What is it and why is it important?
Your product strategy defines the product parameters and range of products required to meet your objectives, working in conjunction with the pricing and distribution strategy. Through the innovation process, viable products are created, verified and commercialised.
Product and innovation strategies exist at an organisation level, category or portfolio level and brand level. At each of these levels, decisions will be driven by your scope of business “what business are we in?”, customer understanding and source of business. This may take innovation beyond product – like LVMH does with LVMH Hotels and Red Bull does with Red Bull TV. For the purpose of this topic, we are focussing on product strategy and product innovation.
How we go about it
For an existing organisation, portfolio or brand, it starts with understanding your growth objectives versus current performance, identifying and sizing the key opportunities that will unlock growth. We reference the Ansoff Matrix as a simple framework to consider the opportunities.
Market penetration: Is there an opportunity to grow any more from selling existing products to existing customers? Growth strategies tend to be focused on promotion, distribution and pricing. Product strategy and innovation may include product and packaging innovation to improve the taste, improve health or sustainability, reduce costs, increase the relevance at key gifting periods, increase quantity or frequency of use. It could also include acquiring a competitor.
Product development: Is there an opportunity to grow any more from selling new products to existing customers? New product development is the primary growth strategy. Product strategy and innovation may include line extension, brand extension or new branded products within the portfolio. It may also include acquiring products from competitors or forming strategic partnerships to gain access to new products.
Market development: Is there an opportunity to grow from selling existing products to new customers? Growth is gained through selling to new customer segments, into a new domestic region or new global market. Product strategy and innovation includes tailoring products and packaging to new customers. It may also include line extensions for that market. Brand strategy and the relevance of your brand to new customers is a key consideration here.
Diversification: Is there an opportunity to grow from selling new products to new customers? The riskiest and highest investment growth opportunity, product strategy and innovation could be related, tapping into existing expertise or unrelated. Your existing brand and portfolio strategy are key considerations.
For existing and new organisations, portfolios and brands, we conduct and analyse research to understand people’s values and needs, what they’re currently doing to fulfil their needs, their problems, barriers, pain points in the market, and identify whether there is a gap in the market.
We look at what influences their decision-making in terms of their product choice:
We determine whether you have the products required to meet people’s (unmet) needs or whether innovation, acquisition or JV is required.
New products and brands often start with a product idea that solves a problem that exists within the market. We follow a similar process to understand prospective customers, their needs and unmet needs or pain points and whether there is a gap in the market. We look to understand whether your product idea meets their needs and fills the gap, or whether further work needs to be done. Once we have identified the customer segment for whom your product idea is relevant, we’ll develop the brand positioning before finalising the product strategy, along with the distribution and pricing strategy, that delivers against the brand promise.
These findings are developed into a written strategy and product range matrix.
The innovation process takes over to develop product and packaging ideas through to concepts and commercialisation:
Depending on the agility and governance of your organisation, this may be a short or long process. There may be a formal innovation funnel process with research and approvals at each stage. Some organisations seek to develop minimum viable products or beta versions to test and learn with users and/or key accounts in market. This may be done with or without an existing brand, depending on the brand’s target market, positioning and reputational risk. Other organisations want the product to be fully tested and ready to launch prior to entering the market.
We can help you define the innovation process that works most effectively for your organisation and product strategy.
Who we’ve done this for
Please contact us to discuss further what we can do for you.