The product manager's handbook

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Product

Manager’s

Handbook

The Complete Product

Management Resource

second edition

THE

Linda Gorchels

NTC/Contemporary Publishing Group

NTC Business Books

Copyright © 2000 by Linda Gorchels. All rights reserved. Manufactured in the United States of

America. Except as permitted under the United States Copyright Act of 1976, no part of this publication

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0-07-138989-X

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DOI: 10.1036/007138989X

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Preface v

Acknowledgments ix

Part I The Role and Operation of Product

Management 1

1 The New Product Management 5

2 Introducing Product Management and Managing

Product Managers 17

3The Cross-Functional Role of Product Managers 29

4 Product manager.com 51

Part II Planning Skills for Product Managers 65

5 The Product Marketing Planning Process 69

6 Customer Value Management 89

7 The Annual Product Plan 103

Part III Product Skills 129

8 Evaluating the Product Portfolio 133

9 Strategic Product Planning 145

10 New Products: Proposal, Development, and Launch 155

11 The Financial Side of Product Management 191

Part IV Functional Skills 199

12 Pricing Products and Services 203

13The Product Manager as Marketing Manager 221

14 Product Management: The Final Frontier? 239

Appendix: Sample Job Descriptions 253

Endnotes 269

Glossary 275

Index 281

Contents

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v

Back to the Future

The changes I have observed in business have been dramatic since the

first edition of my book was published. The Internet was a fledgling

concept at that time and now it has become a fairly standard part of

business. Although globalization was a growing phenomenon prior to

my first edition, it has also escalated in importance.

On the other hand, there have been some constants. Through all

the turbulence, there remains a need for entrepreneurial spirit, for an

ability to work with and through other people, and for a clear and

focused direction. These are the characteristics of a product manager

acting as the general manager of a “virtual company.”

Product management has long been viewed as one of the more

effective organizational forms for multiproduct firms. The advantages

are numerous and frequently documented. First, it provides a dedicated

champion for a product, brand, or service. Second, a healthy internal

competitive environment can be created. Third, by championing a

number of offerings, a firm can more quickly respond to shifting cus￾tomer loyalties. And, finally, an opportunity is provided to readily

assess candidates for promotion to higher management levels.

Preface

Nevertheless, the effectiveness of product management is contin￾gent upon several factors. If we expect product managers to truly

champion brands, they must be engaged in both day-to-day decision

issues and in developing the strategic future paths of their offerings.

Although some companies have created a hierarchical product man￾agement structure to do this, effective product management in the

future will result from a horizontal decision-making process. Product

managers will play a major role in most product-related decisions,

while relying on specialists to carry out many of those decisions. The

emphasis will be on matching customer needs with corporate capabil￾ities through the development of specific products and services.

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

Frequently Asked Questions (FAQs)

What is a product manager?

A product manager is typically a middle manager charged with man￾aging and marketing existing products (and developing new products)

for a given product line, brand, or service. Other job titles could include

brand manager, industry manager, or customer segment manager.

(Note that the term product will refer to both products and services.)

What types of companies use product managers?

Product managers are used in all types of companies from consumer

packaged goods to services (such as financial institutions) to industrial

companies (such as original equipment manufacturers (OEMs), com￾ponent suppliers, and after-market firms) to nonprofit organizations

(such as hospitals).

What’s the difference between product management and

product development?

Product management is the holistic job of product managers, includ￾ing planning, forecasting, and marketing products or services. Product

development is a corporate process of designing and commercializing

new products. This book focuses on product management.

vi • The Product Manager’s Handbook

Who should read this book?

This book is targeted most directly at existing product managers and

customer segment managers (primarily in “nontraditional” roles beyond

consumer packaged goods). However, it has been used effectively by

people in all types of companies and industries. Many new product

managers and directors or vice presidents of product management or

marketing have found it valuable as well.

What will I learn by reading this book?

