A product development strategy helps companies to build a new product (digital or traditional) after studying market trends and customer needs. However, building a sound strategy requires a lot of focus and dedication.
Therefore, this article takes the topic comprehensively. You will understand what the product development process is at the end of your read. We have also shared its different types, stages, and pros and cons.
So let’s begin. 

What is product development strategy?

A product development strategy is a process of identifying ways to launch new products in an existing market.

Product Development Strategy

Companies also use the same strategy to amend existing products to enhance sales. It is highly important because it is backed by strong market research to make a plan for selling products. 

Ansoff matrix and product development strategy

Ansoff Matrix is a popular framework for business analysis which companies widely use. It consists of four quadrants (boxes) corresponding to four different growth strategies, and product development is one of them.

Product Development Strategy

Understanding product development strategy in Ansoff way clears out several confusions. The product development quadrant explains that companies must focus on R&D to ensure a new product’s success in an existing market. However, companies with a high market share in the current market should only adopt this growth strategy. 

Also Read: How to Build a Growth Strategy for a $100m Business?

Types of product development strategy

There are many great books related to product strategy. You might even have a product development strategy pdf on your smartphone right now. But one that is recommended the most is the Design and Marketing of New Products by Professors Hauser and Urban.
In this book, they have explained 9 strategies which you can also see in the above product development template. And all nine of them are grouped into two main types of product development strategies. 

  • Proactive Product Development Strategies
  • Reactive Product Development Strategies

Proactive product development strategy

The proactive product development strategy refers to companies seeking the market’s needs and building products in advance. They use target marketing, focus groups, and trend analysis to understand customers’ desires. Such firms aim to launch innovative solutions before their competitors.
Companies that follow the proactive product development strategy take one or all the following actions to build products: 

  • Investment in market research
  • Investment in R&D
  • Investment in ideas by entrepreneurs
  • Making alliances to expand the pool of talent
  • Creating joint ventures or acquiring companies

Reactive product development strategy

In this type of product development strategy, companies develop new software solutions or traditional products in response to changed market trends. This reaction could be due to new entrants, recessionary pressures, or technological advancements.
In a reactive product development strategy, organizations try to bring products to the market immediately. This quickness captures customers and fulfils their needs who are already searching for new alternatives.
Companies choosing reactive product development strategy may select an individual or multiple sub-strategies from this list:

  • Responding to customers’ requests
  • Saving existing products through ads, new branding, or discounts
  • Offering copied products to customers but with an improved quality 
  • Copying competitor’s products in low quality and offering them at lower prices

Examples of product development strategy

Let’s read some product development strategy examples by some of the renowned companies in the world, such as Google, Amazon, and Microsoft.

Product development strategy of Google

Google’s product development strategy solely depends on technology. The company adores its position as a market leader. It ensures upkeeping competitive advantage by focusing on innovation in everything they do.
Google never hesitates to end its products if they do not positively impact customers’ lives or fulfill their demands. For instance, Google Notebook and Google Desktop.

Product development strategy of Amazon

Amazon’s product development strategy revolves around customers’ needs by ‘working backwards.’ Amazon writes press releases before developing an actual product. They describe the product by considering their customers’ problems, needs, and desires. The main aim of this Amazon method is to focus more on benefits than features. 

Product development strategy of Microsoft

Microsoft claims that the company ‘Invests in the Future.’ According to the official annual report, Microsoft’s approach towards product development is its research and development facilities in the US and worldwide. This strategy has also been its greatest strength. Additionally, the company has become a leading contributor to open-source platforms since 2017. 

Elements of product development strategy

Have you spent too much time reading a product development strategy ppt? Let’s talk about the elements that make an excellent approach towards product development. Typically, there are 7 stages of product development strategy. Imagine building a magnificent software product. This is how the entire process will look from start to finish. 


Product ideation is the first phase of the product development strategy. Here, development teams, product owners, and scrum masters collaborate to brainstorm ideas for new products. 


In phase two, the product development team identifies and picks the most suitable idea that has the potential to make the market go crazy for it.


After selecting the idea, your chosen tech vendor creates a draft version or an MVP to check the product. If your outsourcing company follows an agile framework, it will use iterations to add more quality and value to your product’s features. 

Also Read: 10 Strategies to Choose the Right Tech Vendor for Your Business

Market analysis

Next, the development company analyzes the market and determines all the possible issues that the product can have. Besides, the firm may use the response from product prototyping to amend the product accordingly. 

Product development

The development team can see what customers want in a particular market segment at this stage. Then, they build the product accordingly. 

Market testing

Once the product is developed and before it is launched in the market, the company releases it in focus groups for market testing. The sole purpose of this phase is to gather feedback on the product’s functionality, effectiveness, and marketing. 

Product launch

The team incorporates customers’ feedback, adjusts the product per their demands, and finally launches it into the real market. 

Product development strategy advantages and disadvantages

While there are several product development strategy benefits, the process also has a few drawbacks. 

Pros of product development strategy

The pros of it are:

  • Keeps your business up-to-date
  • Helps seize opportunities
  • More growth and revenue generation

Cons of product development strategy

The cons of it are:

  • Contemporary markets 
  • Evolving customers’ preferences


Product development strategy allows your business to enter a familiar market with a new product to gain more market share. It gives a roadmap to the development team and helps them create robust software solutions. While it shows ways for companies to stay proactive, it also prepares them to defend their hold through the reactive approach.
At Slash, we plan, build, test, and deploy digital products using both proactive and reactive product development strategies. We believe in building customer-centric products and have proved our mettle many times. Contact us to hire the best team of engineers to help build solid digital products that overshadow your competition.

FAQs – product development strategy

What are the 4 product development strategies? The 4 essential product development strategies include market research, customer research, product testing and launching.

What are the 5 stages of a product development strategy? The 5 most common stages of a product development strategy are ideation, validation, prototyping, MVP, and product release. 

What is netflix’s product development strategy? Netflix’s product development strategy is based on providing original content of high quality to ensure user retention and user growth.


Byron Matthiopoulos
Byron Matthiopoulos
Managing Director
Byron Matthiopoulos joined as a Product Owner in 2018, shortly after moving to Cambodia, to help lead one of the biggest projects of the start-up at the time. His background as medical researcher, journalist & advertising photographer and diverse skills have provided a solid foundation for the complexities of the field of product building. His ability to assimilate multiple sources of data into a coherent vision allowed him to successfully run a number of exciting projects over the years. The diversity and complexity of his tasks since he joined Slash had perfectly positioned him to take over the role of Head of Product. He is now leading the ideation, design and creation of new and exciting products through user-centric digital innovation.
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