Product Growth Strategy: What Product Teams Need To Know
The most successful business owners know they need an effective growth strategy. And it’s up to product teams to translate this strategy into a tactical product growth plan. Your product growth strategy should align with the business objectives and contribute to the bottom line.
So how can product managers best align their product strategy with the broader business strategy? Keep reading for everything you need to know.
What Is A Product Growth Strategy?
A product growth strategy is a tactical action plan designed to expand a product's user base, increase revenue, and expand market reach. These plans usually involve product innovation and optimization for user retention, and product expansion efforts such as introducing new product lines. They work in tandem with marketing and customer success strategies to effectively drive business growth by bringing in new customers and retaining existing ones.
Product Growth Strategy, Business Growth Strategy, and Marketing Strategy: Key Distinctions
There are several types of growth strategies that businesses lean on to ensure their ongoing success. The best growth strategy will incorporate elements of each one. Here’s a breakdown of what distinguishes product, business, and marketing growth strategies:
- A product growth strategy finds ways to improve upon an existing product. This could mean expanding its features or functionality, broadening the user base, or reducing frictions within the user flow.
- A business growth strategy expands the business’ product or service offerings to reach more potential customers. This could mean selling more of their existing products, developing new products, or pursuing acquisitions or mergers.
- A marketing strategy spreads the word so that businesses reach their target audiences. This includes driving organic growth channels like a brand’s web and social media presence as well as paid media and advertising.
4 Key Product Development Tactics For Growth
Customers use your products because they get value from them. Therefore, if you want to build a larger user base, you should optimize the value you provide to appeal to a larger market, or entirely new markets. In terms of the tactics themselves, let's discuss ways you can develop your products in order to achieve growth.
1. Diversification: Expanding Your Product’s Value
Many startups or entrepreneurs will begin by offering a straightforward solution to a singular problem. A diversification strategy aims to expand the value your product brings to customers, and branch out your target market to a broader group of potential users.
While your initial offer might achieve product-market fit, you want to expand that potential and turn those early adopters into power users. This helps you avoid keeping all your eggs in one basket and makes your product more resilient in the long-run. A diversification approach to product growth is often the reason why products have a core value as well as additional value.
Diversification growth strategy example: Dropbox
File hosting platform Dropbox’s main value is to provide cloud storage space for its users. But it also lets you edit documents collaboratively online and gives you easy sharing capabilities. This is a strong expansion strategy because the additional functionality complements the original product offer, and will also effectively draw in new users.
2. Market Expansion: Tapping New Markets
Apart from enhancing your product to generate more appeal in your current market, you can also pursue growth by entering new markets. This growth strategy typically works by changing your product to attract potential customers from a target market outside of your existing one. This could mean pursuing customers in new geographical locations, industries, or buyer personas.
You can pursue this growth strategy either by first identifying the new group you want to target and then applying your product to their use case. Or, you can approach it by thinking creatively about new contexts in which your product could be useful. Either way, your product team will have to figure out what’s missing from your product for it to be a viable option within the alternative target user group.
Market expansion growth strategy example: SMB to Enterprise
Many business-to-business (B2B) software as a service (SaaS) products are well-suited to the needs of small businesses or startups. But often these tools lack the enterprise-grade features necessary to win big customers. Businesses will add security safeguards and larger-volume storage capacities to make the product functional in an enterprise context.
3. Market Development: Targeting New User Groups
A market development strategy is less about directly impacting the features of your product or uncovering new use cases, and more about getting it in front of more new users. It’s all about finding and guiding potential customers through the marketing funnel.
With this product growth strategy, your focus is within your existing market, but you target specific segments with your marketing efforts and sales initiatives. These customers may represent a new niche or demographic where your product isn’t yet popular. By targeting these segments, the objective is to enhance your attractiveness in the minds of potential paying customers.
Market Development Growth Strategy Example: Miro
Ultra-popular whiteboarding solution Miro uses a product-led, bottom-up growth strategy to earn new business. It does this by offering a valuable freemium product, with essential features locked to a business or premium account. Their customer acquisition strategy is built around easily bringing in new users, who naturally represent potential customers:
This strategy is all about focusing on acquiring users (not customers) and letting them initiate a domino effect into the rest of the company. Suddenly, the PM who wandered in to try a Miro planning template has invited their team.
— Jaryd Hermann and Aakash Gupta, How Miro Grows: Tactical Lessons From The $17.5B Whiteboard
This business model works by securing a dedicated customer base within an organization, which then makes upgrading to a paid account a no-brainer for company decision makers.
4. Market Penetration: Earning Market Share
Successful companies with products that are not unique, like sodas or smartphones, are always seeking to earn more of the market share—also known as a market penetration strategy. These types of businesses are in a constant fight for a bigger piece of that market pie. It’s not about proving your product’s value, showing the different ways it can be used, or expanding the reach of your messaging. Instead, it’s about product differentiation.
Companies in competitive markets can set themselves apart by lowering prices, offering discounts or referrals, bundling services, adding distinct features, running promotions, strategic partnerships, and other penetration growth strategies. The key is to conduct market research and benchmark against your competitors to define what makes your product unique.
Market Penetration Growth Strategy Example: Dollar Shave Club
Dollar Shave Club entered the highly competitive world of razors and blades at a time when 70% of the market was owned by Gillette and Schick. The brand’s unique direct-to-consumer subscription model offered convenience and cost savings. Meanwhile, its fresh, down-to-earth spin on marketing quickly went viral. All this quickly earned Dollar Shave Club a significant market share before being acquired by Unilever for $1 billion.
How To Craft A Winning Product Growth Strategy
With the top tactics for growth in mind, it’s time to outline the strategy your product team will follow. It’s not always clear where to begin, but here are some tips you can follow to help you along the way:
- Align your product growth strategy with the business and marketing strategies. It’s essential that all 3 types of growth strategies are working together towards common objectives. If you’re developing new features while marketing is pitching existing ones to a new user group, both efforts are likely to flop.
- Explore various growth opportunities and prioritize the ones with the most potential. This will depend on your business model, the maturity of your company and product(s), and what comes up in your market research. The best growth strategies are smart and strategic.
- Establish what metrics you’ll track and your product’s key performance indicators (KPIs) for success. Knowing how to measure the impact of your efforts is essential. This will help you both to gauge your success, but also to keep your team focused and aligned as you work towards it.
Strive For Consistent Product Growth
No matter if you are a small startup or an established company, showing a steady growth rate is one of the best business health outcomes that you can have. With the tactics and tips outlined in this article, you're well-equipped to develop and better position your products.
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