The importance of Product Management
Every innovation is a new experiment
The role of product management is still by far not understood everywhere in the same way. However, Product management is crucial because it fulfils the task of reflecting the complexity of the market in the organization and developing the right answers to it. What needs do customers want to have satisfied, when and where should the product be available and of course at what price.
Product management does not follow fixed formulas, every application is a new experiment, because the starting point, “the market”, is different at every point in time. In the course of my professional career in the field of global product management, I have got to know very different market segments in different industries, including both hard- and software, and services. The spectrum ranges from rather inexpensive devices for craftsmen, such as laser tools for construction, which are sold in large numbers via very diversified sales channels, to expert devices for special segments such as surveying, geographic information systems and BIM, to sensors for specialists who work under Laboratory conditions are used in mechanical engineering and the electronics industry. The range of challenges is as diverse as the customer profiles, the respective sales requirements and of course the required knowledge of the respective markets, including the user profiles.
I´d like to share here some of my thoughts about the importance of product management and the wider definition of it.
Master of the Marketing Mix
There are many things to know if you are a product manager, most notably the marketing mix. Even if this is a very “old” concept, the so-called four P’s are and will remain the anatomy of a product idea. The four marketing instruments product, price, promotion and place are the starting point for planning the marketing mix. They go back to McCarthy [Jerome McCarthy: Basic Marketing: A managerial approach. 1960]. Over the years, further concepts have been developed around the four P, which I will not go into here, as they would go beyond the scope of this text. Nevertheless, the theory is simple, the implementation requires experience in dealing with it. I like to compare it to a game of chess, you learn the basic rules in few hours, but when you play you reach your limits just as quickly. Because knowing the game and mastering it are two completely different levels. When making a comparison, it should also be noted that there is an almost infinite number of possible moves on the market, whereas in chess the useful ones are limited, and in many cases, they have been documented and discussed for a long time.
In the following section I would like to touch on some aspects of the 4 P’s, which questions can arise before and during the development and implementation of a concept. They stand as an example for the vast variety of possibilities and challenges a product manager could face.
Define the Product | Know your customer
The first P, the definition of the product: the focus should be on the customer experience, which product features are decisive for a purchase decision? In the case of consumer products, the effort is sometimes disproportionately invested in the packaging and presentation, because communication is at least as important as the product itself; for some well-known products, it is actually the core of the product idea. If, on the other hand, it is technical products, especially hardware, it is important to understand the future application of the product so well that one has drawn up a specification that anticipates the use as precisely as possible. One should concentrate on presenting each product property as a customer benefit, because it can only be marketed through the benefit. A frequently quoted sentence about this is that
“whoever buys a drill is not interested in the drill, but in a hole”
The more complicated and time-consuming it is to develop a product, the more important it is to make the right decisions right at the beginning of development: which functional models are required, which technical risks must be made manageable as early as possible. If you miss that, you lose a lot of time and money if an aspect has remained undiscovered, because it means that you are set back in the process by at least weeks, if not months. It seems to be a little easier with software, since you can work without the procurement of material; Because of this, however, the temptation is great to first develop in the wrong direction. The earlier the architecture of the product can be defined, the more efficiently the implementation can be approached. There are numerous traps on the way to the finished product; it would be worth writing a long article to delve deeper into this. And even after the launch you are not finished, the expectations of product maintenance and further development are enormous these days, software in particular is never considered to be fully developed. If you stop the expansion, you will quickly disappear from the market.
Set the price | To know what it is worth for
Second, the price of the product: together with the product properties, it determines the product positioning, an abstract description of what it means to have a place in the market for your product that can be converted into sales. One of my favourite quotes comes from the marketing guru Philip Kotler:
“We don’t sell by price; we sell the price.”
