4 Product and Service Strategy
Learn how organizations design and manage product and service offerings, guide them through development and changing market conditions, and account for distinctive service characteristics.
Building a product offering
A product strategy defines the value an organization intends to offer, the customers it will serve, and how the offering will be developed, delivered, and improved. Offerings can be physical goods, services, or combinations of both. A restaurant meal, for example, combines food with ordering, preparation, and customer service.
Strong strategy coordinates product decisions with the organization's resources and marketing goals. Customers seek benefits, not merely features, so planning should begin with the need the offering addresses and consider the entire customer experience.
Three levels and the
An offering can be considered at three levels. The is the need or problem the customer wants addressed: a traveler booking a hotel seeks a place to rest and feel secure. The is the specific offering, such as the hotel room, bed, and amenities. The adds services or benefits, such as customer support, a warranty, delivery, or a hotel concierge.
Organizations also manage a , the full set of products and services they offer. A product line groups related offerings; for example, a company might sell several models of the same kind of appliance. Portfolio decisions include adding options, improving existing offerings, serving additional customer needs, or discontinuing products that no longer fit the strategy. Those choices should reinforce the value customers expect from the organization.
The
The (PLC) is a model for considering how sales and profitability may change over time. Its usual stages are introduction, growth, maturity, and decline. It is a guide for decisions, not a fixed timetable: some offerings never gain traction, while others remain successful for a long time or experience renewed demand.
Introduction: Awareness and sales are building, and launch costs may make profits low. Strategic emphasis may include explaining the offering, encouraging trial, and learning from early customers.
Growth: Sales rise and competitors may enter. Organizations may improve the product, expand distribution, and build customer preference.
Maturity: Sales growth slows and competition is established. Options include defending the product's position, improving or refreshing it, or finding new customers and uses.
Decline: Sales and profitability fall as needs, technology, or competition change. Organizations may maintain, reposition, sell, or discontinue the offering.
A reusable water bottle illustrates possible responses: its maker might first build awareness, then expand retail availability as demand grows. When sales level off, it could introduce new sizes or reach new customer groups. If demand later falls sharply, it may reduce investment or retire the line. These responses are not automatic rules; strategy should reflect customer needs, costs, competition, and organizational goals.
Developing new products
turns an opportunity into an offering customers can use. A common process includes these stages:
Generate ideas from customers, employees, research, suppliers, or market observation.
Screen ideas to remove options that do not fit customer needs or organizational capabilities.
Develop and test concepts by describing possible offerings and gathering feedback from potential customers.
Plan the marketing strategy, including the intended customer, product positioning, price, distribution, and promotion.
Analyze the business case by estimating costs, demand, and sales, and assessing whether the offering can meet organizational objectives.
Develop and test the product by creating a prototype or trial version and checking that it works as intended.
Test the market, where appropriate, to learn how customers respond under realistic conditions.
Commercialize by launching and supporting the offering at scale.
Evaluate results and use performance and customer feedback to adjust the product or its marketing.
The stages help an organization identify weaknesses before committing fully to production and launch. They need not be rigid or purely linear: new evidence may lead a team to revise a concept or revisit an earlier decision. For example, customer testing may reveal that a proposed feature is confusing, prompting a simpler design before launch.
Managing products and services
Product management continues after launch. Product managers help define a product's direction and coordinate work across functions such as marketing, development, finance, operations, and distribution. Their decisions may include setting priorities, responding to customer feedback, tracking performance, and deciding when to improve or discontinue an offering.
Managing a service requires attention to how its characteristics shape the customer experience:
: Customers may be unable to inspect a service before buying. A tutoring company can make its offer easier to evaluate through instructor biographies, sample lessons, and clear explanations of what is included.
: Production and consumption may happen together. A haircut, for instance, is delivered while the customer is present.
: The experience can differ depending on who provides the service, when, and where. Training staff and using consistent procedures can help make service quality more dependable.
: Unused capacity often cannot be stored for later sale. An empty hotel room tonight cannot be sold as last night's room; scheduling and demand-based offers can help manage capacity.
These characteristics make service quality and the customer experience central to strategy. Organizations can use training, clear service processes, customer feedback, and appropriate scheduling to improve consistency and respond to demand. Many offerings combine goods and services, so managers should consider the whole customer experience rather than treating the product and its supporting service as unrelated.