Product Management

PRODUCT MANAGEMENT TOOLS

Product Management

Organizational structure in product management

CEO Virtual team consisting of account managers,
product managers and

a product management consultant.

Product Account manager A Account manager B Account manager C Account manager D
Management
TEAM
Consultant

Product manager X

Product manager Y

Product manager Z

Product Management

Influencing factors and aspects of product management

Research

Customers Development

Marketing Product Sales
Management Board
Support

Finance Legal

Product Management ─ Product Development Process

Structure of the product development process in different steps

Innovation strategy Development Idea screening Concept Marketing strategy
of product ideas development and

test phase

Analysis of Product development Testing in test Product launch
marketability market environment

Product Management ─ Product Development Process

Structure of the product development process – alternative design

Launch Ideate

Prepare Day to Day Explore
Build Product Focus

Management

Define Immerse

Product Development Process – Stage-Gate-Process

Model of the development process with a gate at the end of each phase

Initial Second Decision on Post Pre commer- Post
screen screen business development cialization implement.
case business
review analysis review

Idea Gate Stage Gate Stage Gate Stage Gate Stage Gate Stage P.I.R
1 1 2 2 3 3 4 4 5 5

Preliminary Detailed Development Testing & Full production
investigation investigation Validation & Market launch
(build business

case)

Product Development Process – Stage-Gate-Process

Model of the development process with a gate at the end of each phase

Preliminary Detailed Development Testing & Full production
investigation investigation Validation & Market launch
(build business case)

1 Initial 2 Decision on 3 Post 4 Pre commer- 5 Post -
screen business development cialisation implementation
case review business review
analysis

Product Development Process – Stage-Gate-Process

Model of the development process with a gate at the end of each phase

Initial Second Decision on
screen screen business case

Gate 1 Stage 1 Gate 2 Stage 2 Gate 3 Stage 3

Idea Preliminary Detailed Development

investigation investigation

Post- Pre commercialization Post
development business analysis implementation

review review

Gate 4 Stage 4 Gate 5 Stage 5 

Testing & Full production &
Validation Market launch

Product Life Cycle

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Development Growth Maturity Age

Cash flow Revenue
Profit

Product Life Cycle

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Introduction Growth Maturity Saturation Possible Development
Renewed Growth
Revenue 40-50
III
50% 20-25 20-25 Retire from market
40% II IV
30% 10-15
20% V

10-15 Phases on life cycle curve
10%

0%
I

Product Life Cycle

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Product Life Cycle

Market entry Growing
competitive

pressure

Introduction Replacement
of parts

Units New vehicle
application

End of Elimination
service

Exclusive Threatened by competition Time

Product Management ─ Product Strategy

Three aspects of product strategies (according to performance dimensions)

PriceNew high
PriceProductsmedium

standard
high
Price Quality New
Products
low Product
Strategy Quality
Quality

Brand Manufacturer's brand
Trademark
Generic Brand

Product Management ─ Product line

Product line extension and differed types of product programs

1. Program extension: Price high New Example of program
Products extension with
 New product introduction: higher quality
Diversification and innovation
Previous
 Product modification: Products
Variation and differentiation

2. Program restriction:
Revision and elimination of products with unsatisfactory
profit.

3. Program conservation:
Current product remains unchanged.

low

low Quality high

Product conception ─ Product dimensions

Dimensions of a product

Extended product Payment Free
(Product related service) terms delivery

Actual product Education Design Packing Construction
(Product appearance) & Training &

Customer benefit Installation
(Product or service)
Core-
Brand Product Quality

On-site Functionality Main-
service tenance
& Care

Customer- Guarantee /
support Warranty

Product Management ─ Product-Influencing Factors

Factors which largely influence the market success of a product

Usage Availability

Form Service

Availability Product Price
Quality
Environmental sustainability

Packing Life term

Image Brand

Product Management ─ Process Phases

Product management as a process with different steps and phases

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6

Situations- Product Development Budgeting Planning, Control
Analysis policy of product product policy application and of performance
objectives strategies instruments implementation
of performance program
program

