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a Primer for Productization - Satre 2002-2008

a Primer for Productization - Satre 2002-2008

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Published by Rod Satre
this how to introduces the ways and methods of taking an idea to market from soup to nuts. Its useful to remind the seasoned executives and very important for the new business launches to help you cover the various aspects of product development, pricing, competitive analysis and channel marketing. Plus some novel thoughts on what you do as measurable against other competitors for similar offerings as well as utility of product.
New econoic stimulus offer, free! give it away to others with $1 gratuity to me [see introduction] per person you route the copy or link to. Thanks and good luck with your business. Call or write if you need help! I do consult.
this how to introduces the ways and methods of taking an idea to market from soup to nuts. Its useful to remind the seasoned executives and very important for the new business launches to help you cover the various aspects of product development, pricing, competitive analysis and channel marketing. Plus some novel thoughts on what you do as measurable against other competitors for similar offerings as well as utility of product.
New econoic stimulus offer, free! give it away to others with $1 gratuity to me [see introduction] per person you route the copy or link to. Thanks and good luck with your business. Call or write if you need help! I do consult.

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Categories:Types, Business/Law
Published by: Rod Satre on Sep 10, 2008
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“Let’s start off with a question for the group,” began the Productizer. “The question
is:

what is product management?

Let’s take a roll call listing from each of you,” he demanded.

The list prepared identified some of the activities and atributes of “product
managment:”

1. gathering and interpreting market intelligence
2. projecting sales demand
3. establishing pricing policy and pricing points
4. coordinating internal and external supply and sales channels
5. managing co-marketing product relations
6. supervising cost of product(s)
7. managing marketing and public relations
8. scheduling of marketing events
9. fighting fires!

The Productizer surveyed the list, thought for a moment and made an observation.
“The ninth item on the list was not placed there on a whim, but it was put in last place
for a reason. While putting out fires is a good practice, if it becomes the primary
activity of a product management team, then not much quality time will be expended.
While the product management team (team) acts and looks busy, it has let events
overcome the mission. I am actually disappointed that we did not include:

1-a.) defining product and business mission and goals and managing to the mission
and goals.

Otherwise, how are we benchmarking the performance of the product and the product
team? Additionally, to some degree, the team establishes the personna of the product
or possible product line. That is:

a) how well does the product anticipate and meet the market’s needs?
b) how do the atributes of the product measure up to the norm?
c) how dependable is the product?
d) what is the maturity expectation of the product?
e) what degree of promotion is provided?
f) what flexibility of pricing is determined?

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By reviewing the six questions above, the early product life cycle can be proposed. I
am saying ‘proposed,’” noted the Productizer, “because as a product matures from
idea to market introduction, information not previously considered, quite possibly
unknown, can have remarkable effects on the actual product management program.”

Mary pitched in, “I think I would appreciate a step by step process for product
management. It seems like some of this is a rehash of the early part of the week, and
other information is new or at least, when it comes to my experience. After all, I
thought putting out fires was my primary responsibility.”

The group chuckled at that admission, but clamored for details in earnest. The
Productizer figured this was the capstone of the week, and as it was drawing to a close,
this would be the last time he would be able have the attention of the group and leave
with them some key actions they could use in their respective professions.

“Okay,” he started, “let’s take the last few hours together to collect some information to
take back with you. A caution, to pay close attention to; making a plan and carrying
out a plan is only as good as the adjustments made to the plan to compensate for actual
conditions. The product managment team, and the product manager must always
measure the results that action achieve and be cautious as to the true causitive effect
for the results. Over time, adjustments to product management activities (cause) and
the results from those activities will be understood. But always look at the information
from many sides, as holistically, events are caused in response to the environment.
And the environment defines what happens to a product’s performance.”

George piped in, “is that another way of saying - ‘a rising tide lifts all boats?’”

“Exactly!” replied the Productizer. “Boom times and bust times have different primary
motivators for the markeplace. And the degree of activity is greatly influenced during
the extreemes of the marketplace and the economy in general. Also, the stability of
the local and macro political climate can also influence both the demand as well as the
possibility of uses for products. It is the responsibility of the product manager to have
a crystal ball, sort out the short and long term environmental issues and determine
optimal activities to maximize meeting the mission of the product line.”

“But isn’t the mission always to make the best possible profit?” asked Mary.

“That depends on your reference of time,” the Productizer replied. “You see, early on
you might want the mission of a product to be establishing market share, or define a
new market from a previously unrecognized need. And based on the degree of
product protection, through strategic capabilities, know how or patent protection, you
might consider pricing to be secondary to establishing a critical market size, or
educating a marketplace to a completely new product. Sometimes, a business will
wait a number of years until a product awareness in the marketplace gradually matures
and makes profits due to economies of scale due to the demand growth and/or based
on expansion of the product line to higher profit niche markets. By a careful waiting

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until the identity of the product is intricately linked to a particular business’ product
line, with little earlly profits, the risk of other competitors entering the market with like
products is lowered as the anticipation of profits, the primary motivator to enter a
marketplace would be elusive unless the competitor has a strategic edge. While this
sounds like a great plan to corner a marketplace, being a loss leader does not attract
much investment interest nor can you attract top talent to run a money losing or break
even business.”

