The 5 keys to a successful product strategy

A successful product strategy is the foundation of any successful business. With the right strategy and the (digital) products built on it, you can attract and retain customers, expand your business and continue to grow.

Most of the products we deal with have no intrinsic value. As a result, consumers rely on contextual indicators such as price and placement to determine the value of a product. But ultimately, it is the psychological value of a product that determines its success.

To give your product strong psychological value, it's important to focus your core product on how it fills an unmet need.

1. Identify the core of your product

Whether it's a physical or digital product, all products are made up of three layers - the actual product, the augmented product and the core product. A product is more than its function - memorable products must include a core product that fulfils a psychological need:

A strong core product must be created that meets key customer needs.

Customer needs should always come before products and their features.

You can't be all things to all people - customers and customer segments should be carefully selected.

The Core Product

To understand what a customer is really buying, it is important to determine what the core benefit of the product is. This is the first and most fundamental level of the purchase decision. When it comes to cars, for example, people tend to think of obvious features such as the engine or features, rather than the deeper meaning of the product.

To determine the core customer value of a product, you need to answer a simple question: What is the buyer really buying? In other words: What is the customer really looking for? In most cases, the core value is the basic need that the product satisfies.

The Actual Product

The second product level is the actual product. Here the focus is on the identified core benefit for the target group. This includes the development of product features, design, quality level and brand name. The actual product offers the best and easiest differentiation for the customer.

Alternative products may differ in design, quality and features. These differences can lead customers to choose one product over another.

The Augmented Product

The Augmented Product is the final layer that completes the Actual Product. While the actual product offers the greatest potential for differentiation, the augmented product adds further opportunities for differentiation. It is usually built around the core value and the actual product and offers consumers additional services and benefits (e.g. add-ons or services).

2. Identify the biggest competitors

The value proposition of a strong product lies at the intersection of your core product and an unmet customer need. To defend this position, it is important to understand your competition.

The right classification through differentiation

We usually distinguish between four types of competitors: Narrow, Shape, Need and Resource.

A successful product strategy looks beyond the obvious competitors and competes against competitors that satisfy the same customer need or compete for the same finite resource.

3. Define target groups and niches

A strong product cannot meet all the needs of all consumers. It is therefore essential to target a group of consumers who share the same basic need. This is your product's niche.

What makes a good niche?

A good niche is large, identifiable, accessible and the consumers within it have similar behaviours. The aim is to serve the customer as well as possible, e.g. Facebook originally only targeted students - the niche is the basis for building and expanding a product strategy.

The following questions can help identify the target niche: Who is my product for and not for? What are the needs of that niche? What can my product do to meet the needs of this niche?

4. Engage your customers through product loops

Every business has an inherent interaction with its customers. These interactions between businesses and customers form a 'product loop'.

In the case of social networks such as Facebook, these interactions can be daily, but for other businesses, such as a B2B e-commerce shop, these loops may be less frequent. But regardless of frequency, there is always a loop within a process.

The framework of a product loop

We use Product Loops (Engagement Loop, Retention Loop) where user behaviour is reinforced by triggers and rewards to create a habit around the value proposition of your product. By using the product regularly, the customer receives value and becomes loyal to the product.

For example, in an e-commerce store, regularly adding products to the watch list can be rewarded with personalised discount promotions or free shipping.

5. Identify innovation potential and opportunities for improvement

Successful products use innovation to meet changing customer needs. We use a 2x2 matrix to prioritise innovation.

Innovation at the market and product level

The sweet spot of incremental innovation lies at the intersection of either articulated needs of unserved customers or unarticulated needs of served customers.

The airbnb example illustrates that the innovation matrix can be applied globally to the market and competitors, as well as at the company's own product level.

A successful product strategy is like a well-built engine - it has many different parts that all need to work together to achieve the best possible result.

If one of these parts is not working properly or is not optimised, the whole system can be thrown out of balance. So if you want to develop and implement a successful product strategy, you need to make sure that all relevant aspects are considered, analysed and optimised on a regular basis.

This requires a lot of commitment and flexibility, but it's worth it: with a good product strategy, especially in the digital context, companies can tailor their products to individual customer needs and thus make their customers happy.