Integration in Marketing-Mix

Product Management ─ Process Phases

Product management as a process with different steps and phases

Phase 1 Situation analysis of performance program

Phase 2 Product politic objectives Integration in Marketing-Mix

Phase 3 Development of product strategies

Phase 4 Budgeting product policy instruments

Phase 5 Planning, application and implementation

Phase 6 Control of performance program

Product Management ─ Process Phases

Product management as a process with different steps and phases

Phase 1 Situation analysis of performance program
Phase 2
Phase 3 Product politic objectives Integration in Marketing-Mix
Phase 4
Phase 5 Development of product strategies

Phase 6 Budgeting product policy instruments

Planning, application and implementation

Quality / Brand / Packing Innovation / Variation / Elimination
Service / Assortment Differentiation / Diversification

Control of performance program

Product Policy ─ Targets /Objectives

All decisions regarding the creation of the product and the performance program and
their market-driven design

Securing price-/ quality- or market Product
leadership Policy

Improvement of
competitive situation

Achievement of
marketing target

Exploitation of new
target group segments

Risk spreading trough
broad assortment

Product Policy − Customer Benefit

Determination of performance program

Determination of USP Product Creation through
(unique selling position) design, functionality,
Unique customer benefit of
product to differentiate quality, brand and packing
from competitors

Customer
Benefit

Determination of services like warranties, shipping conditions, customer support,
training, etc. (value-added-services)

Product Policy − Gap-Analysis

Analysis to determine product policy objectives

Strategic Target

Revenue Close gap of revenue loss Strategic gap
by diversification

Close gap of revenue loss by
 assortments expansion
 market development

Profit by improving Securing and
the core business expanding core business

Revenue through core business

t0 t5 Time

Product Management − Scoring Model

Scoring model or point rating system for idea evaluation

Product idea / Product concept No. : xxxxxx Weight Points Weighted point values
(Sum 100%) 1 till10
Assessment criteria

1. Company related criteria
 technical feasibility
 investment volume
…

2. Customer related criteria
 customer benefit recognizable
 creation of new customer level
…

3. Trade related criteria
 additional trading profile
 cooperation willingness of trade
…

4. Competition related criteria
 gaining completion advantage
 Imitation risk of competitors
…

5. Environment related criteria
 juristic restriction
 environmental sustainability
…

Sum of weighted product values

Product Policy − Program Structure Analysis

The structure analysis provides information regarding program decisions

Program structure
analysis

Revenue structure Contribution margin Customer structure Age structure
or ABC- analysis analysis analysis analysis

Share of sales on total sales Information about Revenue shares or Representation of the phase of
of the products. product's success revenue of customer the product in the
product life cycle
Distinction between A, B and C Difference between profit Analysis and display
products, depending on the and costs of the product. of importance of certain Life expectancy of products and
volume of revenue share. development of
Representation of customer groups
80% / 20%- principle different dimensions appropriate product and
program concepts

Price Policy − Determinants of Price Formation

Summary of determinants of price policy and influence factors on determined objectives

Company Determinants of price policy Demand situation
specific costs
Price effect Competition situation
Price expectations
Price policy Price regulations
objectives (public regulations)

Revenue Power Payment- and delivery
profit image conditions

Price willingness Exchange rate and
inflation development

Price categories

Price Policy − Price Policy Objectives Development of new
markets or market niches
Comparison of possible pricing policy objectives
! Eliminate or discourage
Increase and recovery of market competitors
shares Image
Create image for product or
Improvement of revenue product line
situation

Improvement of profit
situation

PriceProduct Policy − Price Strategies

Price strategies and price development in the course of time

Premium price- strategy
Absorption strategy (Skimming- price- strategy)

Penetration strategy
„Follow-the-free“- strategy
Low price- strategy (Promotion price- strategy)

Time

Product Policy − Price Strategies

Comparison and explanation of different price strategies

Premium price Absorption Penetration „Follow the free“ Low price
strategy strategy strategy strategy strategy

