Brand & Product Management

How to define your product pipeline:

The focus of this lecture is for you to learn how to define your product pipeline. One way
you could do it is by using your internal knowledge to develop new alternatives or versions
of your product. However, that may not prove to be the best choice if you want to minimize
your risk in the marketplace. For you to develop a pipeline, I will share some tools which,
despite being very old and even sound theoretical, have been very useful in my career.
The first one is the BCG matrix. This matrix has on the X axis, your products relative position
in the marketplace or market share. On the Y axis, it has market growth. What is the relative
market share? It is the ratio of the sales of your product to that of your largest competitor. It
is important because it is not the same to have 50% of market where your largest
competitor had the other 50%. Versus a market where your other competitor has only 10%
of the market.
It is normal considered high if the ratio is above one. Does if the brand had a share of 20%
and the largest competitor has the same, the ratio would be one to one. However, if the
largest competitor only had a share of 5%, the ratio would be four to one, implying that your
brand was in a relatively strong position which might be reflected in profits and cash float.
On the Y axis, we have market growth. It is crucial that you define this variable by framing
your market properly. It is not the same to be a diet cola product within the drink’s
category, then within the diet drinks category. Growing fast in a rapidly growing market are
what organizations strive for. But as we have seen, the penalty is that it requires cash,
because growth is driven by investment. That expects market sharing return and eventually,
into sound profits. Therefore, theory behind the metrics assumes that a higher growth rate
is indicative of accompanying demands or investment. Although the metric has its limitation
which I will discuss it later in the lecture, that premises are very useful for thinking about
your pipeline. Products with high market share, normally have better net result. Why?
Because being a leader allows them to have a higher price and lower cost, because of the
economy subscale and experience curve. In high growth markets, their investment required
to reach and maintain market share, are high. It is easier to gain market share in growth
market than stagnated markets, because in the latter, you win market share by buying away
from your competitors. Pure marketing effort can move our products to the left upper
graph, but it becomes more difficult if the growth is slower. Competitors marking effort if
you do not answer to them, could move our products to the right of the graph. With time,
as we saw in the product life cycle, the market matures, then growth slows. All products
move to the lower left quadrant. Thus, we can see four quadrants, that will help us define
where our product is, and where our next product should be.

 Stars are product in high growth markets and high market share. They use large amounts
of cash and are leaders in the business to keep that position. They have balanced cash
flows. They sell a lot and they spend a lot. And attempts should be made to whole share
because the rewards will be a cash cow.
 So, cash cows have high market share in markets with slow growth. They are the ones
who generate more net cash flow and do not require great investments. The main
objective is to use the funds generated by this product to invest in others.
 Dogs are product with low market share in slow growth market. You should not buy
many dogs in your company because, you could be using your resources to support
initiatives with higher potential. If they do not require great investments and play in very
specific market investments, keep them. Otherwise, sell them.
 Lastly, we have question mark products. Which are those that have low market shares in
high growth markets. They require high investments so try to maintain or improve their
market share, but they do not generate the returns to support them. Your decision must
be conclusive. You either support them to become stars or you abandon them and obtain
the most return from them.

Do you increase market share or your cash? The BCG matrix can help by defining and
managing your pie plan according to where your product is located. In turn, this helps you to
decide where to invest your resources for product development. The inventor of the BCG
matrix, Bruce Henderson, wrote that to be successful, a company should have a portfolio of
products. With different growth rates and different market shares. The portfolio
composition is a function of the balance between cash flows. While theoretically useful and
widely used, many academic studies have called into question whether use in the growth
share matrix helped business succeed. As with other analytical tools, ranking business has a
subjective element involving guesswork about the future. Particularly with respect to
growth rates. I mention other tools which help you in defining and managing your pipeline.
One of them is a product map.
You need to have the product stream for at least two years and use it to manage all your
company's activities. This map defines a string of products that a company is committed to
develop. It is done with a participation of the key leaders of the organization. Why? Because
the product pipeline will have an impact on areas such as marketing, sales, distribution,
technology, service etc. And you need to ensure that they can meet their resources to the
project, when they are schedule on your product map, and not when they consider it a
priority. This map needs to be revisited at least every quarter to make sure that it is a live
document. That it includes all changes in the organization, and in the marketplace. Second
tool is to develop a platform products or services. And these are the ones that inspire and
support whole new line of derivative products. For example, think of the 737 in airplanes, or
the iPhones in smart phones. The third tool is that when defining your platform product,
also generate an exhaustive product strategy that leaves no holes for competitors to exploit.
Understand who is buying your products and why, so you can fill the gaps in the market that
your new products will create. Then you can address those gaps and prevent new entrants.
Fourth is growth sequence does matter. Imagine if Gillette had gone from shavers to selling
a full line of beauty care products for men. Instead of selling per shaving gel and then evolve
into a full line of products. Although we will discuss more about this in the next modules,
make sure that the consumers frame of preference for your brand includes the next product
in your partner. If you are about to launch your product internationally, do not assume that
your home product would work there. Spend time answering the questions, where am I
traveling and how to prioritize the markets and opportunities. My short list for evaluating
this is taken from David Acker, who has written many books on the topic. Questions that
you should be evaluating are, is the new market attractive in size and growth? Are their
favorable transit supporters? How fierce is competition? How long have they been there?
What is their presence and customer loyalty levels? What is the political risk? Can the
company develop its existing business model or are there cultural barriers that prevent it?
With these topics, we end this module, where we had an idea on how became a product
and hopefully, more than one in your pipeline. I hope you have enjoyed it and learned
enough to go out an experiment. However, if you have a breakthrough product, you want to
maximize the benefits of it and one of the best ways to do it by developing a compelling
brand.