How to Develop a Product Strategy: 3 Ways Market Research Can Help
What is a product strategy
The 4p’s of marketing: product, price, placement and promotion are the centre of many businesses strategies. Product refers not only to the physical configurations and details of the product or service, but also the vision, development, positioning and future changes.
So, what is a product strategy?
A product strategy defines:
- What the product qualities are
- What problem does the product solve for clients
- How is it relevant or better than competitors
- Who are the buyers
- How will the product evolve over time
Why should you have a product strategy?
A company whose product does not solve a problem, meets consumer needs or does not add value does not have a long future. That is why a product strategy is so important.
By creating a sound strategy, your company can avoid costly mistakes related to product development and the manufacturing process. With a defined product strategy, uncertainty around the product disappears.
Fictitious company Food and Drinks Inc. has a diversified portfolio but does not have a clear product strategy. Their R&D department is working to reduce the amount of sugar in their foods, but the marketing department is focusing on developing new products that are natural or organic.
At first glance, the two long-term goals might look related. Without a product strategy, though, the R&D team might be looking for an artificial replacement for sugar, while the marketing department would prefer to include only natural ingredients in their products. A clear product strategy could help to avoid this misunderstanding.
Product strategy goes well beyond characteristics. Some questions to answer when creating your strategy include:
- Which market segment are we targeting?
- Who is my target consumer?
- What is considered a winning product from the market’s perspective?
- How are your products better than your competitors?
- What are your product’s strengths and weaknesses?
Using market research to develop a product strategy
Market research can assist businesses with their product strategy by identifying growth opportunities. When developing a strategy, businesses must consider how their product or service solves consumer problems, how their product is different from others and how their competitors address the same consumer needs.
Understanding the consumer needs
The core of a product strategy must focus on the needs of its consumers. Market research plays an instrumental part in anticipating those needs. For example, using resources identifying top consumer trends or megatrends analysis, can help your organization better understand underlying consumer preferences, what will be popular and how this could impact your business. Whether consumers crave convenience, healthy living or experiences, you can use that information to make a product that meets those desires.
Once you have more data and analysis on your consumer, you can tailor your product focus. The product should add value to your customer in a meaningful way; therefore value components should become the central focal point during strategy development.
Market fit analysis
Developing your products and understanding current product offerings
Evaluate and decide on market entry using research in your product strategy. For example, maybe you are interested in high growth rates, or a mature market that needs innovation to revitalize growth. Whatever the case may be, research will help you determine which market is a better fit.
Beyond market analysis, you need to understand your target consumer. Who is your consumer? What are their needs? What are they looking for? What problems can I help them solve? These are all questions you should be asking when developing your strategy.
Fictitious Food and Drinks Inc. wants to develop a new product strategy for its snacks business, but they are not sure they have a good market fit.
Using syndicated market research, Food and Drinks Inc. identifies key trends in the packaged food market. The company discovers that the global consumption of snacks is shifting from sweet to savoury options. This data gives them a clear idea of want kind of portfolio they want to develop as the company works on consolidating their snacks business.
Moving beyond market sizes and shares of various snacks, Food and Drinks Inc. still needs more information to understand why these changes are happening. By looking at additional market research such as Health and Wellness Market Outpaces Standard Food and Beverages, the managers at Food and Drinks Inc. learn that the growth of healthy categories is outpacing their regular category counterparts. This additional analysis has allowed Food and Drinks Inc. to identify markets that are the best fit in terms of “good for you” snacks within their portfolio.
Where do consumers go to buy your product?
Channel or placement considerations can affect the format of the product thus it is important to understand where your consumer is currently looking to buy goods or services. According to Euromonitor International’s data, global internet retailing grew 87% from 2011 to 2016. In the same period, store-based retailing rose only 6.4%. While internet powerhouses like Amazon and Alibaba have both captured the marketplace, more and more players are developing disruptive offerings. When deciding on the vision or future product developments, data on omni-channel retailing and ecommerce could be critical to your strategy.
Evaluating your competitors
If you understand your competitors and their products, you can differentiate your product strategy. A company must learn to quickly compete for consumers’ short-attention spans and communicate how its products are different or better. For example, you might look at historic company and brand shares data to identify the top competitors in a particular category, how concentrated the market is, or if certain brands have become more popular over time.
As Food and Drinks Inc. further develops their snack portfolio, they want to take a look at what companies set the global standard in the category. This type of information can be found in company and brand shares and corresponding global company reports.
Using this market research to determine key snacks leaders, Food and Drinks Inc. replicates Pepsi’s snack business strategy and develops a product concept that resonates with their target consumer.
When developing a product strategy, there are three main components that you should address: the consumer, the market and your competitors. Each helps answer the questions we outlined in this article.
The goal of a product strategy is to better understand your product and potential changes it might take in the future. This could help revolutionize an old product entering a maturity stage or develop a new and innovative product.
Market research supports the creation of a definitive product strategy, helping exceed business targets. Euromonitor International’s market research can help. With data and analysis on more than 30 industries in 100 countries globally, we help develop your product strategy by identifying key markets for entry, competitive analysis, surveying consumers and identifying underlying consumer trends. Contact us or request a demonstration of Passport to learn more.