“Of course,” he went on, with a twinkle in his eye, “there have been many businesses
over time that would have loved to break even.”

Benchmarking the Product

a.) how well does the product anticipate and meet the market’s needs?

i.) Is the market studied both before and during the product introduction?
ii.) Are surveys of consumer feedback a periodic activity?
iii.) Is there an active consumer response network that directs all information to the product manager?
iv.) Is there a program for upgrades and /or customization for the product?
v.) Does the product manager support a “users group” with periodic product information and case studies?
vi.) Is market share rising?

b.) how do the atributes of the product measure up to the norm?

i.) Is market share rising?
1.) Are unit sales as good or better than competing products?
2.) Are niche markets served as well as those served by competing products?
ii.) Are there key features that the product has that exceed the value of the competing products? If not, is
this a planned market stance or is the competition offering more than the product?
iii.) Are product attributes fairly compensated or does the cost for the “bells and whistles” get absorbed in
profit margin?
iv.) Is the product considered a market leader or a follower?
v.) What do the results from comparison performance tests say about the competition? Do these results
provide information suitable for strengthening or weakening the marketing effort?

c.) how dependable is the product?

i.) Does the product’s “mean time between failures” meet expectation, exceed expectation, or fail to hold
up? Has this been evaluated?
ii.) Does statistical process control indicate that the deviation from target ideal product quality is within
one standard deviation? Is this measured and managed?
iii.) If the product requires working with other products is it compatible with all the likely combinations of
complementary products?
iv.) If there are some incompatiblities, are there after market fixes, and if possible are they provided free or

at cost?

v.) Are the tangible attributes of the product of sound material and workmanship? Is the product suited for
its intended use?
vi.) Is the product capable of keeping up with obsolesence? Will upgrades and fixes be offered to registere

owners?

vii.) If reasonable, are spare parts available for reparing of originat equipment. How are they procured? Is
there some easy method of getting product repaired should it be required?
vii.) Is there a help desk, a web site, a useful owner’s manual with clear instructions in the appropriate

languages?

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d.) what is the maturity expectation of the product?

i.) Will the opportunity cost of the product ( for both buyer and seller) be recovered prior to the need to
replace the product due to obsolescence?
ii.) Are sales levels to a sufficient net revenue to maintain product support and product improvement

activities?

iii.) Is the product likely to have a long run of steady sales level with little competition and good cash flow
generation? Or is it likely to have significant competitive pressure and reduced sales income due to
price competition?
iv.) Is the product line expected to wrap around the general market area with other products to round out the
offered products, and maintain a market leadership position?

e.) what degree of promotion is provided?

i.) Are there user gorups and is the product featured at trade shows with technical courses?
ii.) Are seasonal market cycles understood and is advertising coordinatied with sales promotions and
production schedules?
iii.) Are sales demands outstripping production capacity? Or is production capacity exceeding sales

forecast.
iv.) Is the product linked, pre-market with complementary or co-products.
v.) Is the product cross-licensed with other businesses for sales in markets otherwise not served by the
product developer/proprietary owner?
vi.) Is the media used in promoting the use of the product and after market confirmation of benefits?
vii.) Is the relationship of promotion undetstood so that increased advertizing has certain, verified results?
viii.) If the answer to vii above is no, has the promotion method changed or is it expected to change?
ix.) Do your employees use the product, and promote it, even if not in the sales department?

f.) what flexibility of pricing is determined?

i.) Is market segmentaion used to maximize the potential of descrete markets?
ii.) Is each market understood so that pricing expectations for each market are monitored and met.
iii.) Is the owner willing to increase price in the face of competing products dropping prices?
iv.) Is the pricing and market demand tuned to optimized production size and warhousing projections?
v.) Is market leadership paid for with lower than necessary pricing? Is product promotion not used in
conjunction with pricing?

Mary looked bewildered at the last sentence of f.)v.) the Productizer looked at her and asked what was meant by
product promotion in conjunction with pricing. “Well I acutally am confused,” she confessed. “What does
promotion have to do with pricing that it is worthy of mention?”

Bob pitched in, “many times we want to add new customers, so we do a big marketing blitz, with more radio
time and possibly some direct mail connection. But to grab attention, we offer some special deal to the new
prospects. That is effectively a pricing issue. You see, in the banking industry, we can’t lower our prices for
services or offer interest rates that don’t follow certain rules. Instead we might offer discounts such as free
checking with minimum deposits, or waive ATM fees for the first five withdrawals in a month. The promotion
gets the attention, but the hook that pulls in new customers is the free stuff or special deals.”

