PRODUCT MANAGEMENT BLOCK 1: PRODUCT MANAGEMENT — INTRODUCTION Unit 1: Introduction to Product Management Unit 2: Product Management Process Unit 3: The Product Planning System PDF

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PRODUCT MANAGEMENT BLOCK 1: PRODUCT MANAGEMENT — INTRODUCTION Unit 1: Introduction to Product Management Unit 2: Product Management Process Unit 3: The Product Planning System BLOCK 2: MANAGING PRODUCTS Unit 4: Product Line Decisions Unit 5: Product Life Cycle Unit 6: Product Portfolio Unit 7: Produ...

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PRODUCT MANAGEMENT BLOCK 1: PRODUCT MANAGEMENT — INTRODUCTION Unit 1: Introduction to Product Management Unit 2:... Adrian Eftimie

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PRODUCT MANAGEMENT BLOCK 1: PRODUCT MANAGEMENT — INTRODUCTION Unit 1: Introduction to Product Management Unit 2: Product Management Process Unit 3: The Product Planning System BLOCK 2: MANAGING PRODUCTS Unit 4: Product Line Decisions Unit 5: Product Life Cycle Unit 6: Product Portfolio Unit 7: Product Pricing BLOCK 3: BRANDING AND PACKAGING DECISIONS Unit 8: Branding Decisions Unit 9: Positioning Decisions Unit 10: Brand Equity Unit 11: Packaging Decisions BLOCK 4: NEW PRODUCT DEVELOPMENT Unit 12: Organizing for New Product Development Unit 13: Generation, Screening and Development of New Product Ideas BLOCK 5: IMPLEMENTING NEW PRODUCT DECISION Unit 14: Concept Development and Testing Unit 15: Pre-test Marketing and Test Marketing Unit 16: Product Launch

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Block 1: PRODUCT MANAGEMENT — INTRODUCTION

Unit 1: Introduction to Product Management

Unit 2: Product Management Process

Unit 3: The Product Planning System

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1.

UNIT I: Introduction to Product Management

Learning Objectives  To understand how Product Management evolved  What a Product Manager has to do.  To understand the linkages of Product Management with other functions in the organisation.

Structure 1. Product Management 2. Historical Background 2.1. Your Learning 3. Product Management and its Interface with Other Organisational Functions 3.1. Identifies a market problem 3.2. Quantifies the opportunity 3.3. Communicates the market opportunity to the top management 3.4. Communicates the problem to Product Development team 3.5. Communicates to Advertising/ Promotion team 3.6. Empowers the sales team 4. Your Learning 5. Summary 6. Key Words 7. Exercises 8. Further Reading

1. Product Management Product Management is a function within a company that deals with the planning or marketing or forecasting of a product or products through at all stages of the product lifecycle. Product management and product marketing are different yet complementary efforts with the objective of maximizing sales revenues, market share, and profit margins. Product Management has several roles which cover many activities from identification to development, to launch and even support during its life cycle. The issues handled by the product management team vary 3

from being strategic and/or tactical in nature depending on the type of organisation and where in the organizations hierarchy the function lies. Product management can be a separate function or a part of marketing or engineering functions. Since better and new products are a key differentiator in the market and are what drives company‘s profits Product Managements main focus is on new product development. However since they are the ones who know most of the product and the basis of its origin the Product management is responsible for the growth and development of the product in the market and sometimes they may even be responsible for the bottom line generated by the product.

2. Historical Background Business executives throughout industry spend more and more time trying to answer one basic question: ―How can I assure continued profitable growth of my business?‖ The answer to this question is quite simple: ―By providing the optimum solution to the market needs.‖ Market needs are classified as Goods or Services. All these have a tangible value and can be commercially produced and marketed profitably. For our purpose, we shall classify both – goods and services – as products. Hence, if we were to answer the above question again, it could be: ―By providing a continual flow of new products to satisfy market needs or desires.‖ The question then arises: ―Now where will these products come from?‖ In the early 1900s, new products were created by gifted inventors who worked with crude equipment and facilities but were creative geniuses with determination and vision to follow their discoveries in spite of tremendous difficulties. Men like Edison, Watt, and Marconi created products like the electric bulb, steam engine and the telegraph. All their products came from years of hard work and hit and trial experiments. Once these basic inventions were developed, new products evolved. For example, after the steam engine, motorised transportation in the form of cars became a reality, and steam boats replaced horses and sailboats. By the end of World War I, new technologies had become so complex and the speed at which new developments were made became so rapid, that the individual inventor became less and less relevant. Instead, companies started organised development of products. World War II gave a further impetus to the development and refinement of products. However, most of these were based on Research and Development (R&D) in a given manufacturing company and were not driven by customer needs. The R&D product planning programs were expensive and slow, and they often were unproductive. Managements then concluded that a new approach was needed to make product development more productive. They realised that to be successful they needed to identify products that could satisfy the customer’s needs and desires, and which 4

could, at the same time, match the company's manufacturing capabilities keeping in mind the constantly changing market conditions. Thus, it was no longer a case of merely reacting to market conditions. A company needed to stay ahead by creating new markets while continuing to dominate existing ones. Hence, what was needed was a formal approach to Product Planning and Management. The formal process of Product Planning & Its Management is led by a Product Manager whose primary role is to serve as the ―Voice of the Customer‖. He is responsible for the ―4P’s” of Product Management: – – – –

