The product manager's handbook the complete product ma (1)

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Excellent reference for Product Managers

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  • ProductManagersHandbookThe Complete ProductManagement Resource

    second edition

    T H E

    Linda Gorchels

    NTC/Contemporary Publishing Group

    NTC Business Books

  • Copyright 2000 by Linda Gorchels. All rights reserved. Manufactured in the United States ofAmerica. Except as permitted under the United States Copyright Act of 1976, no part of this publicationmay be reproduced or distributed in any form or by any means, or stored in a database or retrievalsystem, without the prior written permission of the publisher.

    0-07-138989-X

    The material in this eBook also appears in the print version of this title: 0-658-00135-3.

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    TERMS OF USEThis is a copyrighted work and The McGraw-Hill Companies, Inc. (McGraw-Hill) and its licensorsreserve all rights in and to the work. Use of this work is subject to these terms. Except as permittedunder the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may notdecompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon,transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it withoutMcGraw-Hills prior consent. You may use the work for your own noncommercial and personal use;any other use of the work is strictly prohibited. Your right to use the work may be terminated if youfail to comply with these terms.

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    DOI: 10.1036/007138989X

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  • Preface vAcknowledgments ix

    Part I The Role and Operation of ProductManagement 1

    1 The New Product Management 52 Introducing Product Management and Managing

    Product Managers 173 The Cross-Functional Role of Product Managers 294 Product manager.com 51

    Part II Planning Skills for Product Managers 65

    5 The Product Marketing Planning Process 696 Customer Value Management 897 The Annual Product Plan 103

    Part III Product Skills 129

    8 Evaluating the Product Portfolio 1339 Strategic Product Planning 145

    10 New Products: Proposal, Development, and Launch 15511 The Financial Side of Product Management 191

    Part IV Functional Skills 199

    12 Pricing Products and Services 20313 The Product Manager as Marketing Manager 22114 Product Management: The Final Frontier? 239

    Appendix: Sample Job Descriptions 253Endnotes 269Glossary 275Index 281

    Contents

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  • v

    Back to the Future

    The changes I have observed in business have been dramatic since thefirst edition of my book was published. The Internet was a fledglingconcept at that time and now it has become a fairly standard part ofbusiness. Although globalization was a growing phenomenon prior tomy first edition, it has also escalated in importance.

    On the other hand, there have been some constants. Through allthe turbulence, there remains a need for entrepreneurial spirit, for anability to work with and through other people, and for a clear andfocused direction. These are the characteristics of a product manageracting as the general manager of a virtual company.

    Product management has long been viewed as one of the moreeffective organizational forms for multiproduct firms. The advantagesare numerous and frequently documented. First, it provides a dedicatedchampion for a product, brand, or service. Second, a healthy internalcompetitive environment can be created. Third, by championing anumber of offerings, a firm can more quickly respond to shifting cus-tomer loyalties. And, finally, an opportunity is provided to readilyassess candidates for promotion to higher management levels.

    Preface

  • Nevertheless, the effectiveness of product management is contin-gent upon several factors. If we expect product managers to trulychampion brands, they must be engaged in both day-to-day decisionissues and in developing the strategic future paths of their offerings.Although some companies have created a hierarchical product man-agement structure to do this, effective product management in thefuture will result from a horizontal decision-making process. Productmanagers will play a major role in most product-related decisions,while relying on specialists to carry out many of those decisions. Theemphasis will be on matching customer needs with corporate capabil-ities through the development of specific products and services.

    Now, to introduce the second edition, Id like to use the contem-porary format (often used in website design) of frequently asked ques-tions (FAQs).

    Frequently Asked Questions (FAQs)

    What is a product manager?

    A product manager is typically a middle manager charged with man-aging and marketing existing products (and developing new products)for a given product line, brand, or service. Other job titles could includebrand manager, industry manager, or customer segment manager.(Note that the term product will refer to both products and services.)

    What types of companies use product managers?

    Product managers are used in all types of companies from consumerpackaged goods to services (such as financial institutions) to industrialcompanies (such as original equipment manufacturers (OEMs), com-ponent suppliers, and after-market firms) to nonprofit organizations(such as hospitals).

    Whats the difference between product management andproduct development?

    Product management is the holistic job of product managers, includ-ing planning, forecasting, and marketing products or services. Productdevelopment is a corporate process of designing and commercializingnew products. This book focuses on product management.

    vi The Product Managers Handbook

  • Who should read this book?

    This book is targeted most directly at existing product managers andcustomer segment managers (primarily in nontraditional roles beyondconsumer packaged goods). However, it has been used effectively bypeople in all types of companies and industries. Many new productmanagers and directors or vice presidents of product management ormarketing have found it valuable as well.

    What will I learn by reading this book?

