117091485 product-and-brand-management

PRODUCT MANAGEMENT

BLOCK 1: PRODUCT MANAGEMENT — INTRODUCTION
Unit 1: Introduction to Product Management
Unit 2: Product Management Process
Unit 3: The Product Planning System

BLOCK 2: MANAGING PRODUCTS
Unit 4: Product Line Decisions
Unit 5: Product Life Cycle
Unit 6: Product Portfolio
Unit 7: Product Pricing

BLOCK 3: BRANDING AND PACKAGING DECISIONS
Unit 8: Branding Decisions
Unit 9: Positioning Decisions
Unit 10: Brand Equity
Unit 11: Packaging Decisions

BLOCK 4: NEW PRODUCT DEVELOPMENT
Unit 12: Organizing for New Product Development
Unit 13: Generation, Screening and Development of New
Product Ideas

BLOCK 5: IMPLEMENTING NEW PRODUCT DECISION
Unit 14: Concept Development and Testing
Unit 15: Pre-test Marketing and Test Marketing
Unit 16: Product Launch

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Block 1: PRODUCT MANAGEMENT —
INTRODUCTION

Unit 1: Introduction to Product Management

Unit 2: Product Management Process

Unit 3: The Product Planning System

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1. UNIT I: Introduction to Product Management

Learning Objectives
 To understand how Product Management evolved
 What a Product Manager has to do.
 To understand the linkages of Product Management with other functions
in the organisation.

Structure
1. Product Management
2. Historical Background
2.1. Your Learning
3. Product Management and its Interface with Other Organisational
Functions
3.1. Identifies a market problem
3.2. Quantifies the opportunity
3.3. Communicates the market opportunity to the top
management
3.4. Communicates the problem to Product Development team
3.5. Communicates to Advertising/ Promotion team
3.6. Empowers the sales team
4. Your Learning
5. Summary
6. Key Words
7. Exercises
8. Further Reading

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 lifecycle.

Product management and product marketing are different yet complementary
efforts with the objective of maximizing sales revenues, market share, and
profit margins. Product Management has several roles which cover many
activities from identification to development, to launch and even support
during its life cycle. The issues handled by the product management team vary

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from being strategic and/or tactical in nature depending on the type of
organisation and where in the organizations hierarchy the function lies. Product
management can be a separate function or a part of marketing or engineering
functions.

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

2. 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. For our
purpose, we shall classify both – goods and services – as products. Hence, if
we were to answer the above question again, it could be: ―By providing a
continual flow of new products to satisfy market needs or desires.‖ The
question then arises: ―Now where will these products come from?‖

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,
motorised transportation in the form of cars became a reality, and steam boats
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
organised development of products. World War II gave a further impetus
to the development and refinement of products. 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 realised that to be successful they needed to identify
products that could satisfy the customer’s needs and desires, and which
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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 Product
Manager whose primary role is to serve as the ―Voice of the Customer‖. He
is responsible for the ―4P’s” of Product Management:

– Price
– Place
– Product
– Promotion

Note: This includes indirect management and cooperation with other members
of various groups

In this book we will go through the various aspects of Product Management as
is now undertaken in this complex business environment. The book has been
structured in five broad areas. The first being the introduction to the basic
subject itself where we will not only have a look at the historical background
and how product management has come out from being a product of ‗creative
geniuses to a well structured process with a reasonably well defined interface
within the organisation. In the chapter 2 and 3 the whole process involved in
managing product development and how once we have decided what product
to make the organisation needs to function in order to bring our the product to
the market in the shortest and most efficient manner. It also discusses how the
product launch can be staggered to provide a strategic advantage to the
Marketer.
Once we are through the basics we go to the next section consisting of units 4,
5, 6 which will discuss in greater detail how we must organise ourselves to
develop new products and go through the process of generating new ideas and
evaluating which of them is economically viable before actually taking up the
developmental effort of time and money.

The next section with units 7, 8, 9, and 10 will help you understand how from
the concept we actually undertake the development of the product, and pre-
test or test market the product before we actually launch it in the market.
Once we find that eh product meets our marketing objectives the steps we
need to follow to launch the product.

Now that we have launched our products we need to understand how to
manage these products that are in the markets. The units 11, 12, 13 and 14
will give you an insight into where new products should be added, when should
you support them in their life cycle and when should you decide to withdraw
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the product. In this section we will also understand how to balance the
product portfolio and the factors affecting the pricing decisions.

We know that in addition to the product it is equally important to package and
brand the product in a manner that it fits in the product positioning that has
been decided by the product management team. So the Units 15, 16, 17 and
18 will take you through the processes followed to arrive at branding,
positioning and packaging decisions.

2.1. Your Learning
1. What was the need for an organised product management process?
2. Do you think that with today‘s organised product management process
we are able to address customer needs better?

3. Product Management and its Interface with Other
Organisational 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 organisation
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:

3.1. 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.

3.2. 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.

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3.3. 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.

3.4. 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 the product development team
that they need a product that fdoes 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.

3.5. It communicates to 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. They type of
advertising communication for 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.

3.6. 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 – 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
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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.

3.7. Your Learning
1. How does Product Management function impact Marketing of a
product?
2. How does the top management benefit from a separate product
management team?

Fig: 1.1 Product Managements Role

4. What a good Product Management must do
A good Product Management Team or a good Product Manager must work
in order to keep his company ahead of competition and help provide a
competitive edge to the company. Some of the characteristics that
differentiate a good product management from a bad one are:

a. Realize your product is not the centre of your customer’s
worlds

A good product manager must realize that his product is most
probably one of many products which a customer uses every day. A
product manager is likely to think about his product all day, every day.
It is very unlikely that the customer think about or uses this product
nearly that much; to them, it is more likely just one of the many
products in the market. Thus decisions about product design and
features must keep this in mind.
If we are over absorbed about our product and think the customer will
understand everything or will find everything we develop useful, we
may create problems for ourselves. For example:
 We can add features that we consider useful but if the
customer does not use them then it is of no use putting the
feature no matter how useful we think it is.
 If we use very specific terminology (which sometimes gets
developed internally in the organisation during the development
phase of the product or may be a technical term not generally
used) which is not easily recognized by anyone new to the
product. Then this may not be understood by the customer.