“You do have to worry though,” he cautioned. “Many times, we have found ourselves giving special rewards to
our longer term, loyal customers. We’ve found that holding onto a long term customer is very valuable as
compared to bringing in new clients. So we have looked for ways that don’t cost so much but pay back in
loyalty. Such things as the Thanksgiving Turkey Giveaway is an example.”

“That’s right!” encouraged the Productizer. “If your product is worth promoting, then the current clients already
using it are just as worthy of protection and special dispensation. I think Mary has seen the connection!”

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And with that, the Productizer took off for his next project. He turned for a moment, and noted, “by the way,
when do you end the life of a product? When the cash flow is not worth the effort to maintain the product line,
and you have better things to do with your resources. Remember, opportunity cost know no boundaries.”

Good Luck!

Glossary

accounting and finance - a service group that measures the financial units of a
business and determines the best practices to manage cash flows, debt and investment
practice

added value - the act of improving a product so that after the improvement the product
has more worth than it previously had. This worth can be based on better utility of the
improved product, or an enhancement that makes the product have worth more
intrinsically.

advertising
advertising
advertising
advertising - this was listed 4 times in the text, and left here for emphasis and
definition of what advertising is: bringing product awareness to the marketplace

appearance - the look of a product, which can include not only the form, feel, color
and texture of the product but also the package and labeling of the product.

assessment - a comparative measure of something such as a product and analysis of the
product against other competing products. This could include tallying up the pluses
and minuses of the broad review of the product. See- benchmarking

bartering - exchange of good or services for other goods or services without the
normal “financial instruments” such as legal tender or other conventional means of
transferring wealth.

benchmarking - includes setting a basis for the performance of the product and also can be
defined as establishing a product type base for various attributes. Typically a product
is said to be benchmarking when it establishes the quality that is to be met or beaten if
competing products are to have any chance of being accepted into the marketplace.

bottling the wine - wine is typically produced in large casks, barrels or tanks, bottling means to
take some of the bulk produced wine and place it in a smaller bottle that is easily
transported, finally being sold and consumed by individual customers the “added
value” is a reasonable size of product as well as significantly improved portability of
the product.

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bottom-feeder - business entities that emphasize and focus their business pursuits on
the acquisition of low valued goods and services and take little note of quality
differences. Bottom-feeders find uses and markets for products that the average buyer
would not purchase. Acquisitions are typically for much less than cost of goods.

bought time - purchase of product utility on a shared basis, where ownership is for
only the period of time needed. It reminds me of the early days of heavy computing
where only a few organizations could afford the big computers and the rest of us
‘bought time’ on them.

break even analysis - consideration of when “costs going in” are evenly matched to the
revenues from the sale of the product. This can establish the price of a product, based
on all considerations including volume of product sales, where there is neither loss nor
any profit. This is below what many call the bottom line value.

brokers and distributors - brokers sell large volumes of products in smaller volumes
and units. Distributors do the same but they are likely to actually handle the product
and possibly inventory the product whereas brokers quite likely never see the actual
product.

bulk - product in volumes too large for any one user, unless that user also produces
other products in bulk. Bulk can be used either for large volumes of finished good or
for raw materials that will be consumed in the production of other products.

bulk merchant - one that sells only to large volume, commercial/industrial customers

bundle - add things to the final the product in such a way so that more than one unique
product is definable within the final product and the bundle has better utility that the
items sold separately. For example: printers with cables have more utility and ease of
use than printer and cable sold separately.

business strengths - those attributes of a business that promote the success of a
business and are measurably better that those of competing businesses

business weakness - those attributes of a business that promote the failure or poor
performance of a business and are measurably worse that those of competing
businesses

buying power - the ability to purchase services or materials in such volume that the
purchaser can contribute to a lowered delivered product cost and thus negotiate a
better purchase price than smaller volume buyers

capital
capital

capital

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capital - Again listed 4 times in the text. You can’t have too much capital, or the basic
measuring stick of success - money or some other form of wealth.

capital equipment - what is also called hard goods or durable goods, equipment that
lasts for a number of years and is not considered disposable. On that basis,
management wishes to utilize the capital goods as efficiently as possible.

capital resources - These are durable, fixed equipment, machinery or other property
that is needed to produce the product. Failing to own these resources would require
that the needed equipment and fabrication space would have to be rented or leased or
some other business would be involved in applying its resources in the manufacture of
a product. Those firms with capital resources have already spent the money, or
committed to some form of debt to acquire the resources. Many times this is what the
income from stock sales are used for. While capital resources are usually identified as
already spent, they are charged back on a tax basis as depreciation. The cost should
also be recognized in the allocation of fixed costs to the manufactured cost of the
product.

carriers - These service businesses work to transport product from one location to
another and include the transaction of sales with delivered goods. The modes of
transport are any combination of truck, ship, rail, or air cargo.

