A step-by-step guide to creating a winning product strategy

Building a product without a strategy is chaos. Confused stakeholders, blinkered developers obsessing over details, marketers with no clue about their audience — everyone’s busy, but nothing’s getting done.

Meanwhile, your competitors are speeding ahead, leaving you eating dust. You need something to tie it all together. To provide direction and shape. To make your product thrive, not just be relevant. Enter the product strategy. 

What is a product strategy?

A product strategy is a top-level plan for how you’re going to sell your product. It includes decisions about what you’re building, who you’re building it for, and how you plan to thrive out there in the wild, plus how to measure and improve along the way. 

We’re not getting into the minutae just yet, so no numbers or metrics. But you still need to be practical and focused on realistic outcomes. “Be the best” is not strategic. “Gain 20% of the market share by the third quarter” is. Your strategy includes your target market, unique value proposition, competitive positioning, and key milestones. 

Why is a product strategy so important?

Without a strategy, you’re basically sailing a ship without a compass. Here’s why having a solid product strategy matters so much.

1. Keeps everyone aligned: Your team can work better when they all know what they’re doing. The strategy keeps everyone, from the CEO to the newest intern, pulling in the same direction. Sales people sell the benefits, customer service teams know the pain points, and developers can see how their techy tasks add up to the whole without getting swamped in details.
2. Helps you prioritize what matters: A good product strategy helps you focus on what’s truly important. Instead of getting lost in the endless list of ‘maybe-nice-to-have’ features, it helps you zero in on what will actually make a difference for your users (and your business).
3. Gives you the competitive edge: Understanding your market and your competition is a big part of product strategy. This knowledge helps you spot gaps and opportunities, allowing you to create a product that stands out and offers something unique.
4. Optimizes resource use: Resources — whether it’s time, money, or talent — are always limited. A clear product strategy helps you use these resources wisely, focusing on areas that will deliver real impact.
5. Puts the customer first: A strong product strategy is all about prioritizing the customer. It involves holding a magnifying glass up to their needs, giving you the focus you need to build something people truly want and need. 
6. Helps you manage risks: No plan is without risks, but a good product strategy helps you plan for those inevitable bumps in the road. This foresight can save you from expensive errors.
7. Helps you measure success: With clear goals and metrics in place, you can see what’s working, what’s not, and make data-driven decisions to keep improving.
8. Helps stakeholders get your plan: The product strategy sets out why and how you’re going to do what you plan to do. With this clarity and transparency, everyone’s happier and your chances of getting their support rise.

Where does the product strategy fit in the overall product development plan?

It connects your product vision and mission with the practical steps you need to take to bring it to fruition. 

After you’ve crafted your vision — a summary of why you/your product exists, like ‘we believe everyone should be able to afford niche perfumes — you’ll think about the who, what, and why of your plan. This is your strategy.

• Who is this product for, aka who are our personas? (To continue with the same example, this might be budding fragrance enthusiasts with small budgets)
• How does this solve their problems? (It will help them experience unusual, boutique scents for less)
• How will we differentiate our product in the market? (We will give users access to non-commercial scents at a price point that’s lower than anywhere else)
• What are our goals for this product? (Here, think about performance-related metrics rather than specific figures)

After you’ve built your product strategy, you’ll create actionable steps for achieving your goals in a product roadmap. From here, you’ll create your product backlog and get to work on planning sprints, milestones, and timelines. 

Let’s break this down into something called ‘the product development pyramid’.

The product development pyramid explained

The product strategy pyramid is a handy diagram that helps you align your product development efforts with your overall product plan and broader business goals. It consists of five levels: vision, mission, product strategy, product plans, and roadmap.

Image source: www.artkai.com

1. Vision: This articulates why your business/product exists. It should be inspirational, and give a clear direction. 
2. Mission: Below the vision, the mission defines the purpose of your product. It explains what it aims to accomplish in the market. The mission is more concrete than the vision, and it should be equally as motivating. 
3. Product strategy: With your vision and mission defined, you can start to shape those overarching goals into a series of approaches. Think of this as the ‘how’ part one: we’re still looking at the ‘why’ and ‘what’, but considering the practical steps to get there in a big picture way, rather than getting bogged down in the details. This is the difference between strategy and tactics.
4. Product plans: These are the detailed plans that support your product strategy. They specify the specific projects, initiatives, and features you need to develop. Product plans translate your strategy into actionable steps. An example plan might include launching a bike-sharing service, developing a mobile app for easy access, and partnering with local governments.
5. Roadmap: Last but not least. This is a tactical level doc where you map out a timeline for your tasks. It’ll include major milestones, deliverables, and deadlines, with the goal of keeping everyone on track and accountable. 

