Product Development Strategy: An Ultimate Guide with Examples

02 Dec 2021

Do you know how vital a good product development strategy is to successfully develop and market a product or product line? Without a properly designed product development strategy, any new or existing product runs a considerable risk of failure to market, leading to loss of energy and resources.

The product development strategy includes the forms and actions used to market a new product or modify existing ones to enter new markets. Product development consists of several steps, from producing an idea to distributing products to customers. Every stage requires the strategy to be successful and generate income for a company. We will discuss all aspects of product development strategy through this blog.

What is a Product Development Strategy?

Product development strategy enables organizations to create a stream of innovative offerings that attract customers and competition. Product development strategy is a subgroup of corporate strategy. It sets the direction for new products by defining goals and funding decisions.

The primary reason for the product development strategy is to gain competitive advantage by placing the product supply in the best possible position to drive business objectives such as profit, revenue, and sales growth.

Why is Product Development Strategy Important?

Product development strategy is important because it uses market research to develop a plan for product sales success. Your overall strategy should consist of the methods that you will use during each stage of product development.

This can assist you in overcoming obstacles and focusing on the most effective strategies. Creating plans on how to develop various products can also allow you to adjust existing products and grow your business.

Benefits of Product Development Strategy

Here, we will list down the benefits of the product development strategy. Get a quick look:

Offer a Trial

Offering a free or less expensive sample version of your product can convince customers to give your product a try that they otherwise would not have bought the full version. This strategy is based on the quality of the product, assuming that several customers who experience the trial will purchase the full version. Providing a free trial can show customers how they can get an advantage over the rest of your products.

Increase the Value of the Product

Value can be increased by having products in bulk, including premium features, or by adding customer support programs. Existing customers can buy your products to get a better deal, while new customers will come because of the added benefits.

Create Package Detail

You can encourage customers to buy more of your product by creating deal packages. This strategy exposes customers to multiple types of your products via assortments or sample packs that could solve various issues for the customer. An array of deals can introduce customers to a product they might not have bought and encourage future purchases.

Specialize and Personalize

Products can also be personalized or specialized for a specific group of customers to create a unique and personal gift. Customizing the product based on the lifestyle and needs of customers can help them choose your product over a competitor's product that only offers a general version.

How to Develop a Product Development Strategy

The product management team plays a crucial role in product development, acting as strategic directors of the process. Product development is a broader process that involves the coordinated effort of many teams in a company, including:

• Product management
• Design (UX / UI)
• Development (or manufacturing)
• Marketing
• Testing and quality control
• Sales
• Maintenance and support

Stages of Product Development

Creating new products and services can be a process full of uncertainty. However, following the systematic product development procedure helps companies gain confidence and clarity in what they are developing.

Stage 1: Generation of Ideas

The goal should be to generate many valuable ideas that can form the basis of your new product development strategy. The main focus at this stage is to organize brainstorming sessions where solving customer problems is prioritized.

This phase is not about creating foolproof ideas that are ready for execution. Instead, raw and untested ideas should be discussed, which can be shortlisted later.

Stage 2: Screening

The ideas generated must go through a selection process to filter the viable ones. The company seeks opinions from clients, workers, and other companies to avoid unfeasible and costly ideas.

External industry factors, such as legislation, competition, and changes in technology, influence the company's decision criteria. At the end of the selection process, only a few workable ideas remain from the large group generated.

Stage 3: Concept Development and Testing

Priority should be given to building a detailed version of the idea and user stories. This value proposal evaluation is the primary step toward concept testing and development. It ensures that focus problems are discovered earlier and the team can correct courses sooner, preventing technical debt from piling up.

Stage 4: Product Development

Product development implies the actual design and manufacture of the product. Development starts with a prototype for market testing. Based on the test results, the business owner decides whether to undertake large-scale production.

Stage 5: Market Testing

This step reduces uncertainty surrounding the success of the product. It checks the feasibility of the new product or the marketing campaign before full launch.

Stage 6: Marketing and Deployment

After development, the company launches its promotional campaign for the new product. Market research conducted during conception influences the timing and location of the product launch.

Product Development Strategies

Following are the product development strategies:

Proactive Strategies

• Invest in Market Research: Companies continuously research customer needs and develop products to meet those needs, investing in UX and market research, vendors, and creating a customer-centric culture.
• Make Alliance: Companies form alliances to pool skills in technology, production, or geography, sharing risks and costs of product development.
• Invest in Research and Development: Product-focused companies invest in R&D to create technically superior products that meet user needs, especially in the digital world.
• Acquire Other Companies: Formal alliances or acquisitions help gain access to additional resources. Cultural differences in mergers can create challenges.

Reactive Strategies

• Defend Against Competition: Companies protect profitability of existing products via advertising, price reductions, improved products, and brand positioning. Reactive strategies often lack time, budget, or willingness for research, increasing the risk of failure.
• Respond to Customer Request: Companies improve products or develop new ones based on customer feedback. While customer-focused, this strategy can miss market opportunities if competitors act faster. Proactive research usually results in higher profits.
• Copy Competitors:Copying competitors' products is an old strategy, one that is even rarer today both online, with eCommerce and Amazon's greater reach, and offline, with store brands. Low-quality versions of many products can often be found in many categories. The success of such a strategy depends on a deep understanding of the customers in a product category and brand positioning.

Product Development Strategy Example

Here, in this section, we will explain some major product development strategy examples. Have a quick look:

Product Development Strategy of “Netflix”

Netflix has a profit and margin-driven strategy to maximize adoption and retention. Netflix is the largest streaming service in the world. Its core offering is a subscription that includes unlimited access to content, and the product strategy emphasizes margin growth.

It has increasingly focused on providing high-quality original content to capture viewers’ attention. Netflix is built on a solid and trustworthy brand that promises easy movie enjoyment. Its ease of use, strong branding, and customization are hard for competitors to duplicate.

Product Development Strategy of “IKEA”

IKEA focuses on low cost while maintaining a consistent level of quality. The large volume of interchangeable parts requires an extensive global supply chain. Initially, the company rented equipment from suppliers and provided quality assurance training. Later, it reorganized its supply chain to manage geographic dispersion and large volumes.

With its core competence in supply chain management, IKEA can pursue a product differentiation strategy by offering furniture for any home. IKEA is also committed to sustainable design principles. Its product strategy is based on intelligent design driven by its unrivaled supply chain.

Conclusion

In general, a winning product development strategy should define the direction of a product and its objectives. A strong vision paints a picture of the world your product will create, while goals and a roadmap show clear direction. Metrics keep the team on track, and a strong team executes the plan to create a successful product. If you are searching for a trusted team of dedicated professionals, you can contact us without any hesitation.

Frequently Asked Questions

Q1. What are the four product development strategies?

The four product development strategies are:

• Cost strategy
• Differentiation strategy
• Focus strategy
• Quality strategy

Q2. What is the difference between corporate strategies and product development strategies?

The product development strategy flows from the corporate strategy. It is a corporate strategy applied specifically to the product development process.

It connects to the corporate strategy in all aspects: from technology, core, augmented, and transformative products, to distribution channels, geographic segmentation, and more. It allows multidisciplinary teams to see how their efforts fit into the bigger picture.

Q3. What are the strategies of new product development?

Here are some useful product development strategies to introduce a product to a competitive market:

• Create new products
• Modify an existing product
• Offer proof
• Specialize and personalize
• Increase the value of the product
• Create offer packages
• Change your mind
• Find new markets

Q4. What are the examples of product development strategies?

Some of the major examples of product development strategies are as follows:

• Nike
• Telfar
• Spotify