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 If we get too involved with our product we may miss
identifying how it can be used with other products thus missing
potential business opportunities.
Hence a wise product manager will generally:
 Use existing standards whenever they are relevant and
applicable. If we have a standard QWERTY key board for
computers and we change this for some other purpose then it
may become difficult for customers to use this.
 Realize that products work with other products which the
organization produces as well as products and systems created
by others — including your competitors.

b. Save some features for later

It‘s important to include enough features when a product is first
released, and delaying the release of some features helps because:
 Customers have difficulty in grasping too many features at
once. Also extra features may distract the customer towards the
less important features and make him miss the truly
differentiating features.
 If features are added with passage of time then product life
can be extended by giving the customer an improved version of
the product. Many times these can be given as priced value
additions.
 Giving some features later may also provide the opportunity
to upgrade or modify existing features that may be needed by
the current market customer expectations. It is not possible for
the product manager to know and plan for all features needed
by the market and hence this enables him to keep his product
abreast with the market and deliver a better bottom line.

c. Product management is more than prioritizing product features

Product managers needs to have a much broader view and needs to
see and understand everything from the basic customer needs to the
business model to the product roadmap to the go-to-market strategy.
Unfortunately, many product managers take the easy feature-focused
development mode. As a result they do not see their function in a
holistic manner.

d. Differentiate to avoid being a ―me too‖

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A good product manager must try to differentiate his product and
avoid being a ―me too.‖ Getting into the market speedily is definitely
important; however it is always better to come into the market later
with a better product than slightly faster with something that does not
stand out. Being first is good but it is no guarantee of success.
Amazon.com was not the first online bookseller; Google was not the
first search engine; the iPod was not the first portable MP3 player; the
list can go on and on.
In “Product Leadership: Creating and Launching Superior New Products ,
Robert Cooper” offers some amazing statistics on ―truly superior,
differentiated products‖:
One of the top success factors we uncovered is delivering a
differentiated product with unique customer benefits and superior
value for the user. … Our NewProd projects studies show that such
superior products have five times the success rate, over four times
the market share, and four times the profitability as products
lacking this ingredient.
“Truly Superior, Differentiated Products” had an average 98%
success rate and 53.5% market share, while “Me-Too” Products
averaged an 18.4% success rate and 11.6% market share. Though
the desire for quick revenue and immediate return within
organizations is often strong, though there is good cause for
launching the “right” product. In the end, the extra effort put into
figuring out how to differentiate a product will be well worth the
effort.

e. Reinforce your product-related communication

Product managers have to ensure that any communication they send
out must be clear and consistent. They need to do this in order to
avoid confusion over action proposed or being taken. The product
manager has to ensure that any communication he sends out must be
understood and taken note of by all concerned with the product – be
it sales, or distributors or even the internal departments like
engineering, R&D, marketing etc. So that all of them are on the same
page.

We all know that communication is one of the most difficult things to
do and many times people do not get the communication in one go.
Thus the product manager must follow up and make sure that the
communicated information has been received and understood by the
recipient.
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f. Do not think that a single product will solve all problems for
customers

We may like to make a single product that will solve all customer
problems since this way our development costs would be minimum
and profits would be maximum. However, trying to make it everything
for everyone usually results in a product that does nothing for no one.
In order to make a product do everything for everyone we would need
to add a lot of features to it making it extremely complicated for
most. And it makes it difficult or the marketer to sell the
differentiating factor to the customer.

We can see that today we are seeing more and more products that
are focussed on a specific benefit – eg anti dandruff shampoos (Head
and Shoulders, Clinic All clear), powders for heat problems
(Navratan), soaps with cream (Dove), Fairness cream for Men, etc.

This is not to say that an all-in-one strategy is always bad. Product
managers can still choose to follow an all-in-one strategy; they just
must be aware of the impact it may have on the perceptions of
customers. Even then, an all-in-one product should be that way
because it provides value and solves specific problems for the
customer, not just all-in-one for the sake of being all-in-one

g. Define the problem before solving it

Product managers and many others unfortunately assume the
problem is clear and jump straight away to solving it. However,
improperly-defined problems lead to improper solutions.
Albert Einstein is supposed to have said that, given one hour to save
the world, he would spend 55 minutes defining the problem and 5
minutes finding the solution. This quote does illustrate an important
point: before jumping right into solving a problem, we should step back and
invest time and effort to improve our understanding of it.
The first and foremost thing to be done before solving the problem is
to define it correctly. This definition should neither be too narrow or
too broad. A narrow definition will limit the scope of the solution and
similarly a very broad definition will give us solutions that may not be
relevant to the problem.
Going too far in either extreme may be unproductive and inefficient in
many situations.
Product managers must not be in a hurry to write down features
without clearly defining the problem. Relooking at problems can
always provide a fresh perspective and give interesting solutions.
Many times the product manager should take the help of research to
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clarify and define issues. The time spent in defining problems in the
early stages always helps save time spent later in resolving issues.

5. Summary
Historically product development was dependent on work undertaken by
inventors and geniuses. Later with the advent of competition it became
more organised. Products were developed in research laboratories of
large companies. However these were products that could be developed
rather than what was needed by the customer. As competition increased
further companies were forced to understand what were the customer
needs and develop products that were needed by him. This led to the
creation of the Product development function. The product development
function is an important function that needs to interface with all functions
of an organisation.