What does a product leader do?

Let’s take a moment to talk about a key figure in all of this: the product leader. 

Product managers flex their role according to the lifecycle phase. Initnially, they focus on strategy development, which includes research, ideation, and MVP development. There’s lots of refining and feedback gathering at this stage as the product finds its place in the market. 

Once the product has a foothold, the product leader focuses on growth. Scaling, optimizing, and improving customer satisfaction keep things moving forward. There might not be so many changes during this stage, save perhaps a reinvention to avoid stagnation, but refinement still holds a key place in the product leader’s responsibilities.

Product leaders also need to manage human resources throughout each phase (alongside the product manager) considering things like technical skills, marketing know-how, and assigning the right people to the right job. Alongside this, they’ll attend multiple strategy meetings, managing the range of insights and voices to keep things productive.

In summary, a product leader:

• Develops and refines the product strategy during initial stages
• Focuses on growth and retention as the product gains traction
• Adapts the product team composition based on lifecycle needs
• Works with with other departments to integrate diverse insights
• Manages strategy meetings to keep them productive and on-topic

A step-by-step guide to creating a product strategy

Let’s break it down into manageable steps. 

1. Define your vision and mission

We’ve included this step because, while it’s technically a separate exercise, both vision and mission form part of the strategy. So — start with the big picture. What’s your dream for this product? The vision is your ultimate goal. It should be aspirational and inspiring. Maybe it’s ‘to revolutionize urban commuting.’ 

Next, craft your mission. This is the ‘why’ and the ‘how’ of your product. It’s more concrete than the vision. For instance, ‘to provide affordable, eco-friendly transportation options for city dwellers.’ Your vision and mission set the stage for everything else.

2. Dive into market research

Now it’s time to get your hands dirty. You need to understand the market landscape inside and out. Who are your potential customers? What do they yearn for? What’s annoying them? This is what’s known as ‘customer discovery’. Use surveys, interviews, and focus groups, and more to gather this information. And don’t forget to check out the competition with a competitive landscape analysis. What are they doing right? Where are they falling short? All important info. 

While this comprises one step in the overall process, it’s one of the biggest and most time-consuming. This research is the foundation of your strategy. So no shortcuts!

3. Create detailed customer personas

It’s easier talking to a person than a faceless crowd. Based on your market research, develop profiles of your ideal customers. These personas should include demographics like age, gender, and occupation, as well as psychographics such as interests, values, and lifestyle. Picture your personas as real people. What are their daily routines? What problems are they trying to solve? This step helps you understand these VIPs on a deeper level, making it easier to tailor your product to their needs. 

Top tip: use a user persona template to simplify the process.

4. Establish your unique value proposition (UVP)

What makes your product stand out? Your UVP is what sets you apart from the crowd. It should clearly explain why customers should choose your product over others. Maybe it’s superior design, better functionality, or unmatched customer service. Whatever it is, make sure it addresses specific customer problems and offers seriously compelling benefits.

Some examples of USP focus areas include:

• Price 
• Usabilty 
• Niche
• Customer service 
• Features 

5. Set strategic objectives

What do you want to achieve with your product? Set clear, measurable objectives that align with your vision and mission. Make them SMART goals — specific, measurable, achievable, relevant, and time-bound. E.g., ‘increase market share by 10% in the next year’ or ‘reduce customer churn rate by 15%.”

6. Identify key performance indicators (KPIs)

KPIs are the metrics that help you track your progress against your initial goals. Tracking them helps you see how well you’re doing (or not as the case may be). They might include customer acquisition cost (CAC), lifetime value (LTV), user engagement, retention rates, net promoter score (NPS), and more. Keep a close eye on the numbers to gauge your performance and keep your decisions rooted in data.

