Product Management

Part 1: Product Management: An Introduction

Unit 2: Product Management Process

Learning Objectives
1. The Product Management Cycle and its significance in Product Development.
2. Management of the Product Development Process.
3. Some key issues to be considered while discontinuing an existing product and launching a new
one.

1. Introduction
We have seen that a company needs to stay ahead not only in its existing markets but also in
new markets that it expands into. In order to stay ahead, it needs newer products on an ongoing
basis that meet the needs of a continually changing market. We have also seen that the product
development process has become a complicated and expensive process. Hence a structured
approach to product development is needed. This is also called the Product Management
Process.

The Product Management Process is cyclical in nature – this means that product development is
a continual and ongoing process which goes through a cycle. As old products die new ones are
born and so the cycle goes on. This process of managing the entire lifecycle of a product from its
conception, through design and manufacture, to service and disposal integrates people, data,
processes and business systems and provides a product information backbone for companies
and their extended enterprise

2. Product Management Cycle

The ―Product Management Cycle has five stages:

2.1. New Product Identification

This is the phase in which the company conducts various activities in order to understand the
customer’s needs and desires and define the functional requirements of the product.

The product management group is entrusted with the task of creating a systematic process to
understand the customer requirements and create a document that outlines what the product
functions should be. During this phase the product development personnel and people from
top management undertake some of the following activities:

a. Customer surveys and responses to existing products so that improvements to existing

products can be undertaken. They also try to understand what the customer feels are
his pain areas (areas where the customer has problems). Many times, it is the solution
of the pain area of the customer that gives rise to new innovations. When a company is
 selling a product in its target segment then this product will fulfil all the needs of a part
of this segment, most of the needs of a large part of this segment and some of the
needs of the balance. In order to know whether the company‘s products are meeting
the customer‘s expectations the company‘s sales force or an agency appointed by the
product management team. These people 17 generate a feedback from the customers
some of which is extremely useful in generating new ideas.

b. They read journals, magazines, books, and also go to international exhibitions,

conferences and see what innovations are being displayed and discussed by eminent
scientists, business associates and competitors. This helps them keep abreast with the
latest developments around the world so that they can use some of these in their own
products. It also helps understand what the competition could possibly develop in
terms of new products.

c. Companies create think tanks that take in all the data that comes in from various
sources and come up with various ideas. This consists of cross functional teams – teams
consisting of people from various departments – many of whom may eventually be
involved in the development of the product. These cross functional teams get all the
inputs that is available for product development and they also bring into the team their
knowledge and experience. Using this they debate and come up with ideas for new
product development.

d. All interesting information is collated and circulated organization wide – usually

strategic planners or technology policy makers. Organizations generally circulate
information about products, technologies, business processes, competition, etc within
the organization. This not only helps people keep abreast with the latest trends but also
allows the germination of new ideas.

2.2. New Product Definition

During this phase various ideas for products generated in the first phase are discussed and
evaluated so that the final product is finalized. During this phase the following activities are
undertaken:

a. The high-level functions of the product are defined. High level specifications mean
that these specifications are an overview of all the functions desired in the product.
These are stated simply and are meant so that everyone in the organization can
understand the functions are and how it solves the customer’s problems. For example,
when the Nano was planned by the Tatas a high-level specification would have given
that they need to develop a car that will cost only Rs one lakh to the customer, would
look modern, have the basic comforts, and that it would be positioned for a two-
 wheeler owner who would aspire for a four 18-wheeler or an existing small car buyer
who would like to buy a more economical more modern design.

b. A business case is made for the new product. This business case defines the size of the
market, the segment for which the product has been defined, what are the investments
needed to make and sell the product and what will be the profit that the product
makes during its life cycle. It also outlines what are the competitive products currently
and also likely to be launched by the competitor. Once the basic product has been
defined like the Nano the product management team will have to make a detailed
report in which they will have to evaluate whether this product will make business
sense. At the end of the day the business needs to make a profit and if a product
cannot make profit it will not be considered for the next stage of development. The
study done in this phase is relatively preliminary and is done to understand the basics
of the economic feasibility.