6. Key Words
1. Goods and Services – Goods and services are the outputs offered by
businesses to satisfy the demands of consumer and industrial markets.
They are differentiated on the basis of four characteristics:
a. Tangibility: Goods are tangible products such as cars, clothing, and
machinery. They have shape and can be seen and touched. Services are
intangible. Hair styling, pest control, and equipment repair, for example,
do not have a physical presence.
b. Perishability: All goods have some degree of durability beyond the time
of purchase. Services do not; they perish as they are delivered.
c. Separability: Goods can be stored for later use. Thus, production and
consumption are typically separate. Because the production and
consumption of services are simultaneous, services and the service
provider cannot be separated.
d. Standardization: The quality of goods can be controlled through
standardization and grading in the production process. The quality of
services, however, is different each time they are delivered.
2. Continual flow of new products – The customer needs to get
something new in order to stay interested in a company‘s product. This
can be in the form of new features, new shapes, new products and even
a new price. This innovation is the continual flow of new products.
3. Voice of Customer – is a term used in business to describe the process
of capturing a customer's requirements. Specifically, the Voice of the
Customer is a market research technique that produces a detailed set of
customer wants and needs. Voice of the Customer studies typically
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consist of both qualitative and quantitative research steps. They are
generally conducted at the start of any new product, process, or service
design initiative in order to better understand the customer‘s wants and
needs, and as the key input for new product definition, and the setting of
detailed design specifications.
4. Return on Investment is usually expressed in percentage. It is the
percentage of money gained or lost on an investment relative to the
amount of money invested
5. Breakeven Point is the point at which cost or expenses and revenue
are equal: there is no net loss or gain, and one has "broken even".
6. Business Rationale defines the fundamental reason or reasons why
developing the product will be beneficial to the business. It outlines a reasoned
step by step explanation.
7. Business Plan is a formal statement of a set of business goals, the
reasons why they are believed attainable, and the plan for reaching
those goals. It may also contain background information about the
organization or team attempting to reach those goals.
8. Product Positioning means the process by which marketers try to
create an image or identity in the minds of their target market for their
product, brand, or organization. The objective of this to ensure that the
consumer remembers the product or brand in spite of the noise created
by the communication clutter.
9. Sales Process is a systematic approach to selling a product or service.
It includes all aspects of sales and helps in creating standardized
processes which allow monitoring of processes and in enhancing sales.
10. Sales Tools All factors that help in selling a product are the sales
tools. These include consumer schemes (e.g. buy one get one free, buy a
car and get a chance to win a TV, etc) advertising, printed leaflets,
banners, channel push, etc.

7. Exercises

1. How can the product management team help in defining the sales
process?
2. How can the sales tools be developed by the product management team?
3. How is the product management team different from the product
development team?
4. The product management can help improve sales? Do you agree or
disagree with this statement and why?
5. What is the importance of Product Development? Do you think that an
organised process of development is helping us develop products that
the customer needs?
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8. Further Reading

1. Kahn, Kenneth B. (2001). New Product Planning. New Delhi, India:
Response Books Page 1-6, 17-20
3. Gorchels, Linda, (2006) The Product Managers Handbook, New York,
USA: McGraw-Hill Chapter 1
4. Mukherjee, Kaushik (2009) Product Management , New Delhi, India: PHI
Learning Pvt. Ltd Pg 4 – 10
5. Lehmann, Donald R and Winer, Russel S, (1997) Product Management,
Singapore, Irwin/ McGraw-Hill Pages 15 – 18
6. Crawford, Merle and Benedetto, Anthony Di (2004) New Product
Management Singapore, McGraw Hill Page 5 – 10

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2. UNIT II - Product Management Process

3. Learning Objectives
 The Product Management Cycle and its significance in Product
Development.

 Management of the Product Development Process.

 Some key issues to be considered while discontinuing an existing product
and launching a new one.

Structure

1. Introduction
2. Product Management Cycle
2.1. New Product Identification
2.2. New Product Definition
2.3. Product Development
2.4. Product Launch and Growth
2.5. Product Discontinuation

3. Your learning
4. Summary
5. Key Words
6. Exercises
7. Further Reading

1. Introduction
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.

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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

2. Product Management Cycle
The ―Product Management Cycle‖ has five stages:

i. New Product Identification

ii. New Product Definition

iii. Product Development

iv. Product Launch and Growth

v. 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:

i. 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 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 fulfil 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

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generate a feedback from the customers some of which is extremely
useful in generating new ideas.

ii. 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.

iii. 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 is 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 produce development.

iv. All interesting information is collated and circulated organisation-
wide – usually strategic planners or technology policy makers.
Organisations generally circulate information about products,
technologies, business processes, competition, etc within the
organisation. 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 finalised. During this phase
the following activities are undertaken:

i. 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 organisation can understand the functions are
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
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wheeler or an existing small car buyer who would like to buy a more
economical more modern design.

ii. 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 make 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.

iii. In this stage the product management team has to sell the idea of the
product to various people in the organisation – 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
organisation. 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 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 as to understand how they 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 organisation
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 organisation and no formal quotation is taken since it has
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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 organisation 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 finalised 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:

i. 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 as
given in 2.3.2.i 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
products 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 organisation – however the overall functional
requirements will remain the same.

ii. 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 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 organisation in the long term, since it may
involve a lot of retraining of its manpower for using the new technology.

iii. 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
19

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 form 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.

iv. At this stage the product is more or less finalised 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.

v. 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 the 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.

i. 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:

20

i. 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.

ii. 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.

iii. 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.

iv. They also keep taking a 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.

v. 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 products 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 has
customer acceptance, and, on the other hand, the new product has still to be
21

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. 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 so much. 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:

i. Availability of a new product – The foremost consideration in
introducing a new product is its availability.

ii. 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.

iii. 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.

iv. Adequate Training - In addition before discontinuing an existing
product and launching a new product the organisation 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.

v. 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.

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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 CEO‘s 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.

Fig 2.1 Product Management Cycle

3. Your Learning
1. It is said that the product discontinuation phase is one of the most
important phases in Product development? Why is this so? Please discuss
whether you agree or not and why.
2. During the growth phase of the product what are the activities that can
be done by the product management team to increase its sale?

4. Summary
The product management process is an important process in order for
the company to stay ahead of its competitors. This process is divided into
five phases starting from the need identification to defining the product,
which is then developed. This developed product is the launched in the
market and all activities are undertaken to ensure its growth. At the end
as customer acceptance drops the product is discontinued. This is an
important phase as in this phase the company has to ensure that
another product is ready to take over the market being vacated by the
existing product. Also the company must ensure that other infrastructure
needed to support the new product is ready and in place e.g. training of
manpower, distribution channel with adequate stocks, etc

5. Key words
1. Pain Areas – these are the areas where the customer has a
problem. These create opportunities for companies create a
product. For example – people wanted to make calls more
conveniently and did not want to walk up to a fixed line phones.
This gave an opportunity to make cordless phones. These could be

