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Product Strategy affects every single business and instrumental to successful Product Adoption. This article provides a holistic approach to thinking about Product Strategy, from defining the market, to developing the product, to understanding the customers—their psychology and journey.


Product Strategy is a compelling and important topic. It affects every single business. Without a good Product Strategy, there is no Product Adoption, and therefore no sales and no growth.

There are numerous whitepapers, frameworks, and discussions focused on Product Strategy. They discuss various elements, from market conditions to product attributes to tactical engagement. In this article, we have synthesized various established frameworks from reputable strategists and businesses to present a comprehensive, holistic approach to Product Strategy.

This article breaks down the full Product Strategy Development process into 5 phases. You can click on the links below to jump to the corresponding phase.

  1. Select the Right Segment
  2. Architect the Right Product
  3. Understand the Customer
  4. Optimize the Customer Journey
  5. Maximize the Online Experience
For each section, we will highlight important concepts core to the topic, as well as direct you to important resources for further understanding.


At the macro level, we have market forces at play. This concept is captured best by the Product Lifecycle. The essence of this framework is that a product will go through 4 stages of development from creation to obsolescence.

The Product Lifecycle is often mapped against the Consumer Adoption Curve (one of the best known marketing frameworks). By doing this, we can determine the ideal market segment to go after at each stage of the product’s lifecycle.

Product Lifecycle Consumer Adoption Curve

To use this framework, we need to determine two things:

  1. What stage in the Product Lifecycle we are in.
  2. What segment on the Consumer Adoption Curve to go after.
Each stage of the Product Lifecycle is typified with a unique set of characteristics. Likewise, different strategies are best suited for the different stages. They are as follows:

By knowing what phase of the lifecycle we are in, we have identified the general corporate strategy. We can now also identify the prevailing customer group, as defined by the Consumer Adoption Curve. There are five distinct customer groups, each characterized by a set of beliefs, motivations, and behaviors:

Please note the customer group percentages displayed in the image above (e.g. 2.5% for Innovators) are merely illustrative. These percentages are only accurate in the case of a normal distribution and thus do not apply to all situations.

Thorough Product Lifecycle analysis provides us with the backbone to our overall product marketing strategy.

The drawback of Product Lifecycle is that it is only a market-focused framework. It doesn’t address other critical drivers to adoption, such as the Product itself and Consumer Psychology.

You may have your overarching marketing mix right, but if you fail at the tactical and execution level, your product will fail.

For more information on Market Analysis, take a look at these frameworks available on Flevy:


What product attributes drive rapid market diffusion and consumer adoption? Tough question.

But, good thing we have the Rogers’ Five Factors framework. Credit goes to Everett Rogers, who also created the Consumer Adoption Curve.


Rogers’ Five Factors proposes there are 5 product-based factors that drive adoption.

Let’s walk through an example of this analysis. Look at the telephone. Up through the late 2000s, every home had a phone. It’s something we take for granted, something that’s necessary part of our daily lives, something we can’t imagine living without. One would assume it was adopted very quickly. Yet, the reality proves otherwise...

The telephone was invented by Alexander Graham Bell in 1876. By 1900, 25 years later, it would only be found in 10% of the households in the US. By 1935, 60 years after its invention, it could only be found in 30% of households. In fact, it wasn’t until the 1980s that the telephone reached 90% of US households.

Why was the adoption rate so exceedingly slow for this wonderful, useful invention?

A look at the Five Factors sheds some light. The Relative Advantage for the phone was low when it was introduced. It was expensive–both installation and ongoing fees were high–and you had few people you could call. It was also highly incompatible with the norms of the time. The idea of speaking into a metal box was foreign and frightening. The technology used in the phone was incredibly Complex and difficult to understand. People wondered, can it transmit diseases? Can I get electrocuted? Does it only speak English? Trialability was low—only the very wealthy and businesses had telephones installed. In fact, in its early years, the only factor the telephone had going for it was Observability, since people could see the telephone wire running into a house.


