Product Development Strategy: Stages and Types

Product Development Strategy

Companies need to have a product development strategy in place in today’s cutthroat business world.

If your company is not growing or losing market share, it’s time to implement a product development strategy. The technology industry is booming, and the software as a service (SaaS) industry is with it. 

New companies are entering this space daily, and those in it are working hard to stay ahead of the curve.

A product development strategy is a vital component of any company. This guide will teach you everything you need to know about developing a successful product development strategy. 

We’ll discuss the different methods you can use, and we’ll provide tips on executing each step successfully. So don’t wait any longer – let’s get started!

What Is the Meaning of the Product Development Strategy?

Product Development Strategy (PDS) is the planned effort by a company to improve an existing product or create a new product. The goal of PDS is to increase market share, revenue, and profitability.

You should use PDS when:

  • The growth curve starts leaning downwards.
  • The market is not responding well to the product.
  • There is too much competition in the marketplace.
  • The market is not responding well to the company’s products.

What Are the Stages of Product Development?

A new product development strategy refers to the processes and tools to develop new products for its customers.

The central objective of this strategy is to ensure success in the market, so it’s critical not to rush into things without researching or planning beforehand as this could result in wasted time and money if you are not knowledgeable of what you’re getting yourself; into!

It’s also essential that companies understand their customers’ needs before launching a product so they can tailor it specifically towards those who would benefit most from using them.

When manufacturing a new product or upgrading an existing one, you need to consider the following stages. 

There are different product development strategies that a company can use to improve or create a new product, and the most common ones are listed below:

Concept Development:

The first step in any PDS is to develop an idea of the product. This process involves brainstorming and developing a list of possible directions that could take place. 

You can use these ideas to create a timeline or roadmap for your development team’s goals over time. 

This is the workspace of a product manager in Chisel where in the roadmaps section you can set timelines, assign tasks and allocate resources effectively.
Chisel gives you roadmaps pillars that will help to neatly determine how to allocate resources, set timelines, and assign tasks to your development teams effectively.

After this, you’ll need to decide on which direction works best based on market research data from similar products already in existence and consumer preference surveys conducted by your company (or third parties).

Sorting and Selecting:

While the ideation process is ongoing, many ideas tend to come to the forefront. It is advisable to try to sort and filter through all the pictures and bring them down to ideas that will do well in the market.

Creating Prototypes:

Prototypes are useful in helping companies develop new products or services by accurately representing what customers want before they even get started on building anything at all!

Prototyping allows developers and designers alike to experiment with different ideas without risk because nothing is complete until it’s ready for production. 

Prototypes can also give you a general idea of how much time it will take to create your product which can help plan budgets and schedules accordingly.

Product Analysis:

This process involves evaluating a product already in the market to see what works and doesn’t. 

It includes studying sales data, customer feedback (both positive and negative), reviews, as well as any other resources you can find to get an accurate idea of how your product stacks up against others.

Its a user survey page in Chisel where you can craft a survey from scratch or use a template to get feedback from your target audience
Craft customer feedback surveys within minutes with Chisel. You can use the templates or craft a survey from scratch as per your choice and requirements.

After this analysis, it’s essential to determine where you could improve things and where there might be gaps in the market for new products or services!

A product analysis usually involves a competitor analysis, which is when companies look at their competitors’ offerings. 

Building the Product:

After you’ve noted your ideas down on paper, it’s time to start building! 

This process is where the prototypes come in handy, as they can help speed up the process by giving everyone an idea of what they need to create. 

With the help of product analysis, you can now successfully create a product that will do well in the market. 


Once you build everything, it’s time to test! You can do this in several ways: user testing (where you give tasks to people with your product) or beta testing (where a limited audience uses the product and provides feedback).

Pricing and Sales:

The final stage of product development is all about making money! 

This stage includes setting a price for the product that will be profitable while remaining competitive in the market, creating sales materials (like an advertising campaign), and establishing partnerships with retailers who will sell your product.

Keep in mind product development is also when you’ll need to think about how you want your product development strategy to evolve. 

For example, if an opportunity arises that could mean increasing production capacity, it would be essential to determine whether or not this step in the process should happen now or wait until later down the road.

What Are the Types of Product Development Strategies?