23

used inside the house but could not go very far. These phones were
the precursors of mobile phones.
2. Think tanks – are a set of people whose job is to think / develop/
create new products or concepts.
3. High Level Specifications – these are broad specifications for
product usually used for one that is under development. These are
created in the initial stages to give an a broad idea of the product
features and design. These specifications are then used to develop
the detailed specifications.
4. Business case is a proposal developed by a specific department to
justify its proposal as making business sense. This is used by the
management to decide whether to go ahead with the project or not
5. Size of market is the total possible sale that a product can have
in a given market. This is given in terms of a Rupee value. For
example we can say that the market for FMCGs is Rs 40,000
crores.
6. Competitive products are competitor‘s products for a given
category of products. These are the products that will compete in
the market with the company‘s products. For example a there are
several motorcycles in the 200 cc category made by various
companies. These are competitive products.
7. Feasibility study is the study conducted to understand if it is
feasible to manufacture a certain product. This is done before a
technical development or project implementation.
8. Economic study once a feasibility study has found the project
feasible an economic study is done to see if the project is
economically viable.
9. Industrial Engineering is a branch of engineering that concerns
with the development, improvement, implementation and
evaluation of integrated systems of people, money, knowledge,
information, equipment, energy, material and process. It also deals
with designing new prototypes to help save money and make the
prototype better.
10. Look and Feel is a term used to describe products in fields
of product design, marketing, branding etc. to describe the main
features of its appearance.
11. Prototype is an initial product usually made to show a
typical impression of the product.
12. Product Functionality gives the various functions of a
product. When the product functionality is modified it means that
some functions of this product are changed because of some

24

customer feedback or lack of technology to manufacture the
product or the cost needed to make this product does not make
economic sense.
13. Test Marketing is a sample marketing undertaken when a
product is being introduced for the first time. This is done in a
small area which is representative of the market in which the
product has to be finally used. However this market is usually not
so large that in case the test marketing fails it impacts the launch
of another modified product. It enables a company to check how
the product will be accepted by the customers.
14. Campaign in the context of product management is usually
used for a sales or marketing promotional set of activities. These
could include advertising, consumer schemes, ground
demonstration activities, etc to make the customer aware about
the product and its features.
15. Customer Maturity as a person becomes more mature with
age so do customers become more mature when they become
more exposed to different types of products. They understand how
to evaluate products and companies and are not easily misled by
the jargon of marketers.

6. Exercises

1. How does understanding the Product Management Cycle help in
undertaking effective product management?
2. During the product development phase which are the departments
involved and why does the product undergo changes in specifications and
functionality?
3. Please explain in what ways the product management group can provide
support to increase sales and profitability of a product?
4. How do you think feedback about the product can be taken from the
customer? Once this feedback is taken what process will we follow to
decide what feedback needs to be considered and what not?
5. Why is test marketing done and what are the benefits for the company?

7. Further Reading
Response Books Pg 25-36
Learning Pvt. Ltd Pg 35 - 37

25

3. Crawford, Merle and Benedetto, Anthony Di (2004) New Product
Management Singapore, McGraw Hill Page 25 – 32
USA: McGraw-Hill Pages 71-74,

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4. UNIT III – The Product Planning System
 To understand the importance of Product Development
 To understand how Planning is done for Product Development
 To understand the Process which is used to Develop a Product
 To understand who is Responsible for the Product Development

Structure

1. Product Planning
2. Customer Requirement Document
3. Need for Customer Requirement Document
4. Contents of Customer Requirement Document
5. Development of Customer Requirement Document
6. Strategic Advantage of a Good Customer Requirement Document
7. Use of Archived Products in Product Development
8. Summary
9. Your learning
10. Key Words
11. Exercises
12. Further Reading

1. Product Planning
All Product Planning is done to keep the company ahead of its competition
and to give it a competitive advantage. The Product Planning system must
dovetail into the business plan of the company. The success of the
company is determined by the success of its products. Effective product plans
are those which not only take care of market and customer needs but also
support company’s growth strategy. Now in order to create effective the
product plans the product management team and the top management must
work in close co-ordination with each other since
1. The product management team has the market information that he
top management will need to create effective business strategy.
2. The top management is in a position to give a clear understanding of the
company’s objectives and direction to assist the product

27

management team to develop the right products that will assist business
strategy.
3. Based on the understanding the top managements objective and
direction the product management team will also be in a position to
develop the appropriate execution strategy and milestones in its
execution.

The Product Management team‘s job is to keep a track of the market
requirements and map them against the managements objectives and
direction so that they can provide the right inputs on products to be
developed to the top management. The product management team collates the
information from:
1. Customers
a. By way of an unsolicited feedback from customers
b. Customer surveys
c. Customer needs as identified by sales or marketing teams of the
company.
2. Think tanks in companies are always evaluating the environment and
aligning these with the companies objectives and directions and creating
product ideas for the product management team to evaluate.
3. Trade fairs – the product management team also visits various trade fairs
as this not only tell them what the competition is planning but also gives
them a new insight into new technologies and developments
happening all over the world. This also assists them in creating business
ideas that will give their company a competitive edge.
4. Competitors activities – since one of the primary objects of product
development is to provide the company a competitive edge to the
company, understanding the competitors activities is very
important. Competitor‘s activities also are a source of product ideas.
These are found from some announcements that the competitor makes
in the press, from the sales channel since the distributors are amongst
the first to know if a competitor is planning something new, or from
some test marketing that the competitor undertakes, and many times
from raw material suppliers. Raw material suppliers visit similar
companies and come to know of new developments because they are the
one who need to supply material and components for new products.
5. R&D or technology development by the company – every company
that has kept ahead of competition has also undertaken some form of
research and development of new products. Technology that is developed
in-house is also a great source of product development.

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6. Patents and technology search allow the product management team to
know what technologies and processes are available for use. Sometimes
the purchase of a patent/ development of a technology allows the
company to develop products for which the competition may not be able
to have an immediate answer. For example when the Xerox Corporation
developed their copier technology there was no other company in the
world which had a similar process and Xerox had a virtual monopoly over
the product sales for many years. It is only later when Xerox became
over confident and stopped investing in the brand and the technology
that other companies like cannon, Toshiba came and overtook them.

The Product Management team continuously evaluates the inputs received by it
from various sources round the year. This information is used by it to develop
new products that have a strategic fit with the business objectives of the
company.