If you are targeting the right market with the right marketing mix, have a compelling product that fosters adoption, the third essential element to analyze is the customer. What makes the customer tick? Rogers’ Five Factors touched a bit on this already, but let us take a deeper look into Consumer Psychology.

If you have a great product, but the product adoption is poor, it is imperative to understand some key concepts in behavioral economics. Here are three important principles to be cognizant of.

Principle 1. Losses Loom Larger than Gains

Every new product provides perceived gains and losses for the customer. These gains and losses need not be financial. For example, let’s say you are starting an online grocery store for your municipality. With the promise of groceries delivered to the door, the perceived gains could be convenience, time savings, and effort savings. On the other hand, you are altering the way the customer performs a certain process–buying groceries. This change will translate to perceived losses (i.e. financial and non-financial costs), which can include the inability to handpick produce and meat, delivery fees, and having to be home during the delivery window.

When we look at this objectively, online groceries is a clear superior choice. Convenience, time savings, and effort savings are great value propositions, after all.

However, when the customer evaluates options subjectively, it becomes unclear whether online groceries is still the better choice. In fact, it is likely the customer views online grocery shopping as the poorer choice. This is because losses loom larger than gains.

A consumer has an inherent Consumer Bias. This bias weighs a loss three times that of a benefit. To put it another way, the objective value of a gain needs to exceed the objective value of a loss by three times for the customer to perceive the new product as better than the existing.

What's the solution? One tactic is to apply "the 10X rule."

If losses loom larger than gains, then we need to create a product where the gains greatly dwarf the losses. Create one where the benefits are 10X that of the losses, so that all economic and psychological switching costs are overcome. This is also known as Andy Grove’s 10X Rule. Andy Grove, Intel’s third employee and former CEO, had stated, for widespread adoption, a new product has to offer a 10X improvement over the incumbent product.

Of course, this strategy is easier said than done.

Principle 2. Reference Points Matter

The second principle to understand is different people have different reference points. These reference points matter. The reference point simply refers to the person’s current state of being.

Continuing our online grocer example, the reference point of a typical customer is someone who currently goes to the physical supermarket to pick up groceries. This process may already be part of the customer’s weekly routine. Gains and losses are relative to this state of being.

For two people with different reference points, a gain for one person may be perceived as a loss for the other. To illustrate this concept, let’s look at the price of gas. Assume the average price for a gallon of gas in the US is $3, whereas it’s $10 in the UK. If a US customer came upon a gas station charging $6.50/gallon, she would be furious. If a UK customer came upon the same situation, she would be ecstatic. (Also, note that even though the objective difference is the same for both customers, the US customer’s sentiment would be more affected than that of the UK customer, because losses loom greater than gains.)

Prospect Theory Value Function
The Value Function Illustrates Objective vs. Subjective Values

By understanding your customer’s reference point, you can determine her perceived gains and losses. In most cases, your reference point is different from that of your customer. This is because you have already used and experienced your product, whereas your customer has not. Your product has become part of your state of being. This disparity in judgment is captured in the concept known as the Innovator’s Curse.

What's the solution? One effective strategy is a reference point pivot.

Since reference points dictate how customers perceive gains and losses, it makes sense to seek out customers with favorable reference points. Think about it this way. In one market, your product may have fulfilled the 10X Rule. In another, your same product may be perceived as 10X worse!

During its earlier years, Walmart opened stores only in rural areas to compete against local mom and pops. Compared with these incumbent retailers, Walmart was a clear 10X improvement. If Walmart had started off launching stores in metropolitan areas instead, where large department store chains were already established, Walmart’s growth would have been hindered.

Ideal markets are ones filled with first time buyers. For the first time buyer, her reference point is neutral. She doesn’t have any preconceived biases over existing benefits lost and new costs incurred, because she doesn’t currently use the incumbent solution. Thus, for many products, it is easiest to launch in emerging markets. This is because emerging markets (e.g. BRICS nations) are filled with first time buyers.

Principle 3. Endowment Effect

According to the Endowment Effect, people value items in their possession (i.e. part of their endowment) more than items not in their possession. This is because people are loss averse.

