Product Strategy: The Biggest Opportunity for Your P&L

Published or Updated On:

June 9, 2023

2022 tough year for my activewear brand. A lot of things didn’t go well. Influencers are critical to our brand, but influencer reach on social shrank. We saw our already saturated space somehow become more saturated. More data privacy and rising ad costs. All signs pointed to 2023 being ugly.

Nope. 2023 has been gangbusters. We’ve sold out of every collection we’ve dropped within days, sometimes even minutes. We’ve had huge influxes of people who want to work with us, and all of those new market entrants & rising costs haven’t mattered at all. Our main issue has been getting product made fast enough. The driving force behind this is two words: product strategy.

The most important thing we did to improve our business & grow net profit was change our product strategy.

Not changing our ads
Not changing our influencers
Not changing our email/SMS flows
Not on-site CRO
Not changing our store, media etc.

Changing our product strategy helped us sell more and charge more - on a scale that blew my mind. 🤯

👀 What a better product strategy looks like for us

We’re a brand for women who lift. In 2022, we kind of forgot that.

We created a lot of experimental looks and styles. We sampled new fabrics that, in hindsight, weren’t a good match for our audience. We did a lot of loungewear. The product strategy erosion expanded to our brand strategy: we started using influencers in different niches, started using models with different looks. This made things worse.

In 2023, we reconnected with what our core customers wants: activewear in the right fabrics & colors. We went on to create a new feature that they’ve been going nuts for (Sculptseam). We realigned brand too. The result? A sales explosion.

We figured out what products will have tons of demand, then made those products. We were right and our audience is going bananas. 🍌 We improved our product strategy. It's not complex. You have to make things people want. A good product strategy is zeroed in on what they want.

☝️Better product strategy is the biggest opportunity for your P&L

Like any owner, I spend a lot of time thinking about our P&L. To improve our P&L, we’ve done a few things - all tried & true:

Reduced operating expenses
Reduced cost of goods
Improved retention

All of these things have helped, but they have paled in comparison to the impact our better product strategy has had. Selling out of every release has meant that our annual run rate is up 50% over last year, and that’s demand constrained by inventory (meaning our run rate would be higher, if we had the inventory). Customers can’t get enough.

Here’s a visual to help explain how I see things for my business.

You can only reduce your costs so much. That has a ceiling. Raising your revenue doesn’t have a ceiling. The most profitable way to raise your revenue is with a better product strategy. This isn’t to say that you shouldn’t do the tried & true things. I’m saying that the biggest opportunity is the products you’re launching.

⚖️ Product strategy is more important than your channel strategy

Influencer marketing is a key growth channel for Paragon. But every year since the 2020 mayhem, organic reach on social has declined. Big influencers are less able to reach their followers, less able to gain new followers. This is happening across the board, for a variety of reasons.

Creators have felt this, and the brands who work with them have felt this. If you’re selling the same shit, it's getting harder every year to make a buck.

But in 2023 with our improved product strategy, we’ve got influencers doing numbers with us that we haven’t seen in years. Reach has gone down (again), but revenue has gone up. That's because product strategy is upstream to your channel strategy. A world-class setup in your systems matters so much less than what you’re selling in it.

We’ve seen this on other channels too. They’re all up. Most notable are the ones where we changed nothing.

Caveat: this isn’t to say channel strategy doesn’t matter. Of course it does. The point is product strategy matters more.

We aren’t alone. One of our influencers is a marketing wiz & runs multiple businesses under her brand. Despite the steady decline in her reach, she is setting lifetime revenue records. How? Deeper connections to her audience, meaning she better understands them & what they want — then makes it. In other words? A better product strategy.

🔑 What a better product strategy allows you to do

Sell more

Instead of 5,000 units/mo, you’re selling 10,000 units/mo.
More volume. And across more SKUs.

Charge more

Instead of $40/unit, you can sell for $55/unit
Don’t need to discount.

What gave me the huge AOV boost I wanted? Hint: it wasn’t better CRO or cross selling. It was raising prices.

Here’s a thought experiment - what would your net profit look like last year if you sold all of your products for no discounts? What would it look like if you sold everything for a 40% higher price? Do some quick napkin math, you might be surprised. Nothing else would need to change, no additional hiring or lucky breaks with new channels. Just better product.

Side note: I’ve seen some entrepreneur wizards pushing a simple “raise your prices” message. The argument is that most businesses underestimate how much their customer is willing to pay. Maybe we’re the exception to the rule, but we tried to do this before our product strategy evolved and it hurt net profit. After it evolved though, we discovered we did have the power to raise prices and improve net profit. The lesson? Don’t just try to raise your prices & justify it, focus on making products your customers want more - then you’ll have the power to raise your prices.

🔮 How to come up with a better product strategy

1. Get out from behind your brand

You spend all your time on the back end. You’re looking at sales performance, inventory orders, talking to your team, managing projects. It’s easy to forget what the customer sees. Step one is to get out from behind your brand. It’s harder than it sounds.

2. Get into your customers shoes

The part that most people don’t do well enough. It helps if you are your target market, but don’t rely on that.

Your goal here is not just to understand them from the third person, but to learn to think like them in the first person.

What do they do every day? What do they care about? What’s important to them? What other kinds of things do they buy? What are their goals? Who are they surrounded by? What do they do on weekends? What are their secret hopes & dreams they’d never say out loud? What do they care about that they themselves are not aware of? Why do they do what they do? What do they say? What are they worried about? What can’t they stand?

A great exercise for this is with a customer empathy map. While filling this out, I spent hours looking at dozens of individual customers on IG learning to think like they do.

3. Play and test

Now that you can think like a customer in the first person, it's easier to think about what kinds of things they might like. What would help them get what they really want? You can evaluate your ideas from their perspective.

Once you think you’ve got something, test it. Don’t rely on your intuitions or on feedback from your internal team. Listen to Steve Blank and “get out of the building”. Have real conversations with customers. Don’t delegate this. Do it yourself.

If you think you’ve got something, test it in a minimum viable way. Create a low effort, low resource experiment where people have the opportunity to pay for it, and see if they actually do. If they open their wallets, then you’ve got your proof to go big.