All these activities lead to the identification of the product and the
commencement of the developmental process. This process is a much more
complex process as compared with the initial steps taken in identifying and
freezing the customer requirement. These requirements form a part of a very
important document called the ‗Customer Requirement Document‘. This
document if created in the right manner can help a Product Manager get the
product to the market in the most economical manner and also help him
manage the product through its life giving the company maximum returns.

2. Customer Requirement Document
At the heart of the whole process of product planning is the development of
the product. Any delay in the development of the product has a cascading
impact on the company‘s sales and profitability. Hence it is important that
before anything else, the decision on what product has to be developed is
taken quickly; this decision pertains to the product‘s broad specifications
and marketing objectives. Once all these have been defined, the actual
development of the product must be undertaken in a manner that reduces
the time to market.

This phase of product development is the first operational phase where time
and money will begin to be committed by the company; the longer and more

29

complicated the process, the longer it is likely to take. The Product
Development Process is led by a Product Development Team. This team
consists of people from R&D, Manufacturing, Industrial Engineering,
Quality Control, Sales and Marketing. It is often seen that delays in
product development occur because of one or both factors listed below:

1. There is lack of clarity on what needs to be developed

2. There is poor co-ordination between the members of the Product
Development Team

Their first task is therefore is to create a single composite document
that will lay out what the customer wants and how the company is going to
benefit from it, what functionality needs to be inbuilt for the customer, etc.

3. Need for Customer Requirement Document
We have seen that the Project Management Process has five stages which
take the product from its inception to its final withdrawal from the market.
In all this, there is one document that virtually holds the entire process
together. This document lays down what each functional area (within the
organisation) has to undertake. It also documents the commitments made in
time and cost by each functional area. This is called the Customer
Requirement Document (CRD). The advantages of this document are listed
below:

 It allows you to completely think out the product and strategy in
advance
 It makes sure you do your groundwork before any activity
(commitment in terms of time and money) starts
 It gives everyone involved an idea of the various aspects of the
product the Product Manager is working on

4. Contents of Customer Requirement Document
Though we need to have a comprehensive document that must contain all the
necessary elements, it is also important that this document is brought out
quickly and must contain the commitments of all the stake holders in
the Product Development Team. The reasons for this urgency are:

 If we take too much time in getting out the CRD then it may become
outdated since the market is moving so fast and priorities are changing
very rapidly.
 Also all the stake holders in the product development process i.e. R&D,
Manufacturing, Industrial Engineering, Quality Control and Sales must
give their inputs and commitments to time taken and costs likely to
be incurred.

30

 Thus the development of the CRD must be an interactive process
between all the stake holders.

5. Development of Customer Requirement Document
The prime responsibility for the development of the CRD is with the
Product Manager who is functionally a part of the Marketing Department. The
CRD can be developed in two ways:

 The Product Manager can develop the complete document on his
own marking the activities to be done by various other departments
and put time frames in which he needs the product.
 The Product Manager can create a broad overview document and
then sit along with the other departments involved in its
development and create the detailed document.

In the first process, where the Product Manager makes the complete CRD
himself, the document may be more weighted from the Marketing and Sales
point of view, and when it reaches the other functional departments they may
or may not agree with the possibility of creating functionalities, time and cost
estimates specified by the Product Manager. This can thus lead to a lot of
rework and disagreements in the team leading to delays or the final
development of products that may not have features that the Marketing team
was depending on to promote the product. Also since the complete document
has to be made in detail it is likely that the Product Manager will take much
longer to get the document ready – thus leading to the possibility of
making a document that has lost touch with the market before it is ready.

The other way is for the Product Manager to make a CRD quickly is to make a
document that has separate sections with large amount of
functionality. Each of these documents is further broken down into small well
defined tasks. The smaller documents are created along with the people
from the department that is going to be involved in the development of that
function. The documents involved with each functional area are live
documents that may continuously be updated as the product development
takes place. This way the team is able to start the work quickly and at the
same time keep the changing market conditions in view. The process followed
here is:

1. The CRD lists out all the functions and features that the product
must have.
2. Each of these functions must be listed by priority i.e. the highest
priority first and then the next and so on.
3. Now the Product Manager starts from the highest priority feature and
breaks it down in to tasks that need to be done in order to accomplish it.
This listing of tasks is done along with the persons who have to
work on it. The advantage of this is that it brings in their commitment
and ownership and the document is not one where the Product
Manager has thrust on the other departments.
31

4. During the discussions the developer gives an indication of the time
and resources needed to complete the task.
5. Once this is complete the Product Manager signs off with the
developer and the signed off document is circulated within the team
while the developer commences his task. This allows the other team
members to understand how the development of the feature will impact
their functional areas and make the necessary preparation to be ready
when it comes to their functional area. For example, if the R&D team has
circulated a signed off document giving the type of development that is
going to be made available, the Production and Quality Control teams
can begin to understand how they will be impacted by the new
technology and prepare for it.
6. The Product Manager moves onto the person/ department who will take
on the development of the next most important task and so on this
process carries on till all the features are accounted for.
7. Another advantage of this process is that we can involve the customer
at any stage of the design to get him to meet the person developing the
feature. This is beneficial since it helps the developer get a clear
understanding of the customer‘s needs.

Many times, the market conditions force us to release products that are not
fully ready. This may be due to some activities of the competition or an
existing product of ours not doing too well in the market. This process allows
us to launch products with the key features and add more features as
they are developed.

6. Strategic Advantage of a Good Customer Requirement
Document

This process has the following advantages over the method of a Product
Manager making a complete CRD document and then sending it to the
concerned stake holders for development:

1. The Product Manager is much more closely involved with the
development team from the beginning and so has a clear idea of what
is possible and what is not.
2. Since the Product Manager has prioritised the development of the
features he can release the product even if all the features are not
ready and can strategically keep on adding more features as time goes
along.
3. Even when the product is launched with a few features it does not
create a major upheaval in the development team since they are
developing the feature in sequence of importance.
4. We can bring in customers to meet developers so that they can be sure
that features desired by the customers are developed in a manner
that is needed by the customer and not as convenient to the
developer.