7. Test and iterate

Before you go for a full-scale launch, it’s important to gather feedback via MVPs. Get as much user feedback as you can. Are their needs being met? Are there friction points? What do they love (and not love)? Use this data to inform your next development round and refine your strategy as you go. 

8. Collab with stakeholders 

Get team members and senior exec stakeholders involved early on. They play a big role in  whether a project is a success or not, so be transparent, and get their feedback. When they feel involved, they’re more likely to support the endeavour. But they also offer valuable insight into business needs and team capabilities, both of which are crucial to a smooth running project.

9. Plan to set your strategy in motion

Now it’s time to do the prep work. Your roadmap is a plan that sets out your product’s goals and features. It should offer a clear timeline, including a list of tasks with deadlines. Since big projects can feel daunting, break it down into short-term, mid-term, and long-term chunks to add structure and focus. 

• Prioritize strategically: Use your product strategy to prioritize items. This isn’t just about what’s urgent, but what’s strategically important. Focus on features that drive growth or give you a competitive edge.
• Break it down: Divide your roadmap into clear, manageable phases. Think short-term (next few months), mid-term (6-12 months), and long-term (beyond a year). Each phase should have specific goals and milestones tied to your strategy.
• Include key initiatives: Highlight major strategic initiatives on your roadmap. These could be things like entering a new market, launching a major feature, or improving a critical system. Make sure these initiatives are prominently featured.
• Allocate resources: Manage budget, personnel, technology, and other assets to avoid bottlenecks. Think carefully about the skill and expertise mix so your team’s a diverse and well-rounded one.
• Develop a go-to market strategy: This should include detailed plans for marketing, sales, and distribution, including the most effective channels to reach your target audience. Refer back to your strategy, specifically the USP part, and plan promo tactics based around this. The goal is to generate buzz from (if not before) day one.

10. Implement a feedback loop, monitor progress, and adapt

No one wants a stale product. Continuous improvement is key to staying relevant. Set up mechanisms for gathering and analyzing user feedback, and use this to reshape your strategy over time. Surveys, user testing, and analytics tools all come in handy here.

Your strategy isn’t set in stone. Regularly review your progress against your KPIs and objectives. Are you hitting your milestones? If not, why? Be prepared to pivot or adjust based on market changes, new opportunities, or feedback. 

Recommended product strategy business models

No need to reinvent the wheel. Here are 3 popular approaches to guide your strategizing.

1. Product-led growth, or freemium model

This model focuses on using the product itself as the primary driver for sales. Spotify has nailed this approach. They make their product so compelling that it essentially sells itself. Often, this means offering a free version that users love, which then encourages word-of-mouth referrals, organic growth, and customers signing up to a premium ad-free experience with additional features. 

This model is great for building a large user base quickly. It offers just enough value in the free version to hook users while offering enticing premium features that drive paid conversions.

2. Product segmentation

Tailoring different versions of your product to meet the needs of different personas can be a great way to capture a user base. Take Facebook, for example. 

They offer versions of their product tailored to various market segments, like personal, education and enterprise. So if, for example, you’re developing cybersecurity apps, you might create a lightweight version for consumers that runs quietly in the background, while also offering a robust, feature-rich version for IT pros that includes compliance tools and an admin dashboard. This way, you cater to the specific needs of each segment, increasing overall market penetration.

3. Lean product differentiator

Sometimes, less is more. Apple beat Blackberry by focusing on simplicity. While Blackberry’s interface was cluttered, Apple’s iPhone was minimalist, focusing solely on functionality. If your product can solve a specific problem really well without unnecessary bells and whistles, you can stand out, even when the marketplace is crowded. The lean approach makes your product easier to use and positions you as a specialist. It also exudes confidence. 

Two common product strategy problems (and how to fix them)

Nothing is ever plain sailing in the world of product development, but knowing about two of the most common issues can help you prepare. 

Outdated strategies

This happens when your product stops answering customer needs. It can happen due to a lack of regular reviews, or a lack of feedback. Misaligned teams can also be a culprit. If it’s not nipped in the bud, plummeting sales, reduced customer engagement and worst of all — irrelevance — may follow. 

