Lesson 1: Introduction to Product Management

1.1 Product Management

Product Management is a function within a company that deals with the planning or
marketing or forecasting of a product or products through at all stages of the product life
cycle.

Product Management has several roles which cover many activities from identification to
development, to launch and even support during its life cycle.

Since better and new products are a key differentiator in the market and are what drives a
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

Historical Background

Business executives throughout industry spend more and more time trying to answer one
basic question: ―How can I assure continued profitable growth of my business? The answer
to this question is quite simple: ―By providing the optimum solution to the market needs.

Market needs are classified as Goods or Services. All these have a tangible value and can
be commercially produced and marketed profitably.

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 steamboats 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.
 Lesson 1: Introduction to Product Management

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 company whose
primary role is to serve as the ―Voice of the Customer. He is responsible for the ―4P’s” of
Product Management:

1. Price
2. Place
3. Product
4. Promotion

1.2 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.
 Lesson 1: Introduction to Product Management

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 break-even 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
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 to 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 the Advertising/ Promotion team: Each product is positioned

for a specific category of customers. The Project Management team shares its vision
with the publicity / sales promotion team giving them the positioning of the product.
E.g.: A Maruti 800 is positioned for a middle class customer while a Honda Accord is
positioned for the high income customer. The type of advertising communication for
 Lesson 1: Introduction to Product Management

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 3 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.