32

5. This way the customers also feel more committed to purchasing
the product as they feel it has been developed for them.
6. The commitments on time, etc are given by the development team and
so they are more committed to meeting the deadlines.
7. The Product Manager is involved in managing several small functions
of manageable proportions. He is also in a position to decide the
strategic launch of the product rather than having to wait for the full
development of the product.
8. The progress of the whole project can be measured in a more accurate
manner.
9. During the development process the other departments involved in the
development, quality control, sales, and technology development can
work together and in anticipation of each completing the task.

However, like all processes, this also has its set of disadvantages:

1. This process requires a lot of co-ordination on part of the Product
Manager.
2. It becomes very critical that the agreements generated between the
Product Manager and the developers are circulated in time and
appropriately amongst the whole team.
3. In this method, unless the Product Manager and the developers agree
with each other, it is not possible to move ahead. Hence it takes a lot of
give and take.
4. There is no single comprehensive document to review but many small
ones.

7. Use of Archived Products in Product Development
Now we must realise that though it seems that product development is a
simple and straight forward process it is not always that we get products that
can be commercialised.

There are many reasons for not commercializing products. Some are

1. The products developed do not meet the customer’s requirement.
Many times a customer may want a product with certain properties
but it may not be technically feasible to get a product with desired
features. 3M was asked by one of its customers to develop an
adhesive with certain properties but the product developed did not
meet the customer‘s requirements.

2. Some products are developed as a by-product of another
development and so have no commercial value.

3. Some products are too expensive for current usage and cannot
find applications today for example the use of solar cars. These cars
are very expensive as compared to existing cars which are based on
33

cheap fossil fuel. The solar cars will find an application as fossil fuel
becomes more expensive and global warming makes use of these cars
more difficult.

4. Sometimes the cost of commercialisation is very high for example
the use of wind power was known for many years but the cost was too
high as compared to cheap fossil fuel. However today with the
increase in cost of fossil fuel, the possibility of its finishing in the next
50 years or so the use of wind power is becoming more prevalent.

Products that are developed but are not commercialised archived and also
form a pool of resource which comes in handy for the development of new
products.

In Figure 3.0 you can see that product conceptualisation is a combination of a
practical (consumer) need real or perceived and some natural
phenomenon which comes from creativity, ingenuity and out of the box
thinking. It is not always that a product developed has the necessary
requirements for commercialisation. So these products are archived. Now
it has been seen many times that from these archives some excellent products
have been developed.

Let us take the example of Post-it notes. A Post-it note is a piece of
stationery with a re-adherable strip of adhesive on the back, designed for
temporarily attaching notes to documents and to other surfaces: walls, desks,
computer displays, and so forth.

34

Post-it® Notes were not a planned product.

A man named Spencer Silver was working in the 3M research laboratories in
1970 trying to find a strong adhesive. Silver developed a new adhesive, but it
was even weaker than what 3M already manufactured. It stuck to objects, but
could easily be lifted off. It was super weak instead of being super strong. No
one knew what to do with the adhesive, but Silver didn't discard it. Then one
Sunday four years later, another 3M scientist named Arthur Fry who was a new
product researcher with a knack for inventing things was singing in the
church's choir. He used small strips of paper to mark his place in the hymn
book, but they kept falling out of the book.

He knew that Silver's adhesive did not bond permanently or leave a sticky
mess and he soon realised that if he applied a thin coating of the glue on a
strip of paper it would also be re-useable. He need not lose his place in his
hymn book again

It still took a long time and a lot of effort on the part of Art Fry and his
accomplices to persuade 3M that their product would work. There were many
difficulties to overcome, and at each stage of the way Fry would have to
convince the engineers and product developers to press on and find a way to
produce the blocks of notes

35

It was finally Introduced to the market in 1980, one year later Post-it Notes
were named 3M's Outstanding New Product, despite the fact that at first they
had to be given away free, to demonstrate their usefulness.

This was ten years after Silver developed the super weak adhesive. Today
they are one of the most popular office products available.

8. Summary
The actual process of product planning begins much before the creation of a
Customer Requirement Document. It begins with the definition of business
objectives by the top management and in order to fulfil these objectives the
product management team undertakes an elaborate exercise not only for
tracking customer requirements but also to scan competitors activities,
technologies evolving, etc to make sure that they have the products that will
give the organisation a competitive edge over its competitors. In this whole
process of planning and execution it is the creation of a Customer Requirement
Document that helps the product Managers to stay on course. This document
assists the Product Manager in developing the product by helping him create a
road map for the process. In addition it allows other functional departments
who are involved in the product development understand how they are
interlinked in the whole process of product development. The advantages of
this document are also that it allows the product manager to plan how features
will be released in the market to ensure that the product meets its revenue
and profit goals.

9. Your Learning
1. What is a Customer Requirement document? What is it used for?

2. How does having a Customer Requirement help?

3. Why must the requirements of the Customer Requirement Document be
an interactive process and contain commitments of all the stake holders?

4. What process do you think the process manager must follow to make the
CRD on his own or he must involve other departments which will be
involved in product development?

5. What are the contents of the Customer Requirement Document? Who is
responsible for getting it made?

6. What are the advantages of having a good Customer Requirement
Document?

36

7. Take a product that needs to be developed and write how you would go
about making a customer requirement document.

10. Key Words
1. Time to market – is the time taken to bring the product into the market
from the time of its inception. Companies always work minimising this
time. This helps them reduce development costs, pre-empt competition
from getting new products into the market before them.

2. Single Composite Document – Composite means made up of separate
parts or elements. So a single composite document means that there is one
single document that contains inputs from different departments but is
comprehensive about all the activities that need to be done.

3. Inception means from the beginning or the start.

4. Stake Holders are all those who will be responsible for or benefit from
an activity.

5. Prime Responsibility means the main responsibility. This is usually
with the person who is driving the project.

6. Live Documents – these are documents that are continuously being
modified along with the ground reality of the situation. This is different
from changing a document without justification. Usually a liv document
would be changed if say the market conditions changed dramatically or
technology was not available for manufacture or it became
uneconomical, etc.

7. Sign-off – signals that some activity is complete or that an
understanding has been arrived at.

8. Archived Products – Archives are places where things that have no use
or are old have been stored. So sometimes products that are developed
but do not find use are stored. These products are the archived products.