cash flow - problems can cause foundering of a business before the cycle balances out.
For many businesses, early growth and development of the product can sap all the
money out of a product. While in most business circles this is considered a normal
feature of a growth spurt in the product “raising star” the forecast and management of
cash flow; balancing money coming in against money going out is tantamount to
success. Once real cash flow is determined to be flowing out faster than it is coming
in, the product manager is required to correct the issue. In fact, by then it might be too
late. One way to manage this is to gather a cash reserve in the beginning anticipating
that there will be a delay in cash flowing in until the product is established. This is
also one use of stock funds. In the early stages of the DOT.COMs in the 1990’s and
into 2000’s, many firms over estimated the possible cash flow coming in and
underestimated the cash flow going out. Once their realization of a negative spiral
came to the forefront, multiple businesses filed for bankruptcy and closed down.

cataloging the inputs - in the production of any good or service, many efforts and
materials are brought into the mix. A careful cataloging g of the inputs is required to
fully recognize what is required to produce a product or service. in the end, all
products totaled up will have used all inputs and allocating between products is the
best way to identify those products that contribute to a business’ success and those that
undermine the profitability of the business. Special caution is offered to not cut
products too quickly before complementing results are fully understood.

channels - common distribution and marketing, and an efficient corporate structure are
identified as channels. Consider them as pathways to produce and deliver product to

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the end consumer. Each pathway, as it is refined over time wears a stable, solid path
of practice for “that’s the way we do it,” or “we’ve always gone to XYZ for that
service,” to “we always buy from ACME.”

co-marketing
co-marketing - Many products sell through the efforts of more than one unique
business. By working together, each benefits in the sale of their individual product
bundled with some other firm’s product. This includes both tangible and intangible
goods and services.

commodity - status indicates that the product is so ubiquitous and little differentiation
is made that the only feature of variation is price. The consumer is confident that all
product attributes are so similar that each source of product is exchangeable with
competing products. Milk and eggs are examples.

competition - When more than one company makes a product or offers a service, the
other company is known as the competition and its like product is called a competing
product.

complementary - goods positioning the product with like goods or/and services, the
new product can be introduced with an already established good or service or co-
marketed. Complimentary goods are not necessarily from multiple firms. They are,
however, discrete products that combined have an added value and promote the
consumption of both products. Engine oil is typically sold at gasoline filling stations,
even though each is a separate purchase.

consumables - These products are depleted in use and have no residual end product
identity. In making charcoal, the energy used to making the charcoal is consumed, and
although part of the process of making the product is consumed in the manufacture
and is not recoverable and a defined product.

consumer definition - A key demand on the product manager is to define and
understand the consumer or the different type of consumer. Following that definition,
the product manager can tailor a product to fulfill the requests of that consumer. Also,
dialog with a consumer will help in the direction of enhancement of the product over
time and the introduction of additional products that both complement the original and
expand the market services.

corporate mission - This is the defining of what a business is trying to achieve and
helps both the business and its customers establish what is expected of the business.
Missions should be clear enough to establish an identity, but flexible enough to allow
a company to adapt to growth and evolution of the business.

cost of leaving - When a business leaves a product production and sales, the cost of
leaving includes what happens to the capital resources, excess raw material and

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finished goods inventory, selling of land and buildings, and termination of human
resources. There is also a cost of impact on other products such that ongoing
expenses that would have been distributed over a broader product line now must be
carried by few products and thus cause a higher fixed cost portion. Non-recurring
expenses related to the cost of leaving are allowed to be reported as one time expenses
and are usually reported as below the line costs in financial reporting.

CostsFixed - all costs that are based on activities not directly related to the production
volume of the product in question. i.e. costs such as depreciation, administration etc.

CostsVariable - all costs that are directly related to the product production. These would
include raw materials, power costs used in the production, packaging and shipping
costs, warehousing and inventory carrying costs directly linked to the actual product
sold.

counter-trade - also known as bartering, the exchange is not quid pro quo but instead
third party products are traded so that the end product of the consuming firm is not
what is sold to the provider of the good or service to that consuming firm. Instead, the
end product is sold in the country of origin and goods purchased in that form of money
are exchanged for a third product that has value in the counter-trading country of
origin of the original supply to the consuming firm. This is used in economies with
weak financial methods and avoids the exchange of inflated local currency.

cross marketing - This entails the marketing of products that are in demand due to the
popularity and demand of some other product. Thus if off road vehicles start to be a
large market section, the tilt level gauges could find a cross market to those owners
that go off-road. The key to success in cross market is to identify products and needs
that initially have not been embraced by the consuming public and establishing a
demand ahead of the competition requires a marketing of the concept to the buyer.

customizing - providing a feature or multiple features that does not have a clear and
clean link to the intended utility of a product for the mass consumer, yet would result
in a significant shift in the business satisfaction for a subset of the marketplace.
Customized products are frequently directed to one or few more customers. For that
reason, long term agreements and capture of the extra product development costs are
used to recognize a business relationship much closer than an ordinary buyer-seller
relationship.

day’s sales outstanding - . The total number of days from when a good or service is
delivered to a client to when payments are received for that good or service. Typical
terms are 20% down and net 30 days from invoice. Some organizations measure the
days sales outstanding based on when a product was available for sale up to the date
the cash flow came in to pay for that product. This is also sometimes called cost of
inventory.

