Product Management Lecture Notes PDF

**PRODUCT MANAGEMENT LECTURE/NOTES** **BASIC CONCEPTS AND TOOLS OF PRODUCT DEVELOPMENT/MGT. IS DIVIDED INTO FOUR PARTS** A. Introduction to product development B. Conducting product development C. Organizing for product development D. Managing product development **WHY IS PRODUCT DEVELOPME...

**PRODUCT MANAGEMENT