11. Exercises

1. What are the strategic advantages of creating a good Customer
Requirement Document?

2. In the CRD functionality is written in order of importance. Why is this
done? How does this benefit the company in the rollout of the product?

37

3. How does using Archived products in product development benefit the
product development process. Does this turn out to be more cost
effective or does it only impact time of development?

4. Once a product manager signs of with the product developer why is it
necessary to circulate this acceptance to all the other members of the
product development team? How does this benefit the company?

12. Further Reading

Response Books pg 29 – 38, 41 – 45,
Learning Pvt. Ltd Pg 21 – 30, 73 – 76
3. Lehmann, Donald R and Winer, Russel S, (1997) Product Management,
Singapore, Irwin/ McGraw-Hill 32 – 34
USA: McGraw-Hill p 90-96

38

6.

7. BLOCK 2: MANAGING PRODUCTS

8. Unit 4: Product Line Decisions

9.

10. Unit 5: Product Life Cycle

11.

12. Unit 6: Product Portfolio

13.

Unit 7: Product Pricing

39

14. Unit IV - Product Line Decisions

 To understand what is a ‗Product Line‘ and its relevance in Product
Management
 To understand what how product line can be managed.
 To understand difference between product mix and product line
 Concepts in product line management

Structure

1. Product Decisions
2. Product Mix
3. Product Line
4. Product Line Decisions
4.1. Withdrawing Products
4.2. Increasing Products
4.3. Product Contribution
5. Summary
6. Your learning
7. Key Words
8. Exercises
9. Further Reading

1. Product Decisions
Decisions regarding the product, price, promotion and distribution channels are
decisions on the elements of the "marketing mix". We can say that decisions
about the product are amongst the important ones since they affect the
market planning of the company. If the wrong products are introduced in the
market it can have catastrophic consequences for the company. For example
computers may be totally unsuitable for rural areas where electricity is not
available and where incomes are low; and the attempt to sell products to
customers without considering their cultural values and needs both can have
negative consequences on sales and achievement of business objectives.
However today‘s markets are a complex mix of aspirations and product
requirements and hence decisions are not so simple since the customer‘s
requirement lies somewhere between his aspirations and his need for a
product. Hence the marketer tends to introduce several products in his desire
to meet the aspirations and needs of his target market.

40

Product modification decisions are based on how much an organisation has to
stay close to a standardised product (just by extending it) or how much it has
to move towards innovation (by making something new). So between
extension and innovation there is a whole spectrum of possibilities for different
products. The closer a company‘s products stay to extension the lower the cost
and the closer it gets towards innovation the higher is the cost of introduction
or decisions.
Product modification decisions revolve around decisions regarding the physical
product (size, style, specification, etc.) and product line management.

2. Product Mix
The product mix of a company is defined as the total set of products offered by
it. The product mix consists of product lines and individual products. For
example, all the courses a college offers makes up its product mix; courses in
the marketing department make a product line; and the basic marketing
course is an individual product. Product decisions at these three levels (product
mix, product line and product) are generally of two types:
i. Decisions that involve width and depth of the product line and
ii. Decisions that involve changes in the product mix occur over time –
adding, removing products or enhancing the range (width).
The depth of the product mix refers to the number of product items offered
within each line; the width refers to the number of product lines a company
has. For example, Table 1 illustrates the hypothetical product mix of a college.

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Table 1: Wide Width and Average Depth
The product lines are defined in terms of departments. The depth of each line
is shown by the number of different product items — courses offered — within
each product line. The college has decided to offer a diverse marketing mix.
Because the college has a number of departments, it can appeal to a large
cross-section of potential students. This college has decided to offer a wide
product line (academic departments), but the depth of each department
(course offerings) is only average.
MathematicsPhysics
Geometric
ConceptsIntermediate Physics
Analytic GeometryAdvanced
Physics
Calculus IQuantum Mechanics
I
Calculus IIPhysics and
Astronomy
Calculus IIIThermodynamics
Numerical AnalysisCondensed
Matter Physics II
Differential
EquationsElectromagnetic
Theory
Matrix TheoryQuantum
Mechanics II

Table 2: Narrow width, large depth

Some other concepts in a product mix are family branding – If a line of
products is sold with the same brand name, this is referred to as family
branding. For example Nescafe has several products under its main brand
Nescafe – classic, gold, espresso, cappuccino, taster‘s choice, etc.

When we add a new product to a line, it is referred to as a line extension.
When we add a line extension that is of better quality than the other products
in the line, this is referred to as trading up or brand leveraging. When we
add a line extension that is of lower quality than the other products of the line,
this is referred to as trading down. When we trade down, there are chances
that it can lead to a reduction in the brand equity. We may get sales in the
short term but in the longer term it may harm the brand if we are not careful
on how we are going to use this lower quality/ price product.

46

Image anchors are highly promoted products within a line that define the
image of the whole line. Image anchors are usually from the higher end of the
line's range. So when the company promotes them their values rub off onto
products lower down in the range and customer‘s perception for these products
is enhanced. So when a car company promotes its model it shows the top most
model in the range with a rider that all accessories are not a part of standard
equipment. This helps to sell the lower end models of the same car.

When we add a new product within the current range of an incomplete line,
this is referred to as line filling.

Price lining is the use of a limited number of prices for all your product
offerings. Its underlying rationale is that these amounts are seen as suitable
price points for a whole range of products by prospective customers. It has the
advantage of ease of administering, but the disadvantage of inflexibility,
particularly in times of inflation or unstable prices.

Product-mix management and responsibilities

It is extremely important for any organization to have a well-managed product
mix. Product-mix decisions are concerned with the combination of product lines
offered by the company. Management of the company‘s product mix is the
responsibility of top management. Some basic product-mix decisions include:
i. Reviewing the mix of existing product lines;
ii. Adding new lines to and deleting existing lines from the product mix;
iii. Determining the relative emphasis on new versus existing product
lines in the mix;
iv. Determining the appropriate emphasis on internal development
versus external acquisition in the product mix;
v. Gauging the effects of adding or deleting a product line in relationship
to other lines in the product mix; and
vi. Forecasting the effects of future external change on the company's
product mix.

3. Product Line
Product Line is defined as a group of products that are closely related to each
other. They function in the same manner and are sold to the same customer
groups. These products are marketed from the same types of outlets and fall
within a specified price range. The product line has
i. Line depth refers to the number of product variants in a line.
ii. Line consistency refers to how closely related the products that
make up the line are.