c. In this stage the product management team has to sell the idea of the product to
various people in the organization – sales, production, R&D, HR, etc. Once the Product
Development team has determined that the product is viable it has to convince the
management that the product not only meets the strategic objectives but also the
profit objectives of the organization. Until the management is convinced the financial
commitment needed to commence product development cannot be made. The
presentation to the management will also have details of the financial support needed
for development, the time by which the product will be developed, the business
prospects and the techno-commercial feasibility.

During this phase, the Technology group with industrial engineering group conduct a
feasibility study; In addition, an economic study is done. Let us say in the case of the
Nano once the basic product idea had been agreed to in principle the product
development team would have conducted a study as to understand how they can meet
the given objectives of the product specification and yet make the product feasible.
This is done in consultation with the technical teams of the organization like R&D,
operations, procurement etc in order to understand broadly if the product can be made
economically. At this stage many assumptions are made based on which the decision is
taken. For example, the product management team will assume that a certain
technology needed to manufacture the product will be available at a certain cost and
base their calculations on that. This assumption is based on the experience of the
people in the organization and no formal quotation is taken since it has 19 not been
decided for sure that this is the technology that will be used or some other option will
be taken. Later once the decision is taken then the organization tries to get the
technology for a price below the figure taken in the assumptions.
2.3. Product Development
Once the product’s high-level specifications have been finalized and the top management has
approved this product and committed resources for its development, the Product Management
Group involves the Product Development Team. This team consists of people from R&D,
Manufacturing, Industrial Engineering and Sales. They are given the high-level specifications of
the product and given the tasks of creating the actual physical product. During this phase:

a. The various functions involved in the Product Development Team make a detailed
specification of the product. They also define the look and feel of the product. The task
of converting a high-level specification as given in 2.3.2.i into a detailed product
specification is not a small task. It involves a detailed process in which several
functional areas are involved. Each functional area provides inputs in the best way of
meeting the products objectives and the Product Development team considers all the
inputs and decides on what options to take. During this period the product
specifications may undergo minor changes keeping in view the strengths of an
organization – however the overall functional requirements will remain the same.

b. They evaluate the various options in manufacturing processes and the need for any
new technology to make the product. They also evaluate the impact of various options
in making the product in terms of investment needed, profits generated, etc. While
making the detailed product specifications the management also evaluates the
manufacturing options it has for the new products. They need to evaluate whether the
existing manufacturing processes are adequate for making the new product, or they
need to expand the manufacturing set up or they need to create an altogether new
facility. Many times, it happens that new technology needed to manufacture the new
product has a significant impact on the existing processes and so the management
needs to evaluate whether such a technology should be used or not, whether this is
going to be beneficial to the organization in the long term, since it may involve a lot of
retraining of its manpower for using the new technology.

c. The first prototype of the product is developed and evaluated to see if the product
meets all the functional requirements set out in the initial documents. This is an
important stage in the product development cycle. This product is put through
functional trials to see if the specifications laid out at the beginning are met – not only
form the engineering point of view but also from the customer‘s requirements point of
view. At this stage sometimes a few chosen customers are also shown the product for
their feedback. The feedback from testing and the customer is considered by the
product management team and they decide on the changes to be incorporated in the
product.
 d. At this stage the product is more or less finalized and the product functionality frozen.
However, some fine tuning may continue till the product launch and even during the
life of the product. These modifications are done to suit the conveniences of
manufacturing or additional features needed by Sales.

e. Once the final product comes out of the factory it is once again shown to some key
partners (much larger numbers than before) in the market and sometimes test
marketed in a small area to get the more feedback. Test marketing is usually done so
that the actual user experience is received. It is normally done in a small representative
market away from the main market of the company. The reason for doing the test away
from the main market is that in case the test fails or has a negative impact the main
market (which is significantly larger) must not be affected. This feedback also is
discussed internally and the relevant parts are incorporated in the product.

f. The product is then ready for launch.

