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Define product strategy for IC PMs

Overview

One of the ways PMs can create leverage is by deeply understanding their product strategy and aligning their product work to their product strategy. This leverage looks like:

Knowing which features to invest in because these features fully align with your strategy, and will generate outsized product returns if you invest in them.

Knowing which features to modify or avoid because there’s misalignment.

But product strategy is a fairly nebulous term, making it challenging for PMs to effectively articulate their product strategy. This is where the Product Strategy Map (PSM) comes in. This framework breaks product strategy down into six distinct dimensions.

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Not only does the PSM help PMs better distinguish needle-moving initiatives from potential duds, but it also becomes a shareable artifact that helps PMs communicate with their stakeholders.

What you'll do

Define the target audience.

Establish the problem to solve.

Describe the value proposition.

Explain strategic differentiation.

Consider channel strategy.

Define monetization strategy.

1 Define the target audience

When defining the target audience, we’ll apply the “bullseye approach”. This involves filtering down from our total addressable audience into our narrowest target audience.

The bullseye approach to target audience definition solves the problem of having too loose an audience definition by starting with the most general audience possible first, and then narrowing it down until we’ve gotten to the audience where we have the strongest product-market fit.

Refining your target audience does not mean you are turning people away. Rather, you actively prioritize developing for a certain subgroup of your users for whom your product resonates most, and deprioritize feature development for those outside their user group.

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Define total addressable audience

This is anyone we "could" serve or who "could" get value from our product.

This has parallels to our Total Addressable Market, a number that’s almost always findable in our investor or board decks since it is a key financial metric. The key difference is that instead of looking for the addressable market dollar size, we’re more focused on figuring out who our addressable audience consists of.

Narrow adience hypothesis

This is typically done by filtering on several common attributes.

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This might involve several layers of narrowing, e.g., narrowing on both use case and role.

Confirm target audience with data

To determine what customer segments are most ‘attractive’, we might consider several attributes.

Segment size: what is the total addressable market size for this segment? Is the segment large enough to enable us to build a meaningful business against it?

Resonance with value proposition: how well does the existing value proposition resonate with this audience?

Willingness to pay: can we effectively monetize against this audience based on evidence of their willingness to pay, available budget, derived value, etc?

Strongest delivered value: which customer segment is the most engaged and the happiest with our solution? NPS and retention are good proxies of this.

Channel strategy: can we effectively and affordably reach this target customer segment via our available marketing channels?

Strategic fit: does this audience fit the overall strategic vision for the company, especially in light of where we ultimately want to expand with future products and services?

Example | Substack

Substack is an online publishing platform for subscription newsletters. It provides a solution for writers who want to get paid for writing by allowing readers to pay for regular subscriptions.

Define total addressable audience

The broad audience was all writers because their product could fundamentally serve any person who wanted a publishing platform.

Narrow target audience hypothesis

The Substack team narrowed their audience to writers who wanted to get paid and who published regularly, because their product was designed to support subscription-based writing. They knew they could design Substack’s user experience to encourage readers to pay and subscribe.

Confirm target audience with data

They found that professional journalists benefitted the most from Substack’s offerings. Since they were already professionally writing, they needed to find a platform that could financially support them, which wasn’t the case for hobbyists who only occasionally wrote articles.

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Example | LinkedIn Sales Navigator

LinkedIn Sales Navigator (LSN) is a premium LinkedIn subscription for salespeople, built to help them find and engage with new prospects and customers.

Define total addressable audience

The broadest audience is all sales professionals.

Narrow target audience hypothesis

The LSN team applied several layers of narrowing.

They first narrowed down their audience to B2B,

Then to B2B sales professionals who manage more than $100K ACV contracts,

And finally to B2B account executives who ‘hunt’ for >$100J ACV new contracts. This meant excluding account managers who ‘farm’ by maintaining and expanding existing contracts.

Their logic was that their product’s main value was providing social selling information, which would have the highest willingness to pay from companies that did high-value deals.

Then, within the sales audience, account executives would receive the most value, since key LinkedIn Sales Navigator benefits, like a way to contact the user and pre-sales intelligence, were more relevant to them than to account managers.

Confirm target audience with data

The LSN team discovered that tech and finance account executives engaged particularly well after launch because LinkedIn overall had a high density of tech and finance members.

These sales professionals got more value out of the product because they had more prospects already there. This signaled to the Sales Navigator team to refine their target audience to B2B account executives with more than $100K ACV deal size in tech/finance.