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demand trends - the measurement of “price elasticity” measures how many units are
sold relative to pricing at different offered prices. Thus a trend of number of buyers
compared to the offer price of a product can define a demand trend.

demurrage - if transportation equipment is used to store product instead of just loading
it at point “A” and unloading it at point “B,” then the shipper can no earn money
hiring out its transportation system to others. To discourage this and to realize income
from lost availability of its transportation asset, most shippers charge a demurrage fee
based on extra time beyond the reasonable expected time period for unloading a
product.

depreciation - this is an accounting method of charging business operations an
allocated cost for the purchase and often the installation of fixed capital equipment or
other durable capital resources that are not allowed to be charged at full cost in the
period of acquisition. This allows for spreading the cost of long term investments over
an extended period and recognizing the application of capital resources in the
production of goods and services. Depreciation is also applied to reducing tax liability
in many countries.

differentiators - those attributes of a product or service that are remarkably different
than that of competing product offerings.

diffusion of information - well placed products, i.e. products that are a hit as well as
targets that met some consumer need generate“word of mouth” market knowledge.
This diffusion of information is a phenomenon that allows for the marketplace to help
promote products that meet otherwise previously unsatisfied needs.

diluted market share - is that point in time that other competing firms offer
competitive products and thus there are more offered products than the original
demand would demand. This forces each firm to scramble for its fraction of the
product sales and a gradual shift from the early, lead position to one that does not have
the percent of full market shares and or a reduced volume of sales units. This is
usually indicative of lower priced product offerings and less profit per unit of sale.

discounting - many products have a “list” price which is discounted to various buyers
based on some relationship or incentive program. This activity is legal under some
circumstances such as group buying relationships or volume discounts. Discounting
regulations should be understood prior to implementation to adhere to local, national
and international laws and protocols.

distribution - this is the act of taking a product and providing it to consumers beyond
the manufacturer’s facility. Thus the distribution offers products to a wide range and
possibly greater geographical marketplace than what the manufacturing activity works
with. Distribution employs considerations for sizes of shipments, external
warehousing needs, and pricing to the various channels the product flows through.

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domestic and international - local, within one country (domestic) as opposed to; multi-
country (international.)

downstream - business practices of companies following the gathering of natural
resources or other raw material production that can be sold as a product itself. Term
typically used in the energy, oil and gas business.

Ease of entry - a judgment of how much knowledge, worker skills, and capital
resources are required to enter into a business. A low ease of entry business is subject
to multiple competitors that can ramp up production and sales early and recover the
business development costs quickly. A business with a high entry cost, such as a
pharmaceuticals manufacture and sales, requires many years and some technical
know-how that is not easily found.

economies of scale - many products are less expensive to manufacture with larger
volumes of production because the fixed costs can be spread over a larger production
count. Thus products with high percentage of total product cost in fixed costs
(CostsFixed) can experience lower fixed costs per unit as product volume grows.

efficiency - a measure of how little waste is produced both in human labor and
consumption of materials and energy in the carrying out of business activities. This
applies in both goods and service businesses.

expected price - is the price that customers are used to paying.

external growth - many times, to gain an entry into a business, firms will purchase
some or all of another business that already has an established capability to satisfy that
desired growth objective. This purchase can be in same business areas or in a
diversification of business areas. Many times there are governmental oversight issues
that need to be satisfied for external growth to be legally allowed.

features marketing - marketing of the differentiators in a product and not necessarily
the product itself.

features - those definable attributes of a product that can be measured or observed
such that they add to the expectation of quality and utility of a product.

fertilizers - a product used to improve the plant growth in agriculture. The product
increases some or all of size, speed of growth, size of foliage or flowers.

final work - the last steps in a product development and marketing program where
multiple other activities had to be carried out in order to come to this step of the
product development. When you go through the productization process, it is best to
systematically go through the early efforts (front work) before continuing on to the last
steps (final work.)