That is exactly what the problem of the choice of product positioning is, every additional cent that is demanded of the customer must be arguable, it must have advantages for the customer, convincing them to accept the offer. It is the fine art of product management to master the positioning because this is the only way to develop coherent communication, a credible story that makes purchasing the product seem like a matter of course. This can include the positioning of one or more brands. Good product positioning is like a good move in a long game of chess. Prices are dynamic in the course of the sales process, skilfully raising and lowering them follows methods. Ideally, you develop unique selling points that allow you the greatest possible freedom in pricing. The prices are also not necessarily assessed objectively by customers, which in turn is significantly influenced by communication, as the following section explains in more detail.
Communication | Know your marketplace story line
Product positioning is supplemented and prepared by developing communication. Before positioning a product by defining its features and price, product management must have drawn a picture of the market. The key question is which segment of a market should be served, whereby the talent of the product management decides how well its image of the market reflects the actual conditions. And the picture is dynamic:
there is never something called “business as usual”
Think of the rapid disappearance of foldable cell phones, or the sudden success of smartphones, both of which had fundamentally redefined the supplier market within a very short time. Within the trilogy, which is made up of the segmentation of the market, the decision which segment should be served (targeting) and the positioning of a product in the found segment, the story emerges, which can turn ideas into sellable products or applications and / or services. The art of communication consists in finding the appropriate media ways and means to tell the story where it should be heard and in a way that it is understandable and memorable. It is a mistake to believe that technical products in the B2B environment are bought on a purely rational basis; there is almost always a large emotional component such as brand loyalty, and others, so that the storyline around innovation also plays a significant role here.
Sales Channel | Find the right place
In the fourth P, Place, you define how and where the product should be offered. For a new sales channel, people must be built or hired to take care of it. This can be more complicated and tedious than product development. A branch or an entire chain may have to be started. Some may dream that this has become easier in the online age, but in the turbo market of the Internet it is also important to secure your place. And by far not everything is sold online. In Germany, for example, according to a recent (July 2021) announcement from the “Börsenverein des Deutschen Buchhandles” (Commercial association of the German bookstores), in Germany
around three quarters of books are still sold in brick-and-mortar stores,
despite the pandemic situation. Obviously, the physical experience of the purchase paired with the presence of staff is still a crucial point for sales. Very technical products are often only sold to the customer through a personal approach from specialists, so that even the difficult questions that the customer has in his decision-making process can be answered. Customer relationship management is a key aspect of success. The product management must therefore strategically define the channel through which a product is most likely to find its buyers. There are no products that sell by themselves. Even if the offering company already has a functioning sales channel, it cannot automatically bring a new product from zero to one without expansion. Would the sales team have the time to add a new product to the portfolio if it already reached its limits with the existing program at full capacity? Is the incentive right? Can the staff call up the right reasoning for a new product if the customer asks critical questions? Do you get more shelf space in the wholesale markets? Product management must be able to assess the competence and the reach of the sales organization in order to take action in good time, taking into account both the acquisition of new customers and the maintenance of existing customers.
Product Management is an art
This excerpt, which, according to the scope of the task, only reproduces a small part of the huge spectrum of possibilities for using the marketing mix, shows how different the requirements for product management can be. Every single P would provide material for several blogs, and as I said at the beginning, there have long been concepts that go beyond the classic 4 P’s that one should be familiar with. That is why one cannot overestimate the role of product management, the decisions that are made there are so profound and far-reaching that an entire company performance can depend on it. Product management has business ownership,
a product manager acts like the CEO for his product and/or service
Successful implementation therefore requires a whole range of talents.
Who will be a good product manager?
What do you have to master as a person and/or as a team to be successful in such a key position? To anticipate the bottom line, the knowledge you have learned is less important than the ability to develop a vision and sell it. Of course, you need qualification, but you don’t need a degree of a business school to become a product manager, and you don’t have to have studied communication either. Primarily you have to be able to recognize a problem as such and offer a solution to it. And that has to be achieved on different levels, these are at least: the (future) customers, the team that takes care of product launch and maintenance together with you, your partners and the financier.
The customer level
A product solves a customer’s problem. To quote the example from above, whoever wants to manufacture and sell drills, basically has to understand something about holes: who needs them and why, where do they need them, and what is somebody willing to spend on them. The better you know the problems of future customers, including their budgets, their optimal approach and price expectations, the sooner you will be able to position and market a product in such a way that it will find buyers.