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Tip

When you evaluate your live customer data to find which segments are most attractive, you’ll commonly end up with one of two outcomes:

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You realize your target audience is even narrower than your original hypothesis. LinkedIn Sales Navigator is a good example of this.

You realize your target audience is different from what you thought. Consider Notejoy as an example of this.

Notejoy is a collaborative notes app for teams and individuals. It differentiates itself primarily on the simplicity of the user experience, being highly intuitive to use.

When narrowing down its target audience, Notejoy originally thought it would best serve small tech companies. These smaller companies likely would not have formal notes software already in place, and their tech-savviness would make them more likely to adopt something new.

However, Notejoy found that its most engaged users were non-tech small and medium-sized businesses like law firms and agencies because they had the least tech-savviness. As a result, Notejoy’s intuitiveness and speed were highly appealing to them.

In contrast, users in tech didn’t value the intuitiveness as highly as they did powerful features.

Common Mistake

It’s common to consider our target audience to be our total addressable audience, the broad base of people the company aspires to eventually serve.

When we try to build for too general an audience, we spread our resources too thin and end up not deeply solving any specific audience’s needs. This then leads to weak product-market fit, which in turn ultimately results in low user retention and satisfaction.

Defining our audience tightly is key, because it allows us to develop a more tailored product and market towards our best customers, who resonate most strongly with the problems to solve, and are thus the most likely to become our product’s evangelists.

2 Establish the problem to solve

To get a deep, root-cause understanding of the problem to solve, take the outcome-motivation gap approach. In this approach, we refine our understanding of the true problem we’re solving for.

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Write out the outcome the customer wants. The outcome is the end benefit our customer wants to experience. It should not be the perceived solution to getting to that benefit.

Consider their motivation for solving the problem. By ensuring we’ve also thought about ‘why’ the customer wants the outcome, we get better ideas on exactly ‘what’ need we have to solve.

Define the gaps they experience in solving the problem with current solutions. By concretely understanding why existing solutions fail, we get a better understanding of the deeper problem we must solve.

Articulate the problem to solve. Now, armed with the understanding of why your users want an outcome and why current solutions fail, refine your framing of the problem you’re solving.

Example | Substack

Outcome: For Substack, an online publishing platform for subscription newsletters, users want to earn a living from writing.

Motivation: Users want to be able to keep writing because the topics they write about are personally meaningful to them.

Gap: There are two issues:

They can’t make a living from doing traditional writing at media publications, because the business model for traditional ad-supported media like newspapers is collapsing.

They often don’t have full freedom to write what they want, because their publication ultimately dictates what they work on and write about.

Identified Problem to Solve: Substack now knows their goal is not just to create a good writing platform, but rather to solve the historical problems around monetization and control faced by professional journalists. Accordingly, Substack’s refined problem statement would be to "enable truly independent writing".

Example | LinkedIn Sales Navigator

Outcome: Their audience wants to Increase the quantity, size, and speed of closed deals.

Motivation: Their audience earns a living on commissions, so increasing their paycheck requires them to increase their total deal dollars.

Gap: Users face two issues:

Their standard approach, cold outreach, is becoming increasingly ineffective (97% of cold outreaches don't convert into sales meetings, and that percentage is only increasing).

Doing the opposite (finding and conducting warm outreach) is hard. It’s difficult to find the right warm contact, difficult to figure out who's the company decision-maker, and difficult to understand what social context they can personalize the outreach with.

Identified Problem to Solve: Since LinkedIn knows they’re trying to help salespeople get more closed deals via warm selling, they can refine their problem to “Help sales professionals operationalize social selling best practices.”

3 Describe the value proposition

Rather than compressing the value proposition into a single statement, we should go to the next level of depth by articulating this dimension as a collection of sub-benefits.

Sub-benefits are the distinct individual benefits that your product provides.

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One way to define the sub-benefits is to consider what our “ideal homepage” would look like. Since product homepages are intended to entice users to try or buy our product, they should ideally be the perfect distillation of our product’s value and differentiation.

A typical product homepage consists of at least 2 parts:

The product tagline: This usually shows up as the very first sentence on the page in large print, communicating the overall value promise to prospective customers. Think of this as the equivalent to your high-level, one-sentence value proposition.