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financial projections - an assessment of the positive and negative cash flow streams
over a period of some extended time. This time period is typically one year with
relative certainty and 5 to 10 years on a speculative basis. These projections are used
to establish budgets and identify when cash flows might require some constraints or
infusion of funds.

finished goods - product that some consumer will buy and use for their benefit.

finished goods and services both tangible and intangible products that are ready for use
by a consumer.

fixed and variable costs - see CostsFixed - all costs that are based on activities not
directly related to the production volume of the product in question. i.e. costs such as
depreciation, administration etc. & CostsVariable - all costs that are directly related to the
product production. These would include raw materials, power costs used in the
production, packaging and shipping costs, warehousing and inventory carrying costs
directly linked to the actual product sold.

fixed cost asset - this is an investment added to buyer’s operations and as such, it is
valued by how it helps buyer’s business produce its product(s). By being a fixed cost,
it will contribute to the production of multiple years and the investment cost is
allocated over the time of its productive contribution rather than a one time expense.

fixed costs - see fixed and variable costs above.

flat-line- when a business has no life left in it, as compared to an electrocardiogram.
Its always best to take some time each day, week, month and year to reassess the
progress and energy of a product and determine whether or not the product is health
and vibrant or the opposite, approaching a flat-line.

fleet costs - this is the cost for the shipping vehicles, both allocated depreciation costs
as well as the variable costs of maintenance and fuel, plus driver expenses.
force rank - to measure and determine a ranking of features from the most important to
the least important. for example; once a firm has established a time line for software
development, we will have emphasized those critical, most important features in
assignments to development groups as the most critical efforts to solve.
.
front work - the earliest steps in product development, such as determining size of
market, price ideas, competing product offerings. This technique is very often done in
a market driven business that seeks to develop products that anticipate market needs.
A manufacturing driven business, on the other hand, will have already made a product
or by-product [one that is also made in the course of manufacturing the target product]
and instead of doing front work will try to determine a market for a product after the
fact. This very often results in selling a product for little or no profit as the
manufacturing has no way to deal with it otherwise. Profitable end uses and analysis

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of commercial value are very often ignored, thereby resulting in lost income streams
due to the lack of “front work.”

go for broke - trying to perfect a product that in many ways can consume all financial
and physical resources. Otherwise known as gambling. This is found mostly in
entrepreneurial firms and not in established publicly held firms.

gross margin per unit sale - is identifying the difference in cost per unit sale from the
sales price per unit.

growth - the increase of a business in unit sales and capacity achieved by either
teaming or partnering with other firms, acquisition of other firms (external growth) or
by expanding the business from within, known as internal growth.

herd mentality -following the common practice and taking actions as other do, with
possibly no insight as to how or why business changes are initiated.

hindsight - the understanding one gains after the consequences of actions or inactions
are already in place. Frequently called experience.

hot - a product, that is so popular that diffusion of information promotes the product
faster than production can provide it. ‘“Mechanisms and approaches will be covered
in a future symposium,” said the productizer.’ The development and marketing of hot
products is a special effort requiring streamlined development and fast, proprietary
action and introduction into the marketplace. Frequently, competition enters so
quickly that profits have to be made on the overall development costs in a short time
period. Many hot products have short life spans and although profitable, early entry of
competing products or better, second generation products dilute the market share and
cause the overall profitability of the product to wane.

in the pipeline - is a term for products in development and nearly ready for
introduction to the marketplace.

incremental or fractional - expansion of the full firm’s business is the growth of parts
of a business to add a bit more product capacity or like products without having to
expend much in the way of capital resources or technology development. Incremental
and fractional growth depends on an established business and offers a business the
opportunity to add to sales and profits with little or no additional fixed costs. This is
an enviable activity as profits relative to unit costs are good for the new products and
the fixed costs for the existing products are reduced due to the larger number of overall
unit sales. [This should be cautioned in that many very profitable businesses get
caught up in incremental or fractional growth and loose their way when the overall
business line approaches obsolescence as fresh new ideas and brand new product
development strategy is a lost art for the firm.]

75

insurance - a means of providing for loss by buying a recovery of lost funds and
efforts through the purchase of insurance policies that will pay funds to the lossee.
Insurance firms make profit by understanding the risk of loss and distributing the risk
over many businesses and activities, thus providing a profit margin to their operations
from the cash in versus the payouts out.

intermediate - goods and services are those that have only a narrow utility in the
marketplace but are necessary to some other producer of goods and services to
produce their product. Thus it is an intermediate step of a longer process of providing
a finished good or service.

intermodal - a means of transporting products with differing types of transportation
vehicles such as ship and rail and train via “piggy-back” trailers.

internal - growth of the firm itself is achieved by adding both technical and capital
resources that otherwise do not exist and expanding the ability of the firm without
having to acquire other firms. Frequently internal growth is achieved by hiring
competing technical and management talent from others and giving them the ability to
steer the business in expanding markets. This is sometimes called “raiding” and
although it is called internal growth, the overall marketplace is at zero gain in
capabilities as some other firm(s) then suffers from lesser capabilities.

inventory taxes - in many areas throughout the world, property, even that for sale, is
itemized and taxed on the potential of future sales value. This can discourage
hoarding and encourages the sale goods in the near time frame to the manufacture of
the goods.

investment of - all actions require a commitment to some degree of time and money.
As such, if either is in limited supply, the optimal use of that resource should be
considered and investment and decisions made on the basis of optimization of the
resource’s payout.

jobbers - these are firms that do work for others and do not necessarily seek an end
consumer for their product but instead fulfill some form of production service to other
firms that take responsibility of introducing and marketing products. Also called
contract ___.