In the book Design & Marketing of New Products (1993), Professors Urban and Hauser identify nine product development strategies. These types branch into mainly two categories of proactive and reactive strategies. Let’s explore each of them.

1. Proactive Product Development Strategies 

It refers to a company’s situation to anticipate the market’s needs and develop products well in advance. They use trend analysis, target marketing, focus groups, and so on to determine what the customer wants. The objective is usually to launch innovative products before the competition does.

Market Research

Many enterprises that focus on proactive product development strategies invest in market research to understand their customers and drive the product development process.

They also invest in innovation workshops, brainstorming sessions, and focus groups on generating ideas for new products or services. 

Analysts estimate that companies using proactive PD spend about $6000 per employee annually in R&D activities compared with less than half that amount ($2200) spent by their counterparts who use reactive PD strategies (i.e., those responding after seeing what competitors are doing).


Companies that use proactive strategies also invest in entrepreneurship – the willingness to take risks. 

This outlook is known as the “blue ocean” strategy because it involves creating new markets or market spaces that do not yet exist. 

The idea behind entrepreneurship is that by doing so, you will create new opportunities that did not exist before, and the company can capture more market share.

Creating Alliances

Another essential aspect of companies involved in proactive product development strategies is creating alliances and partnerships with other organizations. 

These alliances allow them to share resources and expertise, helping them innovate faster than their competitors, who may not possess access to these resources or expertise. 

For example, Apple has alliances with other companies such as Samsung Electronics Ltd., Sony Corp., Panasonic Corporation of North America (PNC), and LG Electronics Incorporated.

These partnerships allow Apple to develop new technologies that will improve the user experience on its devices. In addition, these same partners may also work together on projects that benefit both parties by developing new products that could not be created alone.

Corporate Acquisitions

The next aspect of PDs is a company’s acquisition of other firms. Another method for proactive businesses to expand their product range is corporate assets. 

The more prominent firm may access the technology and items from the smaller firm, which it can incorporate into its product line.

Businesses that take an active approach to product development have more resources and are more willing to take chances since there’s no assurance their efforts will pay off, but the profits can be enormous if they do. 

The central disadvantage of this approach is that it takes time – frequently months or even years before any benefits are observed!

2. Reactive Product Development Strategies

It happens when companies develop new products in response to changes in their environment or industry. 

This response could be because of technological advances, entry of new players into the market, or even recessionary pressures. 

In this case, companies try to quickly bring products to market that meet the needs of customers who are already looking for alternatives.

Reactive Product development strategies are further divided into four categories.

Responding to Customers:

Here companies can respond when customers request something new from them. They can do this because they have a close relationship with their clients or because there is already existing demand for what is being requested by consumers. 

This strategy requires less time and resources than proactive strategies, but it doesn’t always work out since these requests may often be for features that customers may not want or need.

An example of this would be when Microsoft released the Surface RT tablet. The company was reacting to Apple’s iPad, which was dominating the tablet market. However, Surface RT ended up being a flop because it didn’t have the same features as the iPad and therefore couldn’t compete with it.

Responding to Competitors:

In this case, companies copy what their competitors are doing to remain competitive. You can either develop a similar product or add features to an existing product already being offered by the competitor. 

An instance of this would be when Samsung copied Apple’s iPhone and released the Galaxy S. In this case, Samsung could remove a product very similar to the iPhone but at a lower price.

This type of strategy can be successful if the company can do it quickly and before their competitor has a chance to react. However, there is also the risk that the copied product will not be as popular as the original one, which would mean lost profits for both companies involved.

Good and Better

This strategy is homogenous to the previous one, but the company improves on the original product by adding features not already on offer here. 

This approach can differentiate their product from the competition simply because they believe that these new features will make their product better than the competitors. An example of this would be when Google released the Nexus One phone after Apple launched the iPhone in 2007.

The primary benefit of this strategy is that it allows companies to react quickly and get ahead of their competition. Still, there is also a risk that they might not understand what customers want or need and therefore develop something that isn’t useful.

Being Defensive

By decreasing the price of their product, companies can make it more difficult for competitors to enter the market. This approach is known as a defensive strategy because the company is trying to protect its market share by making it harder for new players to come in and take away their customers.

