Every product for sale went through many steps to get there. Whether it’s a car, a face moisturizer, or a piece of software, that item is the result of a product development strategy—a high-level plan that gives direction for creating new products or evolving existing ones.
Here’s how a smart product development strategy can turn a product idea into a commercial offering with longevity.
What is a product development strategy?
A product development strategy is a business practice companies employ when they build and refine products. A successful product development strategy enables a company to create goods—either new product concepts or the modification of existing products—that customers want to buy.
Product development strategies can be a mix of proactive and reactive strategies. Proactive strategies attempt to grow a business, perhaps by introducing existing products to new markets. Reactive product development strategies aim to hold onto market share and remain competitive in a company’s existing market (also known as a defensive strategy).
How does a product development strategy differ from a product development process?
A product development strategy is your high-level roadmap. It outlines your goals, the products you’ll develop, and your plan of action. Think of it as answering the who, what, and why questions about product development.
The product development process is the execution of your strategy. It’s the steps you’ll take to bring a product from idea to market launch. It’s important that your strategy and process are aligned to create trending products that meet both company goals and market demands.
Benefits of a product development strategy
More profitable products
Getting a profitable product isn’t just about charging high prices. You have to understand what customers want and how to make a product that solves those problems. It’s important to do market research and competitor analysis when developing a product.
Easier to enter new markets
If you’re going to enter a new market, you need to know the local consumer preferences and the competition. A product development strategy considers these nuances and helps you adapt and position products to meet niche demands, which reduces the barrier to entry.
Reduce costs in the long run
Although product development may seem expensive upfront, it pays off over time. Regularly gathering feedback can help you improve your product. If your product is of high quality, you’ll save money on fixing bad products and customer service calls.
5 types of product development strategies
1. Market expansion
A market expansion strategy involves broadening your target audience by offering an existing product to multiple markets. To succeed, a company may need to adjust its marketing strategy, expand its web presence, or open new retail locations.
One example of market expansion is when coffee chain Dunkin’ pushed beyond its original New England hub to set up shops in areas throughout the United States.
2. Product improvement
A product improvement strategy makes positive changes to an existing product or product line—perhaps by tweaking the product design in response to customer feedback or technological advances.
A development team can get feedback on a product by convening focus groups or scouring online reviews and social media accounts to see what the public is saying about it. This strategy prolongs a product’s development journey, keeping the product relevant for longer, which can lead to greater profits and offset development expenses.
3. Product extension
Product extension is a business strategy that utilizes a well-known brand name as part of a new product name.
For example, when Ford made its first major foray into electric vehicles, it named a key product the Mustang Mach-E to take advantage of the strength of the Mustang brand. The original Mustang was a gas-powered sports car and the Mach-E is a battery-powered SUV—but market testing convinced Ford to embrace product extension for this launch.
4. Disruptive innovation
New product development strategies have the potential to shake up industries that are stagnant or have room for improvement. The technology industry has become synonymous with disruptive innovation as new technology upends old business models—such as Uber and Lyft in the taxi industry, Airbnb and Vrbo in hospitality, and Netflix and Hulu in television.
Often, the disruption involves bypassing third-party brokers and selling goods directly to a consumer, which often lowers costs and improves efficiency.
5. Diversification
Product diversification ensures a business avoids being overly reliant on one product or niche. Companies can diversify by adding new product lines, launching ancillary businesses, or buying up other companies. An example is the ecommerce bedding company Brooklinen, which entered the pillow market with the subsidiary brand Marlow.
How to create a product development strategy
A complete product development strategy is built on six steps.
- Product ideation
- Product idea validation
- Prototyping and testing
- Production and launch
- Product marketing
- Product analytics
1. Product ideation
The product ideation process involves brainstorming new product ideas. If you’re just starting a business and trying to create a new product from scratch, you might think about gaps in the marketplace.
What customer pain points aren’t being addressed by products currently for sale? If you have an established business, think about what items or services your existing client base would appreciate on top of your current offerings.
2. Product idea validation
Next, you’ll need to validate your product idea, or determine whether your product can command a large enough market to justify the potentially expensive development process.
To get a better sense of the potential demand for the product, you can perform market analysis, conduct focus groups, study similar types of products, or launch a crowdfunding campaign to see if there are many people who would want to back your product.
3. Prototyping and testing
If you’re confident your product appeals to a customer base, you’re ready to make a prototype. Most prototypes cost a lot of time or money (or both) to create, but they’re necessary in order to test and improve your product before you commit to launching it.
For a physical prototype, you might build it by hand, use a 3D printer, or outsource the work to a specialist. Product testing involves getting feedback from people about the prototype and using that to improve the product. You’ll be testing for a combination of product functionality, safety, and customer satisfaction.
4. Production and launch
In order to produce the item at scale, you’ll need a product development process. You may need reliable relationships with manufacturers that can turn raw materials into finished products.
If you want to pick from products that manufacturers have already made, you could choose to partner with a private label manufacturer. In this case, you would simply put your brand name on an existing product. Once you decide how to make the product, you’re ready to list it on your ecommerce site for sale.
5. Product marketing
The goal of marketing your product is to educate the public about why it is right for them. To do this, you should come up with and offer value propositions for the product.