You’ll learn about different approaches to product management from

different types of organizations, as well as ideas for getting work done

through other functional areas. You’ll learn how to develop annual

marketing plans for your products and services, with a special empha￾sis on enhancing customer loyalty and profitability. You’ll learn how to

strategically evaluate your product portfolio, walk through a typical

corporate development process, and prepare for effective launch strate￾gies. And finally, you’ll learn various ways to add perceived value both

to your product and to your effectiveness as a product manger.

How will I learn these skills?

Several techniques have been used to help you in the learning process:

(1) real-world cases showing product management in action, (2) hands￾on worksheets for the planning process, and (3) checklists at the end

of each chapter for evaluating progress at every critical stage. In addi￾tion, this edition has new chapters on the impact of technology on

product managers (Chapter 4), customer value management (Chapter

6), and the financial side of product management (Chapter 11).

What feedback did you receive on the first edition?

A review published in the July 1997 issue of the Journal of Product

Innovation Management stated

This book is a handy broad-based reference guide describing all

aspects of the product management function and relating them to the

contemporary and turbulent business climate. . . . It provides a real￾istic overview of the many roles product managers play and it exam￾ines, in an organized fashion, a variety of management tools which

may be employed to maximize the value of the product manager.

Preface • vii

viii • The Product Manager’s Handbook

The book is valuable because it provides theoretic frameworks [for]

identifying, analyzing, and managing product lines while supporting

those approaches with relevant and recognizable case studies to

clearly illustrate the points being made.1

A customer review from Amazon.com stated:

Product Management is one of those jobs that is different for each

product manager; what it is depends on your product and what you

make of it. The danger is that when you write about product man￾agement, you focus on your specific experience. I found this book to

be general enough to be of interest to many; still it was not so high￾level that it did not provide any help. I would recommend this book

to everyone who thinks about product management as a next career.

I would also recommend it to those who have been in product man￾agement for several years, and just want to read what others think

about it.

In addition, since the book has been used as part of an executive

education program sponsored by the School of Business at the Univer￾sity of Wisconsin−Madison, it has been reviewed by hundreds of prod￾uct managers and has received high marks for practicality and usefulness.

Is the book available internationally?

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

ix

My interest in product management began several years ago when I real￾ized that the term meant significantly different things to different com￾panies. Several people contributed to this growing awareness, including

participants at my product management workshops, sponsored by the

Executive Education department of the School of Business at the Uni￾versity of Wisconsin−Madison. I found numerous examples of nontra￾ditional approaches to the subject, and widely varying success factors.

This book highlights some of those findings. In addition, several prod￾uct managers responded to E-mail inquiries about their positions and

supplied example job descriptions. I want to thank all those individuals

for their willingness to provide input for the revision of the book.

Acknowledgments

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Part I

The Role

and Operation

of Product

Management

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3

The ability to attract and retain high-profit customers is a dis￾tinguishing characteristic of successful businesses, and many

companies struggle with how to attain that goal. To succeed,

firms employ many different strategies, including competency man￾agement; customer retention programs; strategic leveraging; global

marketing; project management; big, hairy, audacious goals (BHAGs);

E-commerce; and supply chain management. Yet all of the tools and

techniques espoused by management gurus have not replaced the

importance of a solid organizational structure to guide an organization

in accomplishing corporate goals. One such organizational structure

that has withstood the test of time in many situations is the product

management structure. In this type of structure, product managers

oversee a set of defined products or services that face different com￾petitors and different customer constraints than many or all of the

other products and services in the company. Determining if product

management is the optimal structure for a particular company involves

a number of considerations, including the company’s culture; how

much technical knowledge is required to design, launch, and support

specific products; and whether the company’s products require dis￾tinctly different approaches to “going to market.”

Once a structure is established, clarifying the roles of company

personnel with whom product managers routinely interact is impor￾tant. The product manager is a generalist who must rely on numerous

functional specialists to develop and market the product line. The prod-