3-5 sub-benefits - The rest of the homepage typically details 3-5 product benefits, specifically communicating how the product would solve key customer challenges. While individual features are often mentioned in the benefit details, the overall benefit statements are phrased in terms of benefit to the customer.

If you have trouble narrowing down what exactly those 3-5 sub-benefits might be, take a bottoms-up approach.

Example |Substack

High-level value proposition: The product tagline would be “a platform for independent writing.”

Sub-benefits: This breaks down into four sub-benefits:

“Get paid to do what you love” - Substack is not necessarily focused on making the writing process itself easier. Instead, it’s focused on reducing the time spent on the overhead around writing, like setting up a website, collecting payments, and doing customer service. This is an important part of Substack’s value proposition because writers starting on their own often spend 40% of their time doing this overhead.

“You’re in charge” - This explains that Substack allows you to build and completely own your audience. In contrast to traditional publications, Substack allows writers to fully own their email list and thus the means of access to their audience. This is highly valuable to the independent writer because then they can choose to export their audience if they ever feel they are getting censored.

“Start your writing journey” - Substack has a specific program, Substack Pro, that pays writers an upfront sum to ease their transition to independent writing. This is about enabling writers to make the leap to independence, as opposed to helping their writing process directly.

“Everything you need to make a living writing” - This conveys that a big part of Substack’s value proposition is making ongoing life as an independent writer easier. They offer services like legal support and health care options to further remove barriers to spending time on independent writing.

Example | Figma

Let's look at how Figma’s website follows this format.

The landing page boldly states its high-level value proposition: “Where Teams Design Together: Figma helps teams create, test, and ship better designs from start to finish.”

Then, underneath, Figma’s value proposition is broken up into its key sub-benefits:

Brainstorm and workshop ideas together in FigJam: to explain how they help “teams design together” through live digital whiteboarding with live audio.

Design without silos: to also clarify that “teams design together” means cross-functional collaboration, not just intra-design teams.

Test and gather feedback: explain that “ship better designs from start to finish’ means having strong prototyping and design features.

Share a common language: to clarify that ‘teams design together’ also means a more efficient collaboration process via features like shared digital libraries.

4 Explain strategic differentiation

Whereas value proposition describes what solution we provide, strategic differentiation describes how we keep that value proposition compelling against our competitors.

When defining this dimension, it’s important to think about the full field of competition, not just direct competitors.

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Direct competitors: These are the competitors we traditionally think of, the ones with value propositions most closely related to our product.

Indirect alternatives: These are competitors that are in a different solution category but are still seen as a viable choice. To brainstorm these, think about the other ways outside our direct competition in which users solve their problems. Another common way is to ask our customers how they would solve their problems without our product.

Adjacent markets: These are companies that don’t directly compete with us today, but offer closely related services. In a good scenario, they could offer interesting functionality to bring into or integrate with our solution, and in a bad scenario, they may start developing functionality that increasingly overlaps with our value proposition.

Once you’ve defined your competition, determine the unique attributes you have that make your product more compelling than the rest. These unique attributes aren’t limited to product features; in many cases, they can also be elements like proprietary IP, talent, or business models.

Example | LinkedIn Sales Navigator

Here’s how LSN might approach defining their strategic differentiation:

Direct competitors: Since LSN fundamentally helps sales professionals discover leads, its direct competitors would be other lead-gen tools like Hoovers, ZoomInfo, and Lead411.

Indirect alternatives: These would be the other methods in which sales professionals discover leads - in this case, through industry conferences.

Adjacent markets: To identify adjacent markets, the LSN team mapped out the user journey. Salespeople go through a standard journey when doing sales.

Lead generation, where they get a list of people to reach out to.

Then, they have to reach out to them and monitor their conversion towards a sale, which is typically managed by sales acceleration tools like Yesware and Outreach and CRM tools like Salesforce or Microsoft Dynamics.

Finally, after the sale is complete, they’ll have a post-sales phase, where they focus on making sure the customer is happy, using customer service tools like Zoho or Asana.

In this example then, Sales Navigator’s adjacent markets are the sales acceleration and CRM tools because it was adjacent to the lead generation step, which LSN played in.

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Identified strategic differentiation: The breadth and up-to-date accuracy of their data. Even if competitors knew that up-to-date data was important, they couldn’t easily re-create the same ecosystem and incentives for users to give them the same.

Example | Substack

Here’s how Substack might define their strategic differentiation:

Direct competitors: Since Substack is a publishing platform that supports subscription-based payments, its direct competitors would be other publishing platforms with subscription-based payment capabilities like Ghost, Medium, Wordpress, and Memberful.

