Lesson 3: Product Management Process

3.1 Product Management Process

We have seen that a company needs to stay ahead not only in its existing markets but also
in new markets that it expands into. In order to stay ahead, it needs newer products on an
ongoing basis that meet the needs of a continually changing market. We have also seen that
the product development process has become a complicated and expensive process. Hence
a structured approach to product development is needed. This is also called the Product
Management Process.

The Product Management Process is cyclical in nature – this means that product
development is a continual and ongoing process which goes through a cycle. As old
products die new ones are born and so the cycle goes on. This process of managing the
entire lifecycle of a product from its conception, through design and manufacture, to service
and disposal integrates people, data, processes and business systems and provides a
product information backbone for companies and their extended enterprise.

3.2 Product Management Cycle

The ―Product Management Cycle‖ has five stages:

1. New Product Identification
2. New Product Definition
3. Product Development
4. Product Launch and Growth
5. Product Discontinuation

1. New Product Identification Phase: This is the phase in which the company conducts
various activities in order to understand the customer’s needs and desires and define the
functional requirements of the product.

The product management group is entrusted with the task of creating a systematic process
to understand the customer requirements and create a document that outlines what the
product functions should be. During this phase the product development personnel and
people from top management undertake some of the following activities:

A. Customer surveys and responses to existing products so that improvements to

existing products can be undertaken. They also try to understand what the customer
feels are his pain areas (areas where the customer has problems). Many times it is
 Lesson 3: Product Management Process

the solution of the pain area of the customer that gives rise to new innovations. When
a company is selling a product in its target segment then this product will fulfill all the
needs of a part of this segment, most of the needs of a large part of this segment and
some of the needs of the balance. In order to know whether the company‘s products
are meeting the customer‘s expectations, the company‘s sales force or an agency
appointed by the product management team. These people generate feedback from
the customers, some of which is extremely useful in generating new ideas.

B. They read journals, magazines, books, and also go to international exhibitions,

conferences and see what innovations are being displayed and discussed by
eminent scientists, business associates and competitors. This helps them keep
abreast with the latest developments around the world so that they can use some of
these in their own products. It also helps understand what the competition could
possibly develop in terms of new products.

C. Companies create think tanks that take in all the data that comes in from various
sources and come up with various ideas. This consists of cross functional teams –
teams consisting of people from various departments – many of whom may
eventually be involved in the development of the product. These cross functional
teams get all the inputs that are available for product development and they also
bring into the team their knowledge and experience. Using this they debate and
come up with ideas for new product development.

D. All interesting information is collated and circulated organization- wide – usually

strategic planners or technology policy makers. Organizations generally circulate
information about products, technologies, business processes, competition, etc within
the organization. This not only helps people keep abreast with the latest trends but
also allows the germination of new ideas.

During this phase several product ideas are generated and there is a fuzzy view of
each of these products.

2. Product Definition Phase: During this phase various ideas for products generated in
the first phase are discussed and evaluated so that the final product is finalized. During
this phase the following activities are undertaken:
 Lesson 3: Product Management Process

A. The high level functions of the product are defined. High level specifications mean
that these specifications are an overview of all the functions desired in the product.
These are stated simply and are meant so that everyone in the organization can
understand the functions and how it solves the customer’s problems.

For example when the Nano was planned by the Tatas a high level specification
would have given that they need to develop a car that will cost only Rs one lakh to
the customer, would look modern, have the basic comforts, and that it would be
positioned for a two wheeler owner who would aspire for a four wheeler or an existing
small car buyer who would like to buy a more economical more modern design.

B. A business case is made for the new product. This business case defines the size
of the market, the segment for which the product has been defined, what are the
investments needed to make and sell the product and what will be the profit that the
product makes during its life cycle. It also outlines what are the competitive products
currently and also likely to be launched by the competitor. Once the basic product
has been defined like the Nano the product management team will have to make a
detailed report in which they will have to evaluate whether this product will make
business sense. At the end of the day the business needs to make a profit and if a
product cannot make profit it will not be considered for the next stage of
development. The study done in this phase is relatively preliminary and is done to
understand the basics of the economic feasibility.