just in time - is the providing of goods and services at the time of demand and no
sooner. This streamlines the day’s sales outstanding as investments are made at the
time of need and no sooner. This requires a good communication program so that all
channels are in synchronization.

kaban - the Japanese term for just in time. See: http://web.mit.edu/manuf-
sys/www/amb.summary.html

76

key product attributes - are those that contribute to the results our clients are looking
for.

labeling - on products is the means of both informing the consumer of the contents of
a package as well as a means of distinguishing a product or product class with style,
color, size of text and other features. Campbell’s Soup® recently revised the label for
its soups by redrawing its model children to leaner forms thereby removing the stigma
of more rotund children which are now considered less healthy.

labor - human resources applied in the production of goods and services. Labor is
many times considered a direct cost for those individuals that work in the actual
production of a good or service and indirect cost for all other human resource
endeavors.

Less than truck load (LTL) - is a form of shipping where the material shipped does not
demand a full truck capacity and thus the shipping firm will make several stops to fill
up the truck with the LTL products prior to traveling to the destination(s). FedEx and
UPS services are extreme examples of LTL.

leveraging - means using other, outside resources in both capital as well as technical
and manufacturing labor to expand your capabilities. However, the potential future
profits are diluted as the external business partners, or jobbers, will require a return on
their investment.

loss leader - sometimes a product introduction will be coupled with a loss leader in
order to introduce your firm’s product to a broadening market. By “giving away” a
product for a loss, the firm hopes to gain additional business based on the actual
product it is trying to promote and grow.

maintenance and capital investments - maintenance is the day to day, ongoing activity
of keeping equipment operational. Maintenance is expensed on an annual basis.
Capital investments are those expenditures of new equipment and installation that will
contribute to productive uses over many years and are expensed via depreciation.

making - the practice of producing something.

management - the leading and administration of a business.

management, labor and maintenance - the three types of human resource demand
inputs to a labor cost.

manufacturing costs - the cost of producing a product up to the point of placing a
finished good upon the manufacturing factory floor.

manufacturing- producing a product.

77

market definition - a description of a market which develops an understanding of all
the relevant issues.

market innovators - those firms that do not have a herd mentality and instead help
determine how and why a market works and introduce new ideas and products before
the competition does or even understands what the heck is going on.

market leadership- what happens to market innovators that are able to provide early
products with good quality.

market position and pricing - a leader can command a higher product price based on
reputation and diffusion of information. Competing firms must find ways to
differentiate and this is typically done with some form of lowered cost, even if
artificial.

market segmentation - the practice of redefining a product to meet subset market
sectors with unique products that can allow for an adjusted price per market sector.

market share - the part of or percentage of a total like product demand that is
controlled by a sole business or business sector.

market size - the total number of units or equivalent currency value of a market
demanded by the market on an annual basis. This can be domestic, international or
global.

market - a set of consumers/customers that seek to acquire a product or service.

marketing and consumer demand - product definition into categories such as specialty,
mass marketing and private branding. Analysis of co-marketing opportunities.
Developing consumer definition and determining features marketing and advertising
approaches.

marketing and sales - the former is the establishment of tools to understand and
manage the dynamics of market forces and the later is the actual exchange of goods
and services for some form of wealth such as currency.

marketing and sales costs - unfortunately are linked together in many businesses even
though they are discrete activities. This is the expense of carrying out either the
marketing function or the sales function.

marketing channels - these are the methods and approaches of providing the
information about a product to the target consumer in overview they are channels as
was described previously, see channels.

marketing units - this is a part of a business that specializes in marketing activities.

78

micro-economic - conditions are economic units on a more local level and more
directly impacting a particular product.

MRP [material requirements planning] - a method of monitoring production inputs
and determining when and how much replacement materials are needed to keep a
working inventory of raw materials and other consumable inputs.

opportunity cost
opportunity cost
opportunity cost
opportunity cost.
opportunity cost - can’t stress this on enough! The cost of spending limited resources
for one activity relative to the ability to pursue other activities with the same, limited
resources.

orientations - high level of technical support used to train consumers in the functional
use of the product or service delivered.

other resources (energy or consumable materials for example) - anything that has to
be purchased and is not uniquely defined in the end product is an other resource.

packaging and labeling - see labeling.

price elasticity and price elasticity of demand - is the measure of demand relative to
pricing levels. Highly elastic means that sales are very much a function of price
whereas the opposite, inelastic means that the demand is stable over large price
fluctuations.

price points - are the expected prices set for certain activity level in market demand.

pricing floor - the minimal value of sale price before the seller walks away from a sale.

pricing stability - this is when enough buyers and sellers participate that a truce in
price and competition leads to stability.

prime numbers - of a business are the building blocks of a business that can not be
broken down into smaller identifiable units and still be unique to that business. For
most businesses, the prime numbers equate to the various business departments of the
organization. If any of these departments should be deleted, the business could not
succeed in reaching the final outcomes it endeavored to take. However, and this is an
important concept, prime numbers are activities and services or deliverables that can
also be defined well enough to separate them from the business operation and secure
their operation by some other means such as a (sub)contractor, a jobber, or a service
provider.