Indirect alternatives: This would be other methods in which their target audience publishes, such as via traditional media publications like the New York Times or the Wall Street Journal.

Adjacent markets: In Substack’s case, writers who look to get paid might turn to more general creator monetization platforms. These would be companies like Patreon and Gumroad.

Identified strategic differentiation: To provide all the tools that an independent writer needs. They offered select writers healthcare and legal support, both of which were things that direct and adjacent market competitors like Medium and Patreon were unlikely to ever do.

They also offered the writer full control over their audience and email list, something that traditional media publications would probably never do. By doing these things, Substack carved out a clear niche to serve.

Tip

Brainstorming adjacent markets is often the hardest step. Here are two approaches if you need help:

Think about the other ways that our users solve parts of their problems.

Think about our user journey. Map out the touch points they experience before and after our product. The products that your user touches before and after your product will often be your adjacent market competitors.

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5 Consider channel strategy

Product-channel fit is how we fundamentally mold our product to take advantage of our best-performing acquisition channels.

There are four major categories of acquisition channels that products use to drive growth: viral, content, paid, and sales. It’s key to understand not just how to optimize the channel, but also how to improve product-channel fit.

To improve your product-channel fit, there are some common product patterns:

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Virality-based products: We need to improve the network effects of our product and ensure fast time to value. This is because we have to incentivize invites and help people quickly get to the point where they would want to invite somebody.

Content-based products: We generally want to make content creation as easy as possible. This is because generated content powers your acquisition, so easier content creation translates into more acquisition fuel.

Paid acquisition-based products: We have to create an extremely fast time to value because people who come from paid channels typically have very low user intent.

Sales-based products: We have to build a product that balances needs across multiple personas. Companies that grow primarily via sales tend to be enterprise products and have to distinguish between the varying user levels as a result (for example, buyer vs. end-user).

Example | Viral loop

Candy Crush is a mobile puzzle game, where a user only has a certain amount of attempts, or lives, to clear a level.

When the user runs out of lives, they have to wait several hours before being able to try again.

Alternatively, they can ask their friends for additional lives so they can instantly try again.

The lives mechanic actively incentivizes inviting others, because they have to wait less time for a level clear attempt with a larger network.

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Example | Content loop

Pinterest likely acquires a significant amount of users through SEO of their content.

The long-term key behind Pinterst’s growth is to keep user content creation going.

Pinterest has done this by making content creation as easy as possible, creating multiple ways to pin images from any device.

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Example | Paid loop

For a video game like Clash Royale, they know that they have to fight for user attention because mobile gaming is a highly crowded market. To keep users engaged, they created a highly streamlined onboarding flow.

Instead of trying to teach every game mechanic from the start, they stuck to teaching only the two core mechanics, placing units on the map and upgrading or editing their deck.

They also intentionally designed the game to take an average maximum of three minutes, so that users could experience a complete game within minutes of starting.

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Example | Sales loop

Workday is an enterprise finance/HR software company that primarily grows through its enterprise sales teams. Since they have to get the initial buy-in of the software, their software focuses heavily on satisfying buyer requirements around reporting and compliance.

However, to keep companies retained, they also have to make the product experience manageable for the end user, making customizable workflows a close secondary product priority.

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6 Define monetization strategy

We can define product-model fit as how you fundamentally mold your product to fit your monetization model.

The pattern you use to improve your product-model fit varies depending on what category of company you are. According to Chris Janz of Point 9 Capital, companies fall into 5 major categories:

Mass market: $10 ARPPU; 10 million paying users.

Prosumer: $100 ARPPU; 1 million paying users.

SMB: $1,000 ARPPU; 100K paying users.

Mid-market: $10,000 ARPPU; 10K paying users.

Enterprise: $100,000 ARPPU; 1K paying users.

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Mass market

To create a successful product, you have to attract a huge quantity of users. This means you must either be an extremely viral product like Facebook or produce content that you can generate enough users from just SEO traffic like YouTube.

For virality-based products, the common ways to improve product virality are to improve the network effects of your product and increase the time to value.

For content-based products, the common way to improve your product is to improve the ease of content generation.

Prosumer

Here, you tend to focus on more niche audiences. You still have to be viral to hit your 1 million user goal, but don’t need the same viral coefficient you needed for the mass market. The common pattern here is to build in casual contact virality.

