If you have to choose between spending money on product development (of already good product, small market shares) or marketing, what would you decide?

It depends on which stage product/industry life-cycle the product is.If its in mature stage then spending extra in marketing or investment on development of current product is not reasonable.Similarly if product is in inception stage then product/brand development is necessary through marketing techniques.But the marketing costs shouldn't add to profit/loss costs.It should be payoff as well

I would choose (Marketing) for this product. But first I will study the market needs to know exactly what point  in the product should i focus on.  There are many easy ways to use marketing without spending money such as social media.

Well, this is a tricky situation Katarzyna.

Like Sohail Lone wrote, everything goes around the  life cycle product analysis. First I also would go by that way, concerning the direct competitors.

Then I would analyse the sales, the amount of budget spent on Marketing and how is facing the competitors products in that market.

Then I would make some previous survey with a good customers panel to know what they think about the product and how could have more offer increment, to understand if could be added any more characteristics to increase the benefits.

After all this, and a BCG matrix, I would have some good suggestions/answers and "material" to help my decisions. 

Directly regarding your question, even don´t know what product you are talking about, the market dimension, the customer profile, the distribution and so on, maybe I would prefer (thinking in some of my similar cases that I´ve faced in the past) bet in some Marketing investment with a strong communication to more specific market niches....and try to put it as an umbrella product or maintain it as a STAR BCG product.

Answering your doubts - FMCG industry, product after years is still in growth stage as a question mark (low shares, huge market growth), penetration%. And I was always wondering why not invest in marketing and let the customers know the product which was really good (from 'quality' shelf) instead of pumping money to make it better and better.