1 INTRODUCTION TO PRODUCT MANAGEMENT

INTENDED LEARNING OUTCOMES

By the end of the learning experience, students must be able to:

1.1 Understand how product management evolved.
1.2 Know the historical background of product management.
1.3 Understand the linkages of product management.

A. 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 from being strategic and/or tactical in nature depending on
the type of organization 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.

One of the secrets of successful technology companies is the capability and capacity of their
product management function. Awareness for product management need arises from signs
such as: (1) disconnect between the strategic vision of the CEO and day-to-day product
development activities, (2) lack of communication and coordination between engineering,
marketing, sales, finance and legal groups, (3) missed launch dates, and (4) lost opportunities in
competitive situations with large accounts.

Product management, as a function, may reside within the marketing or the product
development group. Regardless of where it sits in the organization, success comes from clearly
defined roles and responsibilities and sincere, open channels of communication between the
CEO, the executive leadership team, and product management team.

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B. HISTORICAL BACKGROUND OF PRODUCT MANAGEMENT

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, motorized
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 organized 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 realized that
to be successful they needed to identify products that could satisfy the customer’s needs and
desires, and which 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 organization. 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
organization needs to function in order to bring out the product to the market in the shortest

Learning Module in Product Management 2|P age

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 organize 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 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.

C. PRODUCT MANAGEMENT AND ITS INTERFACE WITH OTHER

ORGANIZATIONAL 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 organization 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:

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.

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.

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

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opportunity and give them a business plan to convince them to commit resources for research
and development.

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 does 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.

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. Example: 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.

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 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.

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:

1. 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 thinks 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.

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  If we use very specific terminology (which sometimes gets developed internally in the
organization 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.

 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.

2. 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 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.

3. 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.

4. Differentiate to avoid being a ― “me too”

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.

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5. 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.

6. 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 focused on a specific
benefit – example, 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

7. Define the problem before solving it

Product managers and many others unfortunately assume the problem is clear and jump
straight away to solving it. However, improperly-defined problems lead to improper solutions.

Albert Einstein is supposed to have said that, given one hour to save the world, he would spend
55 minutes defining the problem and 5 minutes finding the solution. This quote does illustrate
an important point: before jumping right into solving a problem, we should step back and
invest time and effort to improve our understanding of it.

The first and foremost thing to be done before solving the problem is to define it correctly.
This definition should neither be too narrow or too broad. A narrow definition will limit the
scope of the solution and similarly a very broad definition will give us solutions that may not
be relevant to the problem.

Going too far in either extreme may be unproductive and inefficient in many situations.

Product managers must not be in a hurry to write down features without clearly defining the
problem. Relooking at problems can always provide a fresh perspective and give interesting
solutions. Many times the product manager should take the help of research to clarify and
define issues. The time spent in defining problems in the early stages always helps save time
spent later in resolving issues.

SUMMARY

Historically product development was dependent on work undertaken by inventors and

geniuses. Later with the advent of competition it became more organized. Products were
developed in research laboratories of large companies. However, these were products that
could be developed rather than what was needed by the customer. As competition increased
further companies were forced to understand what were the customer needs and develop

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products that were needed by him. This led to the creation of the Product development
function. The product development function is an important function that needs to interface
with all functions of an organization.

KEY WORDS

1. Goods and Services: Goods and services are the outputs offered by businesses to satisfy
the demands of consumer and industrial markets. They are differentiated on the basis of four
characteristics:
(a) Tangibility: Goods are tangible products such as cars, clothing, and machinery. They
have shape and can be seen and touched. Services are intangible. Hair styling, pest
control, and equipment repair, for example, do not have a physical presence.
(b) Perishability: All goods have some degree of durability beyond the time of purchase.
Services do not; they perish as they are delivered.
(c) Separability: Goods can be stored for later use. Thus, production and consumption
are typically separate. Because the production and consumption of services are
simultaneous, services and the service provider cannot be separated.
(d) Standardization: The quality of goods can be controlled through standardization and
grading in the production process. The quality of services, however, is different each
time they are delivered.
2. Continual flow of new products – The customer needs to get something new in order to
stay interested in a company’s product. This can be in the form of new features, new shapes,
new products and even a new price. This innovation is the continual flow of new products.
3. Voice of Customer – is a term used in business to describe the process of capturing a
customer's requirements. Specifically, the Voice of the Customer is a market research
technique that produces a detailed set of customer wants and needs. Voice of the Customer
studies typically consist of both qualitative and quantitative research steps. They are generally
conducted at the start of any new product, process, or service design initiative in order to
better understand the customer’s wants and needs, and as the key input for new product
definition, and the setting of detailed design specifications.
4. Return on Investment is usually expressed in percentage. It is the percentage of money
gained or lost on an investment relative to the amount of money invested
5. Breakeven Point is the point at which cost or expenses and revenue are equal: there is no
net loss or gain, and one has "broken even".
6. Business Rationale defines the fundamental reason or reasons why developing the product
will be beneficial to the business. It outlines a reasoned step by step explanation.
7. Business Plan is a formal statement of a set of business goals, the reasons why they are
believed attainable, and the plan for reaching those goals. It may also contain background
information about the organization or team attempting to reach those goals.
8. Product Positioning means the process by which marketers try to create an image or
identity in the minds of their target market for their product, brand, or organization. The
objective of this to ensure that the consumer remembers the product or brand in spite of the
noise created by the communication clutter.
9. Sales Process is a systematic approach to selling a product or service. It includes all aspects
of sales and helps in creating standardized processes which allow monitoring of processes and
in enhancing sales.
10. Sales Tools all factors that help in selling a product are the sales tools. These include
consumer schemes (e.g. buy one get one free, buy a car and get a chance to win a TV, etc)
advertising, printed leaflets, banners, channel push, etc.

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REFERENCES:

Crawford, Merle and Benedetto, Anthony Di. 2015. New Product Management Singapore,
McGraw Hill.

Gorchels, Linda. 2017. The Product Managers Handbook. New York, USA: McGraw-Hill.

Mukherjee, Kaushik. 2013. Product Management, New Delhi, India: PHI Learning Pvt. Ltd

Learning Module in Product Management 8|P age