In other words, you try to expose your product to as many users as possible, understanding that only a few of them will sign up.

SMB

You have to grow through evangelist customers who love your product and want to introduce it to others. The most common pattern for improving product-model fit here is to make a high NPS, self-serve product.

This often means having a free and paid tier, where users can try the product for themselves. The goal is to make your product so intuitive and delightful that they deeply adopt it, and sell themselves into a paid plan.

Mid-Market

As you move into mid-market, you still have a lot of similar considerations to SMBs. Because you often can’t afford a dedicated outbound sales team yet, you still have to heavily rely on your product for growth.

But you can’t afford to deeply customize your product yet so you have to build an ‘80% product’ - i.e. one that solves most of your audience’s needs, and purposefully shies away from deep customization that only several users want.

As a result, the mid-market pattern for improving product-model fit here is similar: create a high NPS, self-serve product, but with slightly more advanced customization in your higher price tiers. This is because the price point now can support the additional engineering and a light-touch inside sales team.

Enterprise

You are often now customizing your product to specifically answer each account’s needs.

As a result, in the enterprise tier, you generally improve product-model fit by increasing product customizability.

Example | Mass market

Virality-based products: For example, Instagram makes having a larger network helpful in multiple ways. If you do a lot of messaging through Instagram, you naturally want other people to join Instagram to keep communications streamlined.

Content-based products: For example, YouTube facilitates content creation with initiatives like creator revenue share agreements and video creation tools.

Example | Prosumer

Consider the email app Superhuman. One of the primary ways they grow is through exposure of the ‘sent by Superhuman’ email line.

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Example | SMB

Mailchimp focuses on creating customer delight by making their product as simple and intuitive as possible.

They also designed their product to be highly self-serve. Customers can trial their product for free, and experience Mailchimp’s value proposition firsthand instead of being told about it by a sales team.

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Example | Mid market

Consider HubSpot, which has built their product to be relatively intuitive and comprehensive in solving most of its users’ needs.

Their free trial allows users to try the product for themselves with the basic functionality most users need. For their more advanced users, they have higher-priced plans built with more customized functionality.

Their Enterprise plan for their Marketing Hub, for example, allows users to extend the HubSpot platform with custom objects and Salesforce custom sync.

Example | Enterprise

Workday allows each account to customize workflows to their detailed needs.

If they need to send data to another system and pull it back in, Workday has an integration for it. If they need a specific approval chain for decisions, Workday has a configuration for it.

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7 Share and utilize the PSM

After building the product strategy map, we socialize it with our manager and direct team to:

To refine areas that seem unclear - For example, maybe the channel strategy seems unclear or inconsistent. Getting clear on this may help save time and inform work down the road.

Build alignment where needed - For example, maybe the organization agrees on the target audience at a high level but doesn’t agree at a more detailed, or granular, level.

When socializing with stakeholders, slim down the PSM to just the key takeaways and remove the process steps.

If stakeholders disagree or wonder how a certain conclusion was reached, then we can run through our thinking process then, rather than leading with the process.

This avoids the information overwhelm that comes when sharing lots of new information. Additionally, it helps focus socialization time on strategy alignment instead of process sharing.

Tip | Broaden the strategic view

As PMs advance and play a larger and larger role in setting product strategy, it’s helpful to think about the overall “strategy stack,” which includes the company strategy, mission, product strategy, product roadmap, and goals.

The

product strategy stack⁠

provides a framework for understanding the connection between mission, company strategy, product strategy, and roadmap.

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Recap

PMs can leverage the Product Strategy Map to articulate product strategy across six key dimensions and align with key stakeholders.

Target audience: Leverage the bullseye approach to define your audience tightly and narrowly.

Problem to solve: Dig for the root cause, high burning problem by utilizing the outcome-motivation-gap approach.

Value prop: Expand beyond the signal statement value prop statement to 3-5 sub-benefits by picturing the “ideal homepage”.

Strategic differentiation: Focus on the unique attributes that your product has against the full field of competitors, including direct competitors, indirect competitors, and adjacent markets.

Channel strategy: Improve product-channel fit in your viral, content, paid, or sales acquisition channels.

Monetization strategy: Improve product-model fit by considering what category your product falls into mass-market, prosumer, SMB, mid-market, and enterprise.

Share the product strategy map: Socialize the PSM with stakeholders to refine unclear dimensions and to build alignment where needed.

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