Constantly high prices with a high Skimming price strategy Market entry strategy with relatively Extreme form of penetration strategy Promotion strategy with regularly
profit per piece high introduction price which will be low prices for a short term to extend - providing free products in the first low prices with focus on price
reduced successively in the course of the market share step and complementary services in sensitivity
Products of premium value with high time the following sales (example better of customers
quality and high image Focus is to acquire as many product versions)
For new products to maximize profit customers as possible to raise the Relatively small revenue per piece
Only few customers through high and if customers are not sensitive to prices later on Commonly used in the internet and but compensated by high sales
priced product (luxury segments) prices E-commerce volume

Product Management − Diversifications (1) Vertical diversification

Comparison of horizontal and vertical diversification Cultivation
Production
Horizontal diversification Distribution

Decaffei- Coffee Mocha Espresso Trade
nated
coffee Horizontal Vertical

Extension of the current product line with additional Expansion of product line upward or downward to include
products for existing customer pre or post products into own value chain.

Product Management ─ Diversification (2)

Comparison of lateral, concentric and combined diversification

Lateral diversification Concentric diversification

Branch A Juices New products for partly similar customer group.
The company benefits from existing technologies, marketing and
Coffee Branch B sales.

Lateral Combined diversification*

Expanding the program into a different field of activity and to No technological and market-related connections to existing
another step upstream or downstream market. products.
No use of possible synergies.
* Also called conglomerates or heterogeneous diversification

Product Management ─ Types of Diversification

Matrix according to anoff

New products

Related technology Unrelated technology

Same customer type Horizontal diversification

New markets Company is new Vertical diversification
customer type
(or own Customer) (vertical integration)

Similar customer type Concentric diversification Concentric diversification
(distribution and technology is related) (sales is related)
New customer type
Concentric diversification Combined diversification
(technology is related)

Product Management − Objectives of Diversification

Objectives and motives of diversification

Exploitation of potential synergies Increasing of value
Increasing of knowledge
Gain in profitability Diversification
Corporate growth Risk spreading
Securing sales
Increasing market share Utilizing synergies

Overcoming stagnating markets

Product Management ─ Forms of Diversification

Comparison of different forms of realization and entry strategies

Entry strategies Time Costs Risk Advantage Disadvantage
slow high high
Development  usage of existing resources  long development phase
Licensing fast relatively small  usage of potential synergies  high use of resources
Cooperation low  high chances to succeed  high development costs
Acquisition  development of own Know-How  difficult with entry barriers
relatively relatively high
fast high  fast market entry  depended on licensor
 use of existing technologies  only of 1.phase of diversification
relatively high high  low investments  no own development necessary
fast  low risk  license costs

 risk spreading  possible conflict potential
 development of synergies  protection of Know-How difficult
 limited investment
 flexibility  integration problems
 missing market knowledge
 fast market entry  possible juristic problems
 high entry barriers
 low development costs

Target Costing

To customize a product variety exactly for one segment with „target costs“

Share of costs Target costs- control diagram Three segments:

Too complex/ Determine target costs
too expensive  target price of product
 targeted profit
Too simple /  total costs
too cheap
Target cost splitting
 Share of costs of separate

components of product

Target cost realization

Share of usage

ABC-Analysis ─ Revenue Structure Analysis

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100% C
90%
80% B
70%
60% A
50%
40%
30%
20%
10%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Product Management − Market Diagram Supply

Price development by supply and demand

Demand

Price

Balance price (GP) Optimal price where
supply and demand

curves meet

Balance amount (GM)

Amount

Permanent tasksProduct Management for Services

Continuous tasks / project-related tasks

Global product portfolio planning
Market research, idea generation, innovation management
CI, brand and product strategy
Strategic product planning (life cycle, marketing mix, release planning)
Product controlling (sales, revenue, profit)
Marketing concept, product presentation, sales efficiency control
Support departments (sales, operating units, controlling, R & D)
Other operating activities (especially at the beginning of the product life cycle)

Exemplary project tasks Analysis + Coarse Product Product Piloting Product
product idea conception conception realization introduction

(Multi-) project management