existing products may not even realize they would be interested in an alternative. How many customers of cell phones in the mid-90s would have said they wanted data or graphic capabilities on their phone? How many PC users in the 90s would have said they wanted to be able to watch video from their computer?

Using customer and market research to evaluate a long list of features generally travels down the lowest common denominator path- selecting features that will affect everyone but not necessarily help you develop a truly innovative product or a product that will meet a very specific need very profitably. So how do you use market research to create a product strategy? Rather than focusing your research on actual features, focus on understanding the needs and psychology of your customers and the market. Try to understand how they live and work, what they care about, their challenges, and aspirations. Look for things that actually stand out and enable a product to serve a large enough market. Also consider alternatives to conducting research to create a big, expensive, complex product that will result in everything but the kitchen sink, and therefore a product that must be everything to everyone in exchange for identifying opportunities to bring a product to a specific market that will result in a huge win for that segment.

Develop a Customer-Centric Product Strategy — 3 Key Customer-Centric Steps

3 Steps to Trigger Your Product Strategy

So how do you get started, especially if resources (money, time, people, skills) are limited? Take these three steps to help determine the market opportunity, shape your product strategy, and frame your market research:

1. Get A Lay Of The Land. Spend a week digging through existing research, market trends, market dynamics, competitors, technology trends, market forecasts, consumer data, etc. This won’t help you create the product strategy nor validate any product hunches, but it will help you begin to see the big picture and potentially see the relationship between random pieces of information. When you complete this step, see if you can write 2-3 possible scenarios of the future based on your findings.

2. Complete A SWOT Analysis For Each Scenario. For each scenario, complete a SWOT analysis.

Strengths: What are the product strengths that differentiate it from the competition? What organizational strengths do we bring to the table?
Weaknesses: Where are features lacking or underdeveloped? Are there alliances or organizational weaknesses that erode market share?
Opportunities: Where can we differentiate the product? What strategies can we put in place to gain greater market share?
Threats: How could this product fail? What factors in the market or the roadmap can bring it to obsolescence or cause it to lose market share?

Use the SWOT analysis to assess the competitive landscape and to generate and assess your organization’s assets and liabilities. SWOT will not help you define the product or set product objectives, but it will help you evaluate the degree of risk and opportunity, and to what degree you can achieve each scenario. When you’ve completed the SWOT analysis, identify which scenarios you can most likely successfully and competitively develop, launch, and deliver a product to the market.

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3. Shape Your Strategy. Now that you have a scenario, you can use the Five/Six Forces Model (Michael Porter) to dive deeper into the market dynamics of where you are investigating a product. Each of the forces evaluates the competitive intensity of a market. If there is intense competition, there is both strong interest from potential buyers to purchase a product and business model(s) that ensure companies make a profit to meet this demand. To refresh your memory, the forces include:

Competition for your product.
New entrants that would compete in your space, often with new business models.
End users/Buyers and their bargaining power on influencing price, integration, and concentration.
Suppliers of raw materials, components, and services for your product and their bargaining power on business strategy.
Substitute products and those factors that influence them (cost of product, perceived value, cost to switch, etc).
Complementary products/ The government/ The public. This 6th factor takes into account strategic alliances and how the government or public can influence business strategy for a particular product.

This step enables you to investigate whether there is a market for a product. After completing these three steps, you can then decide whether to invest in conducting quantitative market research. The result of these three steps will help you frame what market research is actually needed and whether you can do it on your own or if it makes more sense to seek help.