C. In this stage the product management team has to sell the idea of the product to
various people in the organization – sales, production, R&D, HR, etc. Once the
Product Development team has determined that the product is viable it has to
convince the management that the product not only meets the strategic objectives
but also the profit objectives of the organization. Until the management is convinced
the financial commitment needed to commence product development cannot be
made. The presentation to the management will also have details of the financial
support needed for development, the time by which the product will be developed,
the business prospects and the techno-commercial feasibility.

During this phase, the Technology group with the industrial engineering group
conduct a feasibility study; In addition, an economic study is done. Let us say in the
case of the Nano once the basic product idea had been agreed to in principle the
product development team would have conducted a study to understand how they
 Lesson 3: Product Management Process

can meet the given objectives of the product specification and yet make the product
feasible. This is done in consultation with the technical teams of the organization like
R&D, operations, procurement etc in order to understand broadly if the product can
be made economically, At this stage many assumptions are made based on which
the decision is taken. For example the product management team will assume that a
certain technology needed to manufacture the product will be available at a certain
cost and base their calculations on that. This assumption is based on the experience
of the people in the organization and no formal quotation is taken since it has not
been decided for sure that this is the technology that will be used or some other
option will be taken. Later once the decision is taken then the organization tries to get
the technology for a price below the figure taken in the assumptions.

3. Product Development Phase: Once the product‘s high level specifications have been
finalized and the top management has approved this product and committed resources
for its development, the Product Management Group involves the Product Development
Team. This team consists of people from R&D, Manufacturing, Industrial Engineering and
Sales. They are given the high level specifications of the product and given the tasks of
creating the actual physical product. During this phase:

A. The various functions involved in the Product Development Team make a detailed
specification of the product. They also define the look and feel of the product.
The task of converting a high level specification into a detailed product specification
is not a small task. It involves a detailed process in which several functional areas
are involved. Each functional area provides inputs in the best way of meeting the
product's objectives and the Product Development team considers all the inputs and
decides on what options to take. During this period the product specifications may
undergo minor changes keeping in view the strengths of an organization – however
the overall functional requirements will remain the same.

B. They evaluate the various options in manufacturing processes and the need for
any new technology to make the product. They also evaluate the impact of various
options in making the product in terms of investment needed, profits generated, etc.
While making the detailed product specifications the management also evaluates the
manufacturing options it has for the new products. They need to evaluate whether
the existing manufacturing processes are adequate for making the new product, or
they need to expand the manufacturing set up or they need to create an altogether
new facility. Many times it happens that new technology needed to manufacture the
 Lesson 3: Product Management Process

new product has a significant impact on the existing processes and so the
management needs to evaluate whether such a technology should be used or not,
whether this is going to be beneficial to the organization in the long term, since it may
involve a lot of retraining of its manpower for using the new technology.

C. The first prototype of the product is developed and evaluated to see if the product
meets all the functional requirements set out in the initial document. This is an
important stage in the product development cycle. This product is put through
functional trials to see if the specifications laid out at the beginning are met – not only
from the engineering point of view but also from the customer‘s requirements point of
view. At this stage sometimes a few chosen customers are also shown the product
for their feedback. The feedback from testing and the customer is considered by the
product management team and they decide on the changes to be incorporated in the
product.

D. At this stage the product is more or less finalized and the product functionality
frozen. However some fine tuning may continue till the product launch and even
during the life of the product. These modifications are done to suit the conveniences
of manufacturing or additional features needed by Sales.

E. Once the final product comes out of the factory it is once again shown to some key
partners (much larger numbers than before) in the market and sometimes test
marketed in a small area to get more feedback. Test marketing is usually done so
that the actual user experience is received. It is normally done in a small
representative market away from the main market of the company. The reason for
doing the test away from the main market is that in case the test fails or has a
negative impact the main market (which is significantly larger) must not be affected.
This feedback also is discussed internally and the relevant parts are incorporated in
the product.

