What Is Product Development Strategy?

SHARE THE ARTICLE ON

Product Development Success with Client Feedback team Voxco Blog 400x250 1
Table of Contents

Product development strategy helps product companies to provide a steady stream of unique goods that disrupt the competition while delighting consumers. To highlight innovation, new product development is frequently included into product strategy.

A component of corporate strategy is product development strategy. It directs the development of new goods by creating goals and making financial decisions. The purpose of product development strategy is to create a competitive advantage by positioning product offers to drive company goals such as sales growth, revenue, and profitability.

The strategy for new product development is the mechanism to:

  • Reduce risk when designing a product concept.
  • Increase the compatibility of products and markets.
  • Redesign a product line
  • Increase existing product sales by improving them.
  • Despite market research and marketing strategy being necessary in most cases, there are other inputs to business strategy. A fully formed product strategy includes our brand, our platforms, our technology, etc. Often product management consulting engagements can inform product strategy. 
What Is Product Development Strategy? Product Development Strategy

Exploratory Research Guide

Conducting exploratory research seems tricky but an effective guide can help.

Best Practices Of Product Development Strategy

  • Outside of our primary offering, develop other products and services.
  • Clarify our course of action: a pioneer, a follower, or a low-cost participant
  • Create a product portfolio that is consistent with our risk tolerance and market position.
  • Connect our corporate goal to our product strategy, and ultimately to our annual budgets.
  • Implement appropriate governance, finance, and processes for developing new product strategies.

Product Development Growth Strategy Types

There are several approaches to product development strategies that concentrate on various aspects of the new product process (including what to do with old goods) and the product development organization. Typically, three market position categories influence product development strategy:

  • Premium, inventive, and distinct items with a high price/value ratio (Apple iPhone Pro)
  • Products that are competitively priced yet differ in small ways, such as pricing (Crest Toothpaste)
  • Low-cost items with adequate quality (Kirkland, Costco’s house brand)

The first category above will have the largest product development or R&D spending – often in the 10-20% range, the competitively priced approach is in the 5-10% range, and the low cost category requires less engineering and R&D spends are less than 5% of sales. Technology product development tactics are costly, with software businesses often spending 10-25 percent of revenue on development and testing. This is also true for businesses that focus on new product launches. It’s worth noting that the company’s risk tolerance may come into play here, and it’s frequently better to take a product portfolio management strategy.

Product development plans either supplement or support such positions by focusing on time to market, calculating technical and market risk, a strong platform that spins-off families of products, customer insights and internal procedures to produce the best existing solution. 

What Is A Customer Value Chain?

What Is Product Development Strategy? Product Development Strategy

A customer value chain is a business concept that depicts the process of creating value for a customer. It is analogous to the supply chain, which depicts the many steps of manufacturing and supply from raw materials through the sale of the finished product to the end consumer. The main distinction is that, although a supply chain frequently monitors costs, a customer value chain is predicated on the increase in value to the end user. Another view of this value chain focuses on actions made to retain current consumers.

The delivery of a bed is an illustration of the difference between a simple supply chain analysis and a customer value chain. From a strictly supply chain standpoint, delivery is a minor consideration: it makes no real difference to the bed itself, and the expenses are quite modest for a major corporation with its own distribution network. However, the value of the delivery is high in the eyes of the client. Most consumers do not have the ability to transfer a bed, and without a delivery service, they would be forced to choose between having the bed rendered worthless, investing the time and money to hire a self-drive van, or paying a large fee to have a third-party firm pick up and carry the bed.

Customer value chain analysis entails breaking down each phase that leads to the customer’s ultimate pleasure. A corporation may utilize this type of study to find all of the instances when its operations contribute to this level of pleasure. The firm may therefore enhance its position in two ways: by improving existing incidents to increase satisfaction and by discovering future incidents in which it can play a contributing role. A company, for example, might acquire a raw materials supplier or a distributor in order to expand its footprint in the value chain. It might also increase the quality of its products by refining its production method.

Another way to respond to the customer value chain is to focus on the processes between the final product and the consumer. This strategy is intended to maximize existing clients rather than focusing on marketing to get new consumers. Building solid relationships with clients, for example, through after-sales care and assistance, and giving discounts to returning customers are examples of such procedures. Existing customers may even suggest the product and maker to friends and colleagues as a consequence of such effort.

See Voxco survey software in action with a Free demo.

Customer Oriented Approach For Product Development Strategy (Design Thinking)

As a major aspect of your product development initiatives, focus on the company’s internal process for developing useful breakthroughs that please customers. In this approach, the demands of the clients come first.

Companies that use the Design Thinking approach to new product development invest in a thorough understanding of the client. They next use a set of standardized methods to turn information obtained from clients into marketable products.

This method considers the development of successful new goods to be the outcome of an information processing technique that involves the following steps:

  • Product idea generating based on consumer feedback
  • Product development Product engineering
  • Engineering for manufacturing (or launch)

This strategy focuses on what customers need rather than what rivals are doing. This technique is more customer-focused, and it is frequently used as part of an Agile Product Development process. It places the onus on an internal procedure to meet consumer expectations. This process may also be applied to current items.

Importance Of Customer Value Chain

Customer needs, how they use our product, and how to make it easier for them to utilize our product are all part of the customer value chain. Essentially, the customer value chain provides us with a comprehensive view of how our product contributes value to the lives of our consumers. It assists individuals in visualizing client demands and how our goods relate to those needs, with everything connected — or chained — together. 

Based on these insights and other product analytics, we can use a more objective and data-driven approach to assess goods, features, and concepts against the customer value chain.

Read more

Hindol Basu 
GM, Voxco Intelligence

Webinar

How to Derive the ROI of a Customer Churn Model

30th November
11:00 AM ET