Price Place Product Promotion

Note: This includes indirect management and cooperation with other members of various groups In this book we will go through the various aspects of Product Management as is now undertaken in this complex business environment. The book has been structured in five broad areas. The first being the introduction to the basic subject itself where we will not only have a look at the historical background and how product management has come out from being a product of ‗creative geniuses to a well structured process with a reasonably well defined interface within the organisation. In the chapter 2 and 3 the whole process involved in managing product development and how once we have decided what product to make the organisation needs to function in order to bring our the product to the market in the shortest and most efficient manner. It also discusses how the product launch can be staggered to provide a strategic advantage to the Marketer. Once we are through the basics we go to the next section consisting of units 4, 5, 6 which will discuss in greater detail how we must organise ourselves to develop new products and go through the process of generating new ideas and evaluating which of them is economically viable before actually taking up the developmental effort of time and money. The next section with units 7, 8, 9, and 10 will help you understand how from the concept we actually undertake the development of the product, and pretest or test market the product before we actually launch it in the market. Once we find that eh product meets our marketing objectives the steps we need to follow to launch the product. Now that we have launched our products we need to understand how to manage these products that are in the markets. The units 11, 12, 13 and 14 will give you an insight into where new products should be added, when should you support them in their life cycle and when should you decide to withdraw 5

the product. In this section we will also understand how to balance the product portfolio and the factors affecting the pricing decisions. We know that in addition to the product it is equally important to package and brand the product in a manner that it fits in the product positioning that has been decided by the product management team. So the Units 15, 16, 17 and 18 will take you through the processes followed to arrive at branding, positioning and packaging decisions. 2.1. Your Learning 1. What was the need for an organised product management process? 2. Do you think that with today‘s organised product management process we are able to address customer needs better?

3. Product Management and its Interface with Other Organisational Functions Though all the ―P‘s‖ are interlinked and affect each other, it is the Product that has the most profound effect on all the other functions. Hence the study of the product management process is an extremely important process. It is this function that has a large impact on the bottom line of the organisation and also whether the company is able to stay ahead of competition giving the company a strategic advantage to leverage. Product Management interfaces with other functions in the following manner:

3.1.

It identifies a market problem/ customer needs

This means that the Product Management team uses methods and techniques that help it to identify the problems that the customer would like to have a solution for. Once they identify this, they create a product that will resolve the problem or satisfy that particular customer need.

3.2. It quantifies the opportunity Any new product development that will resolve a customer problem will need a company‘s resources in terms of time, people and money. The company‘s decision to invest in these costs will depend on the business opportunity that could be created by this product. The Return on Investment (ROI) must be large enough for them to make sufficient profits in order to recover the initial investment costs within the breakeven period and then convert it into a profit making proposition.

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3.3. It communicates the market opportunity to the top management Since only the top management can commit resources for new product development, the product management team must provide them with the business rationale for following the opportunity and give them a business plan to convince them to commit resources for research and development.

3.4. It communicates with the Product Development team Once the top management has given their approval for development, the product development team must be explained what the market requirements of the finished product are so that they are clear about what they need to develop. Let us take an example: In the initial stages of the development of mobile phones, the customer had to hold the phone to his ear to listen to the other person. Phone companies understood the market need of their customers not wanting to hold the phone to their ears. They communicated the product development team that they need a product that fdoes not force the customer to hold the phone to his ear. The product development team developed an earphone that was linked to the phone through a thin wire plugged to the phone. While this was better than the earlier system where the customer had to hold the phone to his ear, the Product Management team wanted a further improvement since the wires always interfered while handling the mobile phone, and in any case, the customer had to continue to hold the phone in his hand. The product development team then came out with a cordless earpiece that solved this problem.

3.5. It communicates to Advertising/ Promotion team Each product is positioned for a specific category of customers. The Project Management team shares its vision with the publicity / sales promotion team giving them the positioning of the product. E.g.: A Maruti 800 is positioned for a middle class customer while a Honda Accord is positioned for the high income customer. They type of advertising communication for each type of customer is different and hence the Product Management team must explain the positioning to the Advertising team so that the right communication can be generated.

3.6. It empowers the sales team The sales team also needs to understand the product so that they can effectively sell the product to the customer. That is again the responsibility of the Project Management team – to define the sales process and identify the necessary sales tools to sell to the customer. A Maruti 800 customer will focus mostly on price and may 7

not be so feature conscious while the Honda Accord customer will focus more on features, styling, and comfort. Hence the selling tools for both the products will be different.