This behavior sheds some light on why losses loom larger than gains. If a customer is already accustomed to an existing product or existing way of doing things, it becomes hard for her to give that up and change–even if the alternative presents greater benefits.

An easy and common method companies leverage to take advantage of this psychological principle is to offer free samples, so the customer gets hooked on their products. Once the customer begins using the product, he or she will appreciate the benefits it offers and is likely to spend money to retain these benefits. This is, in essence, an example of Reference Point Pivot.

Similarly, a popular business model adopted by many Internet SaaS companies is the “freemium” model. In the freemium model, the customer is first presented with a free version of the product. Then, the customer is offered (or forced) to a premium version.

For more information on Behavioral Psychology, take a look at these resources:


In most cases, the product you’re selling is not an impulse purchase. The path to purchase is a long process–it’s a journey that can take from several days to several months. This journey is captured in a framework developed by McKinsey & Co called the Customer Decision Journey.

The Customer Decision Journey proposes that the customer goes through four phases in a cyclical process. Each phase represents a potential marketing battleground where companies compete for the customer’s purchase and loyalty.

Customer Decision Journey

These phases along the customer’s journey are:

If our goal is to reach an emerging market, there are certain nuances that should be highlighted and understood. Though the overarching process is the same, the emphasis in marketing is different when comparing a customer in an emerging market versus a customer in an established market. For instance, in an established market, customers often rely on online reviews when making purchase decisions. In emerging markets, online sites are not yet trusted by the customer. Learn more about this topic in this article: Craft a Successful Strategy for Emerging Markets.

For more information on Customer Journey, take a look at these frameworks:


The Internet is becoming more and more crucial in the Customer’s Decision Journey. Because of the Internet, the number of customer touch points has increased significantly.

In the online experience, there are 5 categories of customer touch points. They have varying levels of importance along the path to purchase:

Here is the typical flow of online interaction with the customer through her journey. At the start, the goal is to create Brand Awareness. This is typically achieved through investments in paid advertisements. As the customer begins to actively evaluate her various product choices, Social and Email begin to play a more important role. Through social media, companies can directly engage and influence customers. Email marketing is an effective method of building rapport with a customer. Once a customer has subscribed to our newsletter, we can send regular newsletters to constantly remind her of our company and products. The customers that are most likely to make a purchase are Referral and Direct visitors. Afterwards, in the post-purchase phase, Social and Email continue to play important roles in nurturing that customer bond.

Of course, the relationship between the touch point and decision journey varies by industry and varies by geography.

Source: Product Lifecycle, Rogers' Five Factors, Psychology of Product Adoption
[Full source materials below]

  Product Lifecycle

All products mature through 5 stages of development. The length of each period varies tremendously. Some products have very short cycles, whereas others can take decades or even centuries to go through the cycle. This framework details a 5-phase approach to proper Product Lifecycle Analysis and draws out key strategic insights at each stage of the lifecycle.

Specific topics covered include the Consumer Adoption Curve, Bass Diffusion Model, Lifecycle-Performance Matrix, Strategic Positioning, among others.


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  Rogers' Five Factors

Rogers' Five Factors is a framework for analyzing and understanding the diffusion and adoption of product innovations. Whereas the Product Lifecycle (above) focuses on people, Rogers' Five Factors is focuses on the product. This framework proposes that the rate of innovation diffusion is largely driven by 5 product-based factors.

This document explains the Rogers' Five Factors, provides examples, shows how to use this framework in conjunction with the Production Adoption Lifecycle.


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This is a partial preview of the full document.

  Psychology of Product Adoption

Some innovations are truly spectacular, but consumers are slow or just refuse to adopt. In fact, over 70% of all new products fail in the marketplace—and innovative, new products fail at an even higher rate.

This presentation discusses the topics of Prospect Theory, Endowment Effect, Loss Aversion, Give and Get Dynamics, Innovator's Curse, Product-Behavior Value Matrix, among other topics. It further distills these concepts into Six Product Launch Strategies.


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This is a partial preview of the full document.


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