Product strategy 101: what it is, why you need it, and how to build one

Even the best teams can succumb to chaos without a well-defined product strategy. A strategy-less product team is pulled in different directions, trying to meet objectives that change depending on stakeholders’ whims.

By building a brilliant strategy, product managers keep their teams aligned on what the product should achieve—and why. 

This guide explains everything you need to know about product strategies: what they are, why they’re important, and how you can build an effective one yourself. 

What is a product strategy?

A product strategy is a high-level plan that defines a new product's unique value proposition, target audience, and how it will meet key goals. This is the first step in turning the product vision into action. 

A product strategy often undergoes several iterations in the beginning—it needs to be flexible enough to meet changing user needs and market conditions. But once it’s set, the strategy should act as a stable touchpoint. While the product strategy only changes in response to major shifts, the product roadmap, initiatives, and backlog can change as needed.

What’s the difference between a product strategy and a product vision?

Though the product strategy is deeply connected to the company's and product's goals, it’s distinct from the product vision. 

• The product vision is a broad, aspirational articulation of long-term business and product goals. It acts as a timeless statement of purpose

• The product strategy starts with the product vision but tailors it to your customer, market, and organizational goals—it’s a high-level description of how the product will achieve the vision

What are the benefits of a product strategy?

A product strategy offers guidance as to how the initial product idea will help realize the company’s overall vision. 

A clear strategy is useful for the product research phase, design process, marketing mix, and, ultimately, improves your overall product management.

The best and most effective product strategies 

• Include extensive market research

• Keep the product team focused and aligned 

• Help PMs prioritize features

• Answer the problems you solve for your ideal customers

• Provide guidance to improve your product management team structure 

• Help other departments understand how the product ties into their business goals

• Highlight your unique selling proposition (USP)—in other words, how you’ll differentiate yourself from other market players 

• Convince investors and other external stakeholders on the viability of the product and organization

4 effective product strategies

Deciding on the right product strategy for your company depends on your market's needs and the resources you have available. 

Here are some of the most common:

1. Leader/alpha strategy, which is all about creating a product that leads the market

2. Challenger/quality strategy, where your product challenges the current market leader by offering an improved product experience

3. Niche/focus strategy, where you tailor your product to meet the particular needs of a specific segment of the market, rather than aiming to dominate the market as a whole

4. Cost strategy, where you focus on highlighting your product through the cost of your offer

5 key elements of top product strategies

There’s no one way to build a brilliant product strategy, but typically, successful product strategies are:

1. Driven by vision and purpose

A great product strategy communicates the why behind the product. It offers a clear sense of purpose, outlining how the product makes a difference, who it makes a difference to, and where it will position itself on the market. 

2. Led by user needs

Successful product strategies begin and end with user needs. Great strategies don’t jump straight to offering solutions. They happen when teams spend time understanding the underlying problems of their customer base and generate effective solutions to them.

Experience intelligence platforms like Contentsquare are helpful here: Session Replays and Heatmaps help product teams empathize with user needs by seeing what their users experience, and Surveys offer rich voice-of-customer (VoC) data that will serve as a foundation for effective product strategy.

🔥 Pro tip: to really understand your users’ needs, there's no substitute for sitting down and talking to them. Use a tool like Contentsquare Interviews to easily set up 1:1 meetings with your customers—or recruit relevant interviewees from our pool of 200,000+ participants. 

Ask probing questions about users’ goals, desires, and pain points and listen to what they say. You’ll then receive a transcribed video of the conversation to annotate and share with your team. 

Contentsquare Interviews provides an all-in-one platform to host, transcribe, and share recordings of 1:1 user meetings  

3. Developed collaboratively

The best product strategies emerge through ongoing conversations. Hear from a range of product team members, different stakeholders, and, of course, your users. By leading with cross-functional collaboration, you’ll gather diverse perspectives and get stakeholder buy-in on your strategy from the start.

4. Flexible but stable

Your product strategy will evolve, especially in the early stages as you do more research. But you also need to be careful not to change your product strategy constantly. Remember that this form of strategic planning has long-term goals. It’s supposed to be your product team’s foundation; it can’t shift in response to every new request that arises.

 The best product strategies find a balance. Product managers should allow wiggle room for changes and think carefully before updating the strategy to avoid disorienting their team.