An example of this is when Amazon reduced the price of its Kindle Fire tablet from $199 to $159. By doing this, Amazon made it more difficult for competitors like Google and Apple to enter the tablet market since they would have to lower their prices and be competitive.

This strategy can be successful if the company can keep its prices low for an extended period. Still, there is also the risk that other companies will decide not to compete with them on price and instead focus their efforts elsewhere (such as offering better features or a more user-friendly interface).

Key Difference

The critical difference between proactive and reactive strategies is that reactive strategies involve less planning and more improvisation as things happen at short notice. This approach could mean changing the product design quickly or even launching something completely different depending on what’s required by market circumstances.

The goal of most businesses is to adopt a mix of proactive and reactive strategies so that they are always prepared for whatever happens next in their industry.

Different Examples of Product Development Strategies

Examples of PDS(Consumer)

There are many examples of PDSs, but one is from Frito Lay! The company has developed a new packaging method called “Doritos Locos Tacos,” They take their classic Doritos chip and put it inside taco shells instead (which can either be soft tortilla chips or crunchy nacho cheese).

This approach allows consumers who enjoy eating both items to have them in the same package without buying two separate products.

Starbucks also follows PDSs when creating their signature drinks, including Pumpkin Spice Latte or Peppermint Mocha. These products are not only delicious, but they’re highly sought-after by consumers because it’s hard to find a similar drink anywhere else; this is what makes Starbucks special.

Examples of PDS (Technology)

Apple is an excellent example of successfully implementing PDSs in their company by focusing on what consumers want before they know it exists! 

For instance, when Steve Jobs came up with the idea for an MP player (the iPod), he didn’t just take some existing technology that had existed before but instead thought outside of the box and created something new entirely – which went on to change how people listen to music forever.

Netflix’s product development strategies include creating original content and licensing shows from other networks like HBO or Fox. 

This approach allows them to offer a wide selection of TV programs without exclusive rights over specific ones. 

It means that users can watch whatever they want whenever it’s available instead of being bound by contractual obligations, which require long periods before you can watch new episodes again.

Examples of PDS (Business)

Google is another great example because they’re constantly improving their products like Gmail, Maps, and Drive while adding new features every month! They’ve managed to remain relevant even in today’s age where everything seems disposable, thanks mainly to innovation and being aware of what consumers need next time around. 

This kind of thinking has allowed Google to dominate specific industries such as search engines which dominate the market share with about 85% of all searches performed daily going through their website.

Facebook has changed drastically over the years, but one thing that hasn’t is how they’ve continued to build on what works. This building occurs while also adding new features such as a timeline or instant articles so that users have more options than ever before when it comes to sharing content online and interacting with friends, family members, and more. 

This strategy has allowed Facebook to grow from being a small network college student into a worldwide social media platform used by billions of people across the globe every day!

Examples of PDS (SaaS)

Hubspot follows product development strategies by constantly improving its products like CRM for sales teams or marketing automation tools marketers; this allows them to stay ahead of the competition who are not continually updating their software.

Salesforce is another excellent example of how you can use PDS in a company – they’ve created an impressive product suite that helps businesses organize and track customer data sales leads and automate specific tasks.

What Is an External Product Development Strategy?

The external product development approach entails searching for possibilities outside your own company. This process might be anything from entering new markets, expanding into another country, launching a new product line, or forming collaborations with other businesses.

The external product development strategies will include market research, technology research, and competitive analysis. It’s crucial to complete your homework to make an informed decision about which path to take.

External product development strategy helps identify the opportunities and trends before anyone else does so you can capitalize on them before everyone starts copying your ideas.

What Is an Internal Product Development Strategy?

The internal product development approach focuses on developing new products or improving existing ones using resources already available within the company. 

This strategy might include coming up with new ideas for products or services, redesigning current offerings, or acquiring a smaller company with complementary products or services.

The internal product development strategies will include market research, user research, testing, and product launch.

Internal product development strategies can help businesses stay competitive in today’s fast-paced world. 

These strategies allow them to focus on what works well for them instead of trying something completely different just because someone else did or it might be trendy at the moment.