47

iii. Line vulnerability refers to the percentage of sales or profits that
are derived from only a few products in the line. Ideally a company
would like to get an even amount of sales from each product but
many times one or two products do much better and so contribute a
much higher percentage of sales. The company must evaluate if the
other products not contributing much in terms of sales are
contributing in margins. If not they must question the rationale for
keeping such products in their product line.

4. Product Line Decisions
Since products are in some way fulfilling the customer‘s aspirations and needs
any change in any one or both of these will lead to changes in the product
specifications. This change is what leads to the introduction and withdrawal of
products from the market. Hence Product line decisions can be broadly
classified under three categories:

 Product Withdrawal/ Demise

 Increase in Products

 Item Contribution

4.1. Withdrawing Products
Product withdrawal is as much a planned activity as introduction of a new
product. Companies in-build the time of withdrawal of a product in their
business strategy and link it with the introduction of a new product. Though
companies would like the decision to withdraw a product to be a planned
one sometimes competitive pressures either force companies to withdraw
existing products or their sale decreases so much that there is no sense in
continuing with the product in the market.

The demise of the product can also be attributed to changes in the
environment – attitudes and needs of the customer – which have been
accelerated by market forces like competition, arrival of new technology,
etc.

Decisions on when to withdraw the product depend on several factors:

i. Business objectives Profit/ sales

ii. Strategic objectives – new prod ready, competitive product
launched

iii. New technology availability

48

iv. Need for variety by the customer or sales channel/ retailers.

Product withdrawal even in a planned manner has its own risks because an
existing product already has an acceptance in the market and is
established. It is giving the company some sales and profits. By this time it
is likely that the product development costs have been recovered and the
amount of money needed for supporting the product is not so much as the
customers are already aware of the product. In addition the company has
become adept in manufacturing and selling the product. Once it is
withdrawn the company will need to introduce another product in its place.
How this new product will fare in the market is not known thus there is a
risk in its introduction. For this new product the company will need to spend
large sums to promote it and generate enough sales to recover the costs of
development. The manpower and the sales channel will need to be retrained
in order to understand the product and its benefits thus involving cost. How
the customer will take to this new product is not known for certain until the
market performance actually shows it.

If the company plans to withdraw a product in a planned manned it must
evaluate the following:

i. Has the product met its business objectives in terms of sales and
profits?

ii. Can the product continue to do so in the face of competition and
changing market environment?

iii. Can the product support the marketing expenditure being done in
order to promote it.

iv. Does the presence of the product help in selling other products of the
company even if it is not making any money (Loss leader chapter 7)

v. Does the company have a product that can fill the space vacated by
this product?

vi. Can/ should the company reposition this product? Is it economical for
the company to do so?

vii. Is the business strategy dictating the withdrawal of the product?

49

Thus we can see that the withdrawal of the product is a complex a task as
introducing a new one and yet it is linked with the introduction of a new
product and the business strategy of the company.

4.2. Increasing Products
New product introduction is the logical extension of a product withdrawal. A
company with finite resources can support only a limited number of products in
the market. Thus as newer products are introduced older products must be
withdrawn to make place for them. New products can be introduced in a
product line in several ways:

i. Stretching the product line:

Stretching is a product lengthening beyond the current price range A
company‘s product line may cover a certain range of the products offered
within the industry as a whole. This may cover the range of price from
the low to medium to high price. An example will be the Honda Accord,
Honda Civic, Honda City and Honda Jazz starting from the highest price
to the lowest price. However in this range the ultra high and very low
segment are not covered. There are three ways to stretch the product
line:
 Stretching Down
 Stretching Upwards
 Two Way Stretching

Stretching Down: If the company adds a product, at a price point, below
the Honda Jazz model it will mean a downwards stretching of the product
line.

50

Many companies launch their products at the upper price spectrum of the
market and stretch their product lines downwards. They do this because:

a. They try to respond to attacks to in their current upper price
segment by launching a lower end product.
b. They try and fill an empty price point before competitors can do so.
c. To increase the number of products for expanding their market
share.
d. To counter the attack from lower priced copies being made by
other manufacturers.

The problems associated with a downwards stretch are:

a. The competition may counteract by entering the upper price
segment in which the company is.
b. The company‘s sales channel – sales force and dealers may not be
able to handle a low prices segment.
c. The low end price products may eat into the sales of products from
the upper segment thus lowering the sales of this segment.

Stretching Upwards: If the company adds a product above the Honda Accord
then it would mean stretching upwards the product line.

51

Again many companies find it more convenient to commence their business at
the middle of the price range segment as it gives a reasonable balance of
volumes and margins. Later they enter the upper price segments. The reasons
for entering this are:

a. They are attracted to the higher margins in the upper price
segments.
b. They want to create an image of classiness for their company by
this upper price product.
c. They want to complete the range of products offered by the
company so as to tap all segments in the market.

The limitations of this strategy are that:
a. The competition may respond by entering the middle price
category.
b. Company‘s existing customers may not believe that it is capable of
creating upper price end products.
c. The company‘s sales force and distribution channel may not be
trained to handle the new product.
d. Other companies may also be entering the upper price segment.

Two-Way Stretch: Sometimes companies that introduce products in the
middle price ranges decide to stretch their products simultaneously in the
lower and upper ranges. This is a two way stretch.

52

Some of the reasons for a two way stretch of the product line are:

a. To target different markets at the same time.
b. To keep competition away from the segments in which the
company is.
c. To test how each market is at the same time.

The limitations of this strategy are that:

a. Some of the company‘s existing customers prefer to buy
company‘s cheaper products. Hence there is a loss of sales to the
existing product.
b. Because now customers begin to look at new products of the
company they may compare them with competitor‘s products and
switch to new brands and thus be a loss of customers.
c. The sale of higher category products shifts to the lower priced
products.

Marriott Hotel’s case
The Marriott Hotel group performed a two-way stretch of its hotel product line.
Along with the regular Marriott Hotel it added the Marriott Marquise line to
serve the upper end of the market, the Courtyard, Residence Inn and Fairfield
to serve the low-end of market.

53

117091485 product-and-brand-management

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