Symptoms

• Declining user engagement
• Stagnant or falling revenue
• Increasing customer complaints
• Market share erosion

How to fix outdated strategies:

1. Run regular reviews: Check in to assess the relevance and effectiveness of your current approach. Involve a range of people for diverse perspectives.
2. Stay informed: Keep on top of industry trends and market changes. Subscribe to industry reports, attend conferences, and follow thought leaders in the industry.
3. Gather customer feedback: Collect and analyze customer thoughts to understand their ever-changing needs and preferences. Use surveys, interviews, and user testing to get the best insights.
4. Benchmark against competitors: Suss out the competition, including their strategies and performance. What can you learn from their successes and failures? 
5. Be ready to pivot: Don’t be afraid to make changes big and small when needed. Agility is key to staying relevant in a dynamic market.

Inherited strategies

When we inherit someone else’s strategy, it can be tricky to fully understand or believe in it. This can lead to a lack of ownership, leading to subpar results.

Symptoms

• Lack of team alignment and enthusiasm
• Confusion about strategic goals and priorities
• Inconsistent execution
• Poor performance despite following the strategy

How to fix it

1. Evaluate the existing strategy: Conduct a deep analysis of the inherited strategy. Get to know its foundations, objectives, and performance to date, noting areas that need improving. 
2. Engage stakeholders: Chat with key stakeholders about the current strategy. Gather their insights to understand different perspectives and identify gaps.
3. Align with current goals: Make sure your inherited strategy lines up with current business goals and market conditions. If not, adjust. 
4. Communicate clearly: Communicate any changes (and rationales) so everyone’s in the loop and on board. 
5. Foster ownership: Encourage team members to take ownership of the strategy. Involve them in the planning and decision-making processes to build commitment and accountability.

Top tips for a product strategy you can believe in

1. Ground your strategy in data

Confidence comes from knowing your decisions are backed by solid data. Do thorough market research and customer feedback sessions. When you know your strategy is based on real insights, it’s easier to stand behind it.

2. Set clear, measurable goals

Define specific objectives and key results (OKRs) that align with your business vision, so everything you do has real stakeholder-pleasing purpose. Good goals also make it easier to track progress.

3. Build a strong team

Surround yourself with talented, dedicated individuals who believe in the product and the strategy. A strong, diverse team can challenge assumptions and contribute to solid decision-making.

4. Learn from failures

Not everything will go as planned, and that’s okay. Treat failures as learning opportunities. Analyze what went wrong, extract valuable lessons, and apply them to future decisions. This proactive approach to learning strengthens your strategy over time.

5. Stay committed

Confidence grows with commitment. Stay focused on your vision and mission, even when faced with challenges. Your dedication will inspire others and reinforce the belief in your master plan.

6. Set measurable outcomes

Every item on your strategy should have clear, measurable outcomes. This ties directly back to your KPIs and helps you track progress. For example, if you’re launching a new feature, define how it will impact user engagement or revenue.

7. Be flexible

Your strategy should be a living document. As you gather data and feedback, be ready to adjust. This doesn’t mean constantly changing direction but being responsive to new insights and market changes.

8. Communicate clearly

Make sure everyone understands the strategy and how it ties to the strategy. Use visuals like customer journey maps to make it easy to follow. Regularly update your team and stakeholders on progress and changes, and solicit their input to help guide you in turn.

9. Review and iterate

Regularly review your roadmap in light of your product strategy. Are you hitting your milestones? Are strategic priorities still relevant? Use these reviews to make necessary adjustments and keep everyone aligned.

Use product management tools built for strategy

Product strategies are complex things, so take the strain off with product management tools built for the job. While it’s possible to do this with spreadsheets and emails, it’s a lot of effort when you can do it all with a few clicks in Backlog. Instead of hunting for documents and sending out updates, everyone (including senior and external stakeholders) can log in and see what’s going on. Best of all, it’s updated in real-time, so everyone’s on the same page.

Meanwhile, get diagramming tools on the case too. With Cacoo, you can edit a user persona template, then share it with the team. Better yet? You can integrate the two, meaning everything from milestones to workflows and data visuals are up-to-date, sharable, and fully interactive for everyone to use. Give both a try today for free.