Small startups that do not have sufficient resources use Internal PDSs. This usage enables them to grow their business quickly without overspending on expensive marketing campaigns or hiring consultants that could cost millions of dollars per year.

How Does an External PDS Differ From an Internal One?

An internal product development strategy focuses your attention on existing products rather than trying anything too drastic such as launching something wholly different or expanding into another industry where there might not yet be any demand for what they offer.

The external product development strategy focuses on expanding into new markets and industries. This expansion entails a higher risk factor because unfamiliar territory often comes with unforeseen challenges that could negatively impact their business if they’re not careful.

External Vs. Internal

Flow Chart of New Product Development Strategy

It is essential to be mindful of strategies that will help you launch or develop your product successfully into the market. When creating a product, it is necessary to have a well-defined plan to help you achieve your objectives.

A flowchart is an excellent technique to visualize the steps in your process and identify where you can improve. You can also use flowchart creator to make this process easier.

Upgrading The Products:

It is not uncommon for companies to upgrade their products from time to time, which could involve adding new features, redesigning the user interface, or improving the product’s performance.

When upgrading a product, it’s essential to consider how this will impact users and whether they will adapt quickly to the changes.

You’ll also need to test the new version of the product to ensure that it is working as expected and there are no significant bugs.

Open to New Ideas:

It’s also important to be open to new ideas and not be afraid of change. 

This process could involve incorporating user feedback, researching the latest technologies or trends, or even teaming up with other businesses to develop something new.

If you’re not willing to experiment, your business might not be able to keep up with the competition and could eventually fall behind.

Trails For The Win:

Product trials are a great marketing strategy plus an excellent way to allow your target audience to try out your product. 

Free trials help customers understand the product and, most importantly, how it works for them without making a purchase.

The main aim of free trials is that customers find your product valuable and worth purchasing after the trial period. 

Depending on what you’re selling, the free trial length could vary from a few days to a couple of weeks.

Customization Is Key: 

Customization is often the key to success when it comes to software products. 

This approach means that businesses should offer a level of flexibility that allows users to configure the product according to their needs and preferences.

Not only does this make users feel like they’re in control, but it can also lead to higher customer satisfaction levels and longer-term relationships.

Discover and Develop: 

Diversifying your target audience and discovering new marketplaces can be great ways to develop a new product. 

Suppose you can identify the needs of a particular group of people that other products in the market are not meeting. In that case, there’s an opportunity for you to develop something new.

This type of strategy often requires a lot of research and planning, but it can be enriching if executed correctly.

More Features, More value: 

Every customer pays to get excellent service and some of the best features that a product offers. 

It is essential to keep attracting customers with new features and value, so they don’t lose interest in your products over time.

You can also use this strategy as an opportunity for expanding into other markets by building on existing products or developing something completely new from scratch based on customer feedback and market research.

Package Deals: 

Package deals are a great way to offer customers what they want without developing an entirely new product. 

This approach could involve bundling your products together or offering a discount for purchasing multiple items.

Package deals are ideal for businesses with a range of products available and can help increase sales by providing customers with an attractive offer.

Add to Product Lines:  

If you’re unsure what to do next or your product development strategy is starting to become stale, then adding a new product to your existing line can be a great way to breathe new life into your business.

This approach could involve developing a new version of an existing product, branching out into a related market, or targeting a different audience.

If you want to spice up your product development strategy, then these are just some of the approaches that you could try. 

Remember that no businesses are the same, so it’s essential to tailor your approach according to what is best suited for you and your target audience.

Experimenting with new technologies, features, and approaches can be a great way to stay ahead of the competition and continue growing your business.

Product Developement Flowchart

How Does Product Development Achieve Company Growth?

It can help the company identify areas for improvements or new opportunities that may not have been apparent before. Companies who implement PDS find themselves in a better position than their competitors due to this knowledge gained from PDS techniques and tools.

It also helps launch new products and services, which can significantly boost revenue streams while building customer loyalty through consistent quality improvements.

Wrapping Up

Remember that this is not an exhaustive guide and many other things go into developing a product such as pricing strategy, distribution channels used by competitors, and so on. 

Regardless, we hope this gives you some insight into the different types of Product Development Strategies available at your fingertips to help you reach your business goals.

What works best when combined with PDS is the use of product management software.

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