79

private branding - the practice of associating a product with other complementing
products all under a common brand name.

private label - the affixing of a private label to an otherwise common good or service.

product definition - the established features of a product that describe the attributes of
a product.

product differentiation - see differentiation.

product lines - multiple products that meet specific consumer needs that overlap in
application and usefulness. While the unit sales and market share of the originating
product might decay, the product line is able to take advantage of the trade identity.

production - the act of manufacturing a product or developing a natural resource.

productization process - the holistic approach to determining ways to introduce ideas
into the marketplace.

profit - the residual money left over after all costs for doing business are subtracted
from sales revenue. Note: there is a before and after taxes level of profit.

promotional - actions undertaken to increase the consumer awareness of a product.

promotional expenses - the cost of promoting.

providing a choice - offering a differentiated product to the customer that they may
make a selection. In some economies, only one product is offered per product type.

quality control - the application of measuring product attributes and removing those
products that do not meet certain expectations for performance or other quality. Many
times the quality control is applied early in the process to remove conditions leading to
poor quality products.

quality of handling - distribution and sales are all issues for which each channel must
consider attributes of certain expectations. Frequently, those issues are so important
that agreements worded to maintain levels of performance.

rail - another name for train-based transport of goods.

raw material costs - the costs of products that are used in the manufacture of a final
product and are in some manner, part of the makeup of the product.

raw materials - products that are used in the manufacture of a final product and are in
some manner, part of the makeup of the product.

80

reasonable market - as those businesses that are sized to support a purchase decision
for your product in balance with all other factors and demands on its resources.

regionalized purchasing habits and market volume - by region are due to the unique
driving forces in each business region having a different influence on buying habits.

resource utilization - the use of the company’s and other services’ labor, management
and capital equipment.

return on investment or “ROI” - the pace at which savings or increased earnings pays
out an investment cost.

sales team - those persons exchanging product for money or other method of transfer
of assets.

seasonal products - products that only sell or sell at expanded levels during certain
times of the year, such as champagne at New Years.

segmented market pricing - established subset markets that are sold products at
different prices based on some differentiation of product attributes or volumes.

shipping - moving goods from one point to another.

shrinkage - loss of finished goods or raw materials due to theft of products.

situations - critical business periods that needs immediate attention. And, it forces the
product manager to take notice and initiate a program to fix things.

size and quantity - differentiators.

sold time - the selling of excess capacity of a capital resource.

specialty - unique, small niche scale service or product line.

standard practice - a set of methods that can contribute to stable operations.

status - conditions of a situation.

step-wise pricing benchmarks - as economies of scale intercede with production,
overall price for product(s) can recede or if the opposite is more likely, the
benchmarks might increase.

strategic allocation of market indicators - some indicators are more important than
others.

81

taxes - if you make money, the government wants some of it. They run the public side
of society by taxing the rest of business.

training symposiums - see orientation.

transportation and shipping - a business sector that can be a prime number or service.

truck - a method of shipping with the ability to travel on paved roads easily.

turnaround - the act of fixing a bad situation, typically where control of the product
and pricing is not driven to an efficient market.

un-bundling - the act of breaking larger volumes of products into smaller volumes
which allows for ease of handling by the next level of client.

unfinished state - a product that is not useful to other firms.

Unit Cost = unit price basis = the cost of one sales unit.

unit pricing - see unit pricing above.
upstream - those business practices to get raw materials typically from nature.

user friendly - easy to use and maybe as part of the introduction to the marketplace, we
should consider having a high level of technical support to ease the transition to new
products.

utilities - oil, gas, steam, water, electricity.

value added - your product provides to the client in solving a problem needs to be
enough to sway your client towards paying your firm for the product. To achieve this,
you must clearly understand the needs of you client.

variable - something that on a composite whole increases or decreases in final costs
based on volume of product.

variable costs - are costs that are common to each unit of sales and typically are steady
over multiple sales volumes.

vertical marketing system - in those, the activities are either all under the control of
one business entity or a combination of business entities with well orchestrated efforts
and agreements that cause the channels to work for a common interest and like minded
efforts as a team. The opposite of the vertical marketing system is a flat marketing
system wherein the control of each activity is limited to the two parties involved in
that activity. That means that the producer and the wholesaler have an agreement, but
that agreement does not have any direct implications on the agreement between the
wholesaler and the next step of either the jobber or the retailer.”

82

warehousing - storing of finished or intermediate products.

waste disposal - the cost of removing any unwanted materials.

water - a utility and /or a raw material

watershed - is an event that contributes great understanding to a business practice.

wholesale volume price breaks - see discounting.

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