5. Able to measure key product and business outcomes

Since the product strategy aims for clarity and efficiency, it doesn’t usually get too detailed with numbers or metrics—most product managers save those for the roadmap. 

However, it’s important to define the strategy to offer a clear, measurable benchmark you can test to see whether the product meets key goals. This often means using the strategy’s vision of a successful product to tie in specific time-bound metrics and objectives, like hitting a certain number of daily or weekly active users (AU), increasing monthly recurring revenue (MRR), or improving retention rate.

6 steps to build an effective product strategy

1. Deeply understand and describe your customer

The success of your product strategy depends on your empathy for user needs. Discover your user attributes—who your customers are, what they do, what they want, what they need, and what obstacles they face. 

Tools like Contentsquare (that’s us 👋) keep you connected with your product experience and let you dig into real user needs. 

Once you understand your customers’ needs, communicate them to your team. Many product managers recommend creating personas to add depth to your user knowledge.

2. Ensure you have a well-defined product vision

Start with your organization’s why. Ensure you fully understand your company’s overarching purpose, then align your product vision with the organizational vision by combining user, market, and business goals.

3. Find your product’s unique selling point

Product differentiation is a crucial aspect of a successful product strategy. This step helps you determine how your product will stand out from the crowd and compete in the marketplace in terms of:

• Usability

• Quality

• Cost

• Niche focus

• Customizability

• Features 

Run a SWOT analysis and competitive analysis to better understand the landscape and determine your product market. Use these insights to inform your strategy.

4. Collaborate with different stakeholders

Get product team members and exec-level stakeholders involved in the strategy's inception and development stages. 

This helps you understand your organization's broader landscape of needs and concerns, which contributes to a more robust product strategy. Engaging different organizational stakeholders also helps them get behind your product development process and business strategy from the start.

5. Test and adjust

At the early stages of strategy building, it’s important that you test, adapt, and evolve your product. Get general user feedback (with surveys, a feedback widget, or 1:1 interviews) on your product ideas as soon as possible and use it to refine the strategy. 

Once you’ve built a minimum viable product (MVP), learn how users are experiencing the product and, especially, which needs aren’t being met. 

Conduct unmoderated tests on your MVP to see whether it’s easy for users to navigate without instructions. A tool like Contentsquare’s User Tests allows you to set participants a goal to complete and watch how they go about it. Afterward, you can ask questions about their experience: what were they thinking and feeling? Was any information missing? 

A Contentsquare user test

The next step is to channel all of these insights into the product strategy. Frequently seek feedback like this to test whether your product strategy is still relevant. 

6. Make a plan to execute

Once you’ve defined your strategy based on the product vision, user needs, market differentiators, stakeholder inputs, and feedback, it’s time to put it into action. 

Here’s how:

Create a product roadmap

The product roadmap is your key to bringing the product strategy to life. It’s a high-level plan for how your product will achieve its goals and its priorities. 

It should provide a clear overview of how the strategy will be translated into action, provide a timeline for product development, and establish key metrics to measure success. 

Use the product strategy to inform your product initiatives

Product initiatives are big-picture product themes that describe customer value—i.e. the jobs to be done (JTBD) that help your team discover what people are trying to accomplish when using your product. Each product initiative is then split into concrete plans and actions. 

For example, if your initiative is to make your product more attractive to social media users, you’ll break that down into the features you’ll launch to make that happen, like share buttons or integrations. 

The product strategy should inform long-term themes and smaller projects and tasks.

Refer back to the product strategy when prioritizing the backlog

The product backlog is a dynamic list of product development tasks and initiatives, including features, updates, and bug fixes. 

The product strategy should be a key touchpoint that helps you manage the day-to-day tasks on your backlog. Use the key themes in your product strategy to inform the decision-making frameworks you use to prioritize features and fixes.

Why a brilliant product strategy is key to product success 

If you try to lead a product team with an ill-defined product strategy, you’ll take 1 step forward and 3 steps backward. You’ll lose valuable time to indecision and uncertainty and move forward in stops and starts, if at all. 

But a brilliant product strategy helps you make confident decisions to turn your product vision into a reality. With an aligned product team and a clear sense of your strategic priorities, you’ll be well on your way to developing a product that satisfies your customers. 

FAQs about product strategy