The product could, for example, be the best quality or most affordable option in the market. Marketing your product may also involve offering package deals that bundle your new product with your more well-established items, or offering a discount on the new product.
6. Product analytics
Once you’ve launched your product, you’ll need to track its sales in order to have information on how you can make it better for current and future customers.
When you sell via an ecommerce platform like Shopify, you can see sales reports and analytics filled with relevant up-to-the-minute data, including net sales, sales breakdown, net sales by channel, net units sold by traffic source, and customer profiles. You can use this data to make continual improvements to the product.
Real world examples of product development strategies
Refine your product based on feedback
Personal care brand Wild set out to eliminate single-use waste from bathrooms around the world. The first target was to develop a refillable deodorant with a durable aluminum case and compostable refill packings made from bamboo pulp.
Wild was ready to launch after a year-long product development process and more than 35 iterations of the deodorant. While a lengthy process, it allowed Wild to refind its product based on feedback and performance to meet consumers’ needs.
Prior to launch, Wild built a substantial email list by interacting with potential customers on sites like Facebook, Mumsnet, and Quora.
In these forums, it gathered feedback, validated its product concept, and built consumer excitement. The successful £100,000 in sales during Wild’s prelaunch phase is testament to the effectiveness of refining a product until it’s ready for the market.
🎧 Listen to Wild’s story on the Shopify Masters podcast.
Identify long-term trends in the market
Somos founder and consumer packaged goods (CPG) veteran Miguel Leal is a pro at spotting shifts in the market. One prominent trend he saw in recent years was the rise of authentic Mexican food that reminded him of the food he ate as a kid. But that was only in restaurants. Grocery store offerings were lagging behind when it came to Mexican CPGs.
That’s what gave Miguel his next big idea: to develop a line of products that reflect these authentic flavors and dishes, and make them accessible for home cooking.
Somos worked to develop products that were easy to use in the kitchen, so more consumers could prepare Mexican cuisine at home. This involved testing recipes and cooking styles to get the best results.
Somos’ product expansion roadmap is deep. Miguel and his team take regular trips to Mexico for insights into emerging trends, new ingredients, and potential products that could be relevant in the US market in the future.
Understanding the lengthy product development cycle, Somos is already identifying items that could be popular five to six years down the line.
🎧 Listen to Somo’s story on the Shopify Masters podcast.
Partner with experts to create high-quality products
From the beginning, Bite’s founder Lindsay McCormick’s focus was to create a high-quality, innovative product. Her dedication led her to invest in specialized machinery and conduct clinical testing to ensure her toothpaste tablets were backed by science and good for the environment.
“I started talking to dentists, dental hygienists, and spent a lot of time on YouTube and Reddit figuring out what a tablet really was, and how I could make these things,” Lindsay shares in a Shopify Masters episode. Her hands-on product research with trusted experts helped lead to high-quality products without the costs to fix them down the road.
🎧 Listen to Bite’s story on the Shopify Masters podcast.
Validate your product before launch
At the heart of any successful product development strategy is understanding customer needs and preferences. That’s why before launching Hearth Display, a digital whiteboard that helps families get organized, co-founder Susie Harrison took the most direct approach possible: one-on-one interviews.
Susie and her co-founders conducted hundreds of one-on-one calls with potential customers. These calls gave the team insight into how each household functioned and their common pain points.
Though tough to scale, this research helped Susie develop the solution to these potential customers’ problems. “Especially in those early days, there’s no more important way to spend your time than to talk with your customers and learn from them directly,” she says in a Shopify Masters episode.
Hearth Display built both hardware and software for its product but it still needed more funding. To convince investors, the brand ran a pre-order campaign on Shopify, asking people to make a $50 deposit to show support for the product.
The result? Hearth Display raised $2.8 million in its first institutional seed round, thanks to the validation of the successful pre-order campaign.
🎧 Listen to Hearth’s story on the Shopify Masters podcast.
Start from a personal need
Not every successful product starts with complex market research. Sometimes it can be as simple as a personal need you yourself identify. Bushbalm co-founder Tim Burns got the idea for his first product while on honeymoon.
After using face oil to freshen up below the belt after the beach, Tim found it made a great moisturizer. This led to the first Bushbalm product, called Bush Oil. The company has since scaled into an eight-figure brand in just 10 years.
Product development strategy FAQ
How do you identify customer needs and preferences?
In order to gauge customer needs and preferences, you can conduct focus groups, do market research, look at comments on your website, or use customer relationship management software. You could also study search engine terms for trending topics and run surveys among people in your target market.
How do you generate ideas for a new product?
One way to generate new product ideas is by looking for gaps in the market to see what customer needs aren’t being served by current offerings. You could also research what existing products don’t seem to adequately address customer pain points, like a skin care product that looks fantastic but washes off too easily.
How do you test and validate a product concept?
You can test and validate your product concepts by sharing them with small test audiences and measuring their responses, feedback, and level of satisfaction. You may also try crowdfunding to see how many people would be willing to pay in advance for the product before you develop and launch it.
What impact does customer feedback have on product development strategy?
Customer feedback on a product or prototype should be taken very seriously, because no product can thrive without a customer base. If a customer reports that a product fails to meet expectations, is too expensive, or is dangerous, businesses need to know that before a big product launch. Conversely, if customers rave about a test product, a business may want to make more of it or design variants that will appeal to additional audiences.