F. The product is then ready for launch.

4. Product Launch and Growth Phase: The product launch needs a lot of preparation so
as to ensure that the product succeeds in the market. Just making a good product is not
enough to ensure its success. Thus by the time the final product is ready, the Product
Management group has to develop the support needed to launch the product in the
market. They have to:
 Lesson 3: Product Management Process

A. The product management team knows how they have positioned the product and
what their target segment is. Along with the advertising department they have to
develop the campaign needed to launch the product. Now keeping with the
company‘s overall business objective they know how much they can spend on this
campaign and so they plan the media according to this need.

B. The entire sales force, the channel partners must know what product they are selling
and how it compares to competition. The customers must be able to understand the
product they are buying. Hence the Product Management team must also develop
the tools needed by the sales team and channel partners to sell the product
effectively and for customers to understand them. They create tools like sales
catalogs, leaflets, comparison charts with competition, explaining application
areas and target segments for the product, they provide the pricing strategy, etc.

C. The Product Management group continues to provide support to the product

throughout the life of the product by determining ways to improve sales,
profitability of the product. Many times they have built in features in the product that
have not been released with the initial launch of the product. These features are
added into the product in a phased manner so as to stay ahead of competition and
keep the customer interested in the product.

D. They also keep taking feedback from the customer so that small incremental
improvements can be made to the product thus increasing its life and profitability of
the company while keeping it ahead of competition.

E. We know that capital is scarce and new product development is expensive. Thus if
we can prolong the life of the product it can help the company make profits while
staying ahead of its competition.

The product's life and success will depend to a large extent on the ground work
undertaken by the Product Management Group from the time of its development to its
launch and stay in the market.

5. Product Discontinuation Phase: This is a critical phase in the management of

products. This is the phase when the product is to be discontinued and a new product
has to be introduced. This seems to be quite simple but in reality it is a difficult decision.
The reason is that on one hand we have a product that is established in the market and
 Lesson 3: Product Management Process

has customer acceptance, and, on the other hand, the new product has still to be
accepted by the customer. If the current product is discontinued and the new product is
not accepted by the customer, it can cause a major setback for the company. If we take
the example of the Maruti 800 car – it is a car that has been selling in large numbers,
even though competition has introduced many products.

Now if Maruti introduces a new product in its place they are not sure how the customers
will feel about it. We know that the Maruti 800 is a car that has excellent availability of
spares and maintenance. Even the roadside mechanic can repair it and so there is no
problem in using it anywhere in the country – city, town or village. Any new car will take
some time to penetrate the market. It will also take some time for Maruti to train its
engineers in their service establishments across the country. Thus there is always some
danger of losing a part of the market share to competitors. Hence some of the
considerations in this phase are:

A. Availability of a new product – The foremost consideration in introducing a new

product is its availability.

B. Awareness of the Competitor’s Products - At the same time we need to see what
the competitor is doing. If the competitor has already launched a new product, it will
force the company‘s hand in launching its own product. For example when Apple
launched its iPhone with a large touch screen technology, other phone manufacturers
were forced to launch similar products within a very short time.

C. Customer Maturity - Even though a new product may be ready, it may not be
possible to launch it because the customers are not ready for it. E.g.: consumer
durable manufacturers had washing machines ready in their product portfolio but
could not launch it since the Indian customer was not ready for it. The Indian
customer at that time felt that washing by hand was the done thing and that a
washing machine never washed the clothes properly and that they never came out
clean.

D. Adequate Training - In addition before discontinuing an existing product and

launching a new product the organization needs to be trained in it – E.g.: the
manufacturing team must know how to make it, the sales team and its distributors
must understand how to sell the product. If it is a product that needs installation and
maintenance then this team must also be trained.
 Lesson 3: Product Management Process

E. Adequate stock must lie in the distribution channel so that once the product is
launched and the campaign breaks out, sales must not be lost due to non -availability
at the retail end.

Nowadays, because of the speed at which the market is changing and competition is
responding, existing products are discarded even when they have not completed their
economic life. This puts more pressure on the Product Management Group to develop newer
products that will give returns in shorter and shorter periods of time. We therefore see that
many CEOs make the product management team report directly to them since it has one of
the most profound effects on the bottom line of the company.