3.7. Your Learning 1. How does Product Management function impact Marketing of a product? 2. How does the top management benefit from a separate product management team?

Fig: 1.1 Product Managements Role

4. What a good Product Management must do A good Product Management Team or a good Product Manager must work in order to keep his company ahead of competition and help provide a competitive edge to the company. Some of the characteristics that differentiate a good product management from a bad one are: a. Realize your product is not the centre of your customer’s worlds A good product manager must realize that his product is most probably one of many products which a customer uses every day. A product manager is likely to think about his product all day, every day. It is very unlikely that the customer think about or uses this product nearly that much; to them, it is more likely just one of the many products in the market. Thus decisions about product design and features must keep this in mind. If we are over absorbed about our product and think the customer will understand everything or will find everything we develop useful, we may create problems for ourselves. For example: 

We can add features that we consider useful but if the customer does not use them then it is of no use putting the feature no matter how useful we think it is. 

If we use very specific terminology (which sometimes gets developed internally in the organisation during the development phase of the product or may be a technical term not generally used) which is not easily recognized by anyone new to the product. Then this may not be understood by the customer. 8



If we get too involved with our product we may miss identifying how it can be used with other products thus missing potential business opportunities.

Hence a wise product manager will generally: 

Use existing standards whenever they are relevant and applicable. If we have a standard QWERTY key board for computers and we change this for some other purpose then it may become difficult for customers to use this. 

Realize that products work with other products which the organization produces as well as products and systems created by others — including your competitors.

b. Save some features for later It‘s important to include enough features when a product is first released, and delaying the release of some features helps because: 

Customers have difficulty in grasping too many features at once. Also extra features may distract the customer towards the less important features and make him miss the truly differentiating features. 

If features are added with passage of time then product life can be extended by giving the customer an improved version of the product. Many times these can be given as priced value additions. 

Giving some features later may also provide the opportunity to upgrade or modify existing features that may be needed by the current market customer expectations. It is not possible for the product manager to know and plan for all features needed by the market and hence this enables him to keep his product abreast with the market and deliver a better bottom line.

c. Product management is more than prioritizing product features

Product managers needs to have a much broader view and needs to see and understand everything from the basic customer needs to the business model to the product roadmap to the go-to-market strategy. Unfortunately, many product managers take the easy feature-focused development mode. As a result they do not see their function in a holistic manner.

d. Differentiate to avoid being a ―me too‖ 9

A good product manager must try to differentiate his product and avoid being a ―me too.‖ Getting into the market speedily is definitely important; however it is always better to come into the market later with a better product than slightly faster with something that does not stand out. Being first is good but it is no guarantee of success. Amazon.com was not the first online bookseller; Google was not the first search engine; the iPod was not the first portable MP3 player; the list can go on and on. In “Product Leadership: Creating and Launching Superior New Products , Robert Cooper” offers some amazing statistics on ―truly superior, differentiated products‖: One of the top success factors we uncovered is delivering a differentiated product with unique customer benefits and superior value for the user. … Our NewProd projects studies show that such superior products have five times the success rate, over four times the market share, and four times the profitability as products lacking this ingredient. “Truly Superior, Differentiated Products” had an average 98% success rate and 53.5% market share, while “Me-Too” Products averaged an 18.4% success rate and 11.6% market share. Though the desire for quick revenue and immediate return within organizations is often strong, though there is good cause for launching the “right” product. In the end, the extra effort put into figuring out how to differentiate a product will be well worth the effort.

e. Reinforce your product-related communication Product managers have to ensure that any communication they send out must be clear and consistent. They need to do this in order to avoid confusion over action proposed or being taken. The product manager has to ensure that any communication he sends out must be understood and taken note of by all concerned with the product – be it sales, or distributors or even the internal departments like engineering, R&D, marketing etc. So that all of them are on the same page. We all know that communication is one of the most difficult things to do and many times people do not get the communication in one go. Thus the product manager must follow up and make sure that the communicated information has been received and understood by the recipient. 10

f. Do not think that a single product will solve all problems for customers We may like to make a single product that will solve all customer problems since this way our development costs would be minimum and profits would be maximum. However, trying to make it everything for everyone usually results in a product that does nothing for no one. In order to make a product do everything for everyone we would need to add a lot of features to it making it extremely complicated for most. And it makes it difficult or the marketer to sell the differentiating factor to the customer. We can see that today we are seeing more and more products that are focussed on a specific benefit – eg anti dandruff shampoos (Head and Shoulders, Clinic All clear), powders for heat problems (Navratan), soaps with cream (Dove), Fairness cream for Men, etc. This is not to say that an all-in-one strategy is always bad. Product managers can still choose to follow an all-in-one strategy; they just must be aware of the impact it may have on the perceptions of customers. Even then, an all-in-one product should be that way because it provides value and solves specific problems for the customer, not just all-in-one for the sake of being all-in-one g. Define...