2.4. Product Launch and Growth

The product launch needs a lot of preparation so as to ensure that the product succeeds in the
market. Just making a good product is not enough to ensure its success. Thus, by the time the
final product is ready, the Product Management group has to develop the support needed to
launch the product in the market. They have to:

a. The product management team knows how they have positioned the product and
what their target segment is. Along with the advertising department they have to
develop the campaign needed to launch the product. Now keeping with the company‘s
overall business objective they know how much they can spend on this campaign and
so they plan the media according to this need.

b. The entire sales force, the channel partners must know what product they are selling
and how it compares to competition. The customers must be able to understand the
product they are buying. Hence the Product Management team must also develop the
tools needed by the sales team and channel partners to sell the product effectively and
for customers to understand them. They create tools like sales catalogs, leaflets,
comparison charts with competition, explaining application areas and target segments
for the product, they provide the pricing strategy, etc.

c. The Product Management group continues to provide support to the product

throughout the life of the product by determining ways to improve sales, profitability
of the product. Many times, they have built in features in the product that have not
been released with the initial launch of the product. These features are added into the
 product in a phased manner so as to stay ahead of competition and keep the customer
interested in the product.

d. They also keep taking a feedback from the customer so that small incremental
improvements can be made to the product thus increasing its life and profitability of
the company while keeping it ahead of competition.

e. We know that capital is scarce and new product development is expensive. Thus, if we
can prolong the life of the product it can help the company make profits while staying
ahead of its competition.

2.5. Product Discontinuation

This is a critical phase in the management of products. This is the phase when the product is to
be discontinued and a new product has to be introduced. This seems to be quite simple but in
reality it is a difficult decision. The reason is that on one hand we have a product that is
established in the market and has customer acceptance, and, on the other hand, the new
product has still to be accepted by the customer. If the current product is discontinued and the
new product is not accepted by the customer, it can cause a major setback for the company. If
we take the example of the Maruti 800 car – it is a car that has been selling in large numbers,
even though competition has introduced many products. Now if Maruti introduces a new
product in its place they are not sure how the customers will feel about. We know that the
Maruti 800 is a car that has excellent availability of spares and maintenance. Even the roadside
mechanic can repair it and so there is no problem in using it anywhere in the country – city,
town or village. Any new car will take some time to penetrate the market so much. It will also
take some time for Maruti to train its engineers in their service establishments across the
country. Thus, there is always some danger of losing a part of the market share to competitors.
Hence some of the considerations in this phase are:

a. Availability of a new product – The foremost consideration in introducing a new

product is its availability.

b. Awareness of the Competitor’s Products - At the same time we need to see what the
competitor is doing. If the competitor has already launched a new product, it will force
the company‘s hand in launching its own product. For example, when Apple launched
its iPhone with a large touch screen technology, other phone manufacturers were
forced to launch similar products within a very short time.

c. Customer Maturity - Even though a new product may be ready, it may not be possible
to launch it because the customers are not ready for it. E.g.: consumer durable
manufacturers had washing machines ready in their product portfolio but could not
launch it since the Indian customer was not ready for it. The Indian customer at that
 time felt that washing by hand was the done thing and that a washing machine never
washed the clothes properly and that they never came out clean.

d. Adequate Training - In addition before discontinuing an existing product and launching

a new product the organization needs to be trained in it – E.g.: the manufacturing team
must know how to make it, the sales team and its distributors must understand how to
sell the product. If it is a product that needs installation and maintenance then this
team must also be trained.

e. Adequate stock must lie in the distribution channel so that once the product is
launched and the campaign breaks out, sales must not be lost due to non -availability at
the retail end.