Colleagues, employees and partners
To start a project, you need a committed and capable team to work on its implementation. Here, your knowledge of human nature is more important than pure specialist knowledge. Make sure you have the right people in the project right from the start. Experience is important here; if you don’t have it yourself, you have to buy it, which has to be taken into account in the budget. During the implementation, if you are not yourself an expert in a field, then do not argue with your expert how to solve something, rather convey the vision of the solution that is to be achieved, then the expert will find a way. The matching quote comes from Steve Jobs
“It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.”
In this environment, product management has a role similar to that of a team coach for a sports team, knowing the team’s strengths and weaknesses at all times and acting accordingly and never losing sight of the goal. As far as the technical side of product management is concerned, the person who puts the team together must also take into account that not everyone who fills a position in product management is equally suitable for every task. There are, for example, the more technical product managers who, as a perfect complement to a team of developers, can make the decisions to improve details in the design of product solutions. And on the other hand, there are the pioneers who prefer to deal with the market and are already thinking about the next product and the one after that, while the current variant is still being worked on in the lab.
Convince the donor/financier
The financing of the project must be secured at an early stage over its term, this includes product development, production, marketing, and other things. Regardless of whether you do this as an employee with company funds, or as a self-employed or start-up entrepreneur partially with your own funds, in almost all cases someone has to sign a check or loan who only asks one question,
“What do I (or my company) earn by financing your project?”
Since we are all not prophets, we can at best believe in a project’s success, we cannot “prove” it in advance. Of course, belief must not replace a lack of preparation, otherwise it loses its justification. The known facts such as the market environment and customer knowledge must have been thoroughly examined and documented in a business plan, but there will still be residual uncertainty. Any extrapolation into the future can and will therefore be questioned beforehand. In fact, it would be rather suspicious if there were no doubter, that could indicate a blind spot in the organization, but that is another topic. The decision for the project is positive as soon as the decision-makers’ justified belief outweighs justified doubts. Achieving this is an art, and now it even fills television formats, and rightly so! Product management is at the core of entrepreneurship and requires precisely this quality of credibly depicting why an idea will work. Whoever succeeds in doing this will also find funding.
Credibility
Credibility is the main capital that is contributed by the entrepreneur / product manager, and one of the most valuable qualities to achieve goals, since only with credibility you can keep those in and on the project who are supposed to make a decisive contribution to it. There are a thousand and one ways of losing credibility, but building it up is much more difficult: First and foremost, one can convey credibility by believing in the idea, the project, etc., in such a way that the other person feels it. Show your energy! Of course, the project has to be able to withstand stressful questions, so never despise someone who asks critical questions, but give them a disarming answer. The ambition on which the idea is based contributes in particular. Entrepreneurs who build something from scratch or committed product managers with an entrepreneurial mindset are able to re-occupy market areas, to change the rules of the market in their favour, in short, this is how ideas turn into products that, in retrospect, can be considered ground-breaking, or as we like to say today, “disruptive”.
Be ambitious: Try to answer the million-dollar question
The central question that remains to be answered is how to come up with ideas that turn into successful innovations. First of all, there is a technical answer: You can use standard marketing methods such as diversification to generate new product ideas. Product portfolios are adapted, new customer groups are addressed through modified product variants or the products are better regionalized, competitors, supply chains and / or sales channels are integrated. These are logical steps, and there are numerous documented examples so that you can learn from them throughout your life. It’s in the details, because, as already said, there is no such thing as business-as-usual because the market is constantly changing. The deeper truth behind the brilliant idea is and remains intuition. A sure instinct is essential, as is the diligent work of preparation. However, you can use the methods to the full or overstrain them: analyse mass data from customers, use AI, interview thousands of people and finance 100 man-years of investigation, in the end the one who has the greater ambition and the better nose will be more successful.
It is the generic intellectual property of the product manager to know how to get the company offering developing in the right direction. It´s a challenge, take it on!