4 Measurement Categories Companies Need to Monitor

You’ve decided your product should be brought to market. Awesome! You’re going to need some measures and metrics. Many Marketing organizations have few metrics around products other than those related to demand generation. Here are four categories of measurements related to products every company should monitor:

Financial: Financial metrics are the most common and are used to manage a product. Most of us set and monitor costs, revenue, and profits associated with a product.
Marketing and Sales: These metrics are related to customer acquisition. We are most familiar with metrics in this category around demand generation/opportunity flow and lead cost and quality. Other key metrics to monitor in this category for new products are trial and rate of market penetration, which we discussed previously.
Customer: These metrics include retention/defection rates, share of wallet, and referral rates. For new products, a key metric to monitor is the rate of product adoption.
Operations: Customers who have a poor experience, whether when investigating the product, purchasing it, or using it, may not return. In fact, they may decide to move to a competitive product, potentially taking others with them. Companies should establish metrics around product availability, speed of delivery, etc., and determine how these metrics relate to product acceptance and customer loyalty.

Before a product is launched, establish quantifiable outcomes and performance targets associated with both the launch and the product. Select owners for each of the categories. Team members responsible for the product should track the metrics and report on progress, providing recommendations when the numbers fall below the forecast.

FAQ:

(written by Penn of Sintra.ai)

Q1: Why is product strategy one of a company’s most important competencies?
A: Product strategy is based on market and customer requirements and considers your organization’s capabilities (development, production, distribution), competitive offerings, and competitors’ probable moves and responses. Because it sits at the intersection of customer value, organizational capability, and competitive dynamics, it directly affects growth and risk.

Q2: Why is market research essential to product strategy—and why is it difficult for many companies?
A: Anyone involved in product strategy needs to know how to conduct and use market research. Yet many companies lack the skills, time, or resources to do it well. In those cases, it’s often best to seek expert help rather than rely solely on instinct.

Q3: Why can’t companies rely only on customer input for innovative, category-breaking products?
A: For truly innovative products, customers may not be able to articulate what they want because they have no reference point. Users of existing products may not even realize they would be interested in an alternative. (For example: few cell phone users in the mid-90s would have asked for data/graphics; few PC users in the 90s would have asked to watch video on their computer.)

Q4: What is the risk of using research to evaluate a long list of features?
A: Feature-based research often drives decisions toward the “lowest common denominator”—selecting features that apply to everyone but don’t create meaningful differentiation. The result can be a big, expensive, complex “everything but the kitchen sink” product that tries to be everything to everyone.

Q5: What should market research focus on instead of features?
A: Rather than focusing research on features, focus on understanding customer and market needs and psychology—how customers live and work, what they care about, their challenges, and aspirations. Look for what stands out: the needs and conditions that can support a large enough market or a highly profitable segment.

Q6: What are three customer-centric steps to trigger product strategy when resources are limited?
A: If money, time, people, or skills are constrained, start with these three steps to determine market opportunity, shape product strategy, and frame what research is actually needed.

Get a lay of the land: Spend a week reviewing existing research, market trends, market dynamics, competitors, technology trends, forecasts, and customer data. This won’t validate a product hunch, but it helps you see the big picture and relationships across information. At the end, write 2–3 future scenarios based on what you found.
Complete a SWOT analysis for each scenario: For every scenario, assess:
- Strengths: What differentiates the product? What organizational strengths do we bring?
- Weaknesses: Where are features lacking/underdeveloped? Are there alliances or organizational weaknesses that erode share?
- Opportunities: Where can we differentiate? What strategies can increase share?
- Threats: How could the product fail? What could make it obsolete or reduce share?
  Use SWOT to evaluate risk and opportunity and determine which scenarios you can most likely develop, launch, and deliver competitively.
Shape your strategy using Porter’s Five (or Six) Forces: Once you select a scenario, use the Five/Six Forces model to evaluate competitive intensity and market dynamics:
- Competitive rivalry
- Threat of new entrants (often with new business models)
- Buyer/end-user bargaining power (price, integration, concentration)
- Supplier bargaining power (materials, components, services)
- Threat of substitutes (cost, perceived value, switching costs)
- Optional 6th factor: Complementary products, strategic alliances, and/or government/public influence

This step helps determine whether a viable market exists and clarifies whether quantitative research is warranted—and what research is actually needed.