    Youll learn about different approaches to product management fromdifferent types of organizations, as well as ideas for getting work donethrough other functional areas. Youll learn how to develop annualmarketing plans for your products and services, with a special empha-sis on enhancing customer loyalty and profitability. Youll learn how tostrategically evaluate your product portfolio, walk through a typicalcorporate development process, and prepare for effective launch strate-gies. And finally, youll learn various ways to add perceived value bothto your product and to your effectiveness as a product manger.

    How will I learn these skills?

    Several techniques have been used to help you in the learning process:(1) real-world cases showing product management in action, (2) hands-on worksheets for the planning process, and (3) checklists at the endof each chapter for evaluating progress at every critical stage. In addi-tion, this edition has new chapters on the impact of technology onproduct managers (Chapter 4), customer value management (Chapter6), and the financial side of product management (Chapter 11).

    What feedback did you receive on the first edition?

    A review published in the July 1997 issue of the Journal of ProductInnovation Management stated

    This book is a handy broad-based reference guide describing allaspects of the product management function and relating them to thecontemporary and turbulent business climate. . . . It provides a real-istic overview of the many roles product managers play and it exam-ines, in an organized fashion, a variety of management tools whichmay be employed to maximize the value of the product manager.

    Preface vii

  • viii The Product Managers Handbook

    The book is valuable because it provides theoretic frameworks [for]identifying, analyzing, and managing product lines while supportingthose approaches with relevant and recognizable case studies toclearly illustrate the points being made.1

    A customer review from Amazon.com stated:

    Product Management is one of those jobs that is different for eachproduct manager; what it is depends on your product and what youmake of it. The danger is that when you write about product man-agement, you focus on your specific experience. I found this book tobe general enough to be of interest to many; still it was not so high-level that it did not provide any help. I would recommend this bookto everyone who thinks about product management as a next career.I would also recommend it to those who have been in product man-agement for several years, and just want to read what others thinkabout it.

    In addition, since the book has been used as part of an executiveeducation program sponsored by the School of Business at the Univer-sity of WisconsinMadison, it has been reviewed by hundreds of prod-uct managers and has received high marks for practicality and usefulness.

    Is the book available internationally?

    Yes, the book has had increasing international sales and the first edi-tion was translated into Spanish.

  • ix

    My interest in product management began several years ago when I real-ized that the term meant significantly different things to different com-panies. Several people contributed to this growing awareness, includingparticipants at my product management workshops, sponsored by theExecutive Education department of the School of Business at the Uni-versity of WisconsinMadison. I found numerous examples of nontra-ditional approaches to the subject, and widely varying success factors.This book highlights some of those findings. In addition, several prod-uct managers responded to E-mail inquiries about their positions andsupplied example job descriptions. I want to thank all those individualsfor their willingness to provide input for the revision of the book.

    Acknowledgments

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  • Part I

    The Role and Operation

    of ProductManagement

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  • 3

    The ability to attract and retain high-profit customers is a dis-tinguishing characteristic of successful businesses, and manycompanies struggle with how to attain that goal. To succeed,firms employ many different strategies, including competency man-agement; customer retention programs; strategic leveraging; globalmarketing; project management; big, hairy, audacious goals (BHAGs);E-commerce; and supply chain management. Yet all of the tools andtechniques espoused by management gurus have not replaced theimportance of a solid organizational structure to guide an organizationin accomplishing corporate goals. One such organizational structurethat has withstood the test of time in many situations is the productmanagement structure. In this type of structure, product managersoversee a set of defined products or services that face different com-petitors and different customer constraints than many or all of theother products and services in the company. Determining if productmanagement is the optimal structure for a particular company involvesa number of considerations, including the companys culture; howmuch technical knowledge is required to design, launch, and supportspecific products; and whether the companys products require dis-tinctly different approaches to going to market.

    Once a structure is established, clarifying the roles of companypersonnel with whom product managers routinely interact is impor-tant. The product manager is a generalist who must rely on numerousfunctional specialists to develop and market the product line. The prod-

  • 4 The Product Managers Handbook

    uct manager is the liaison among the functional departments within thecompany as well as among the company, the sales force, and the cus-tomers for all product-related issues. As a result, some understandingof mutual expectations is appropriate.

    On an ongoing basis, product managers exchange information withthe sales force. They represent the voice of the customer at internal meet-ings on the product line in question. And they need to plan for currentand future product activities that benefit the company as a whole.

    Part I discusses the evolution of product management, providessuggestions for selecting the right product managers and managingthe system effectively, and demonstrates the need for product man-agers to be cross-functional leaders.

  • 5

    There has been an evolution in product management over the pastdecade. Rather than declining in number and importance as had beenforecast in numerous articles, product management (especially non-traditional product, market, and service management) has prevailedby encompassing customer management and value chain analysis,evolving into a more holistic position. The overall responsibility of aproduct manager is to integrate the various segments of a business intoa strategically focused whole, maximizing the value of a product bycoordinating the production of an offering with an understanding ofmarket needs. To accomplish this, a product manager needs a broadknowledge of virtually all aspects of a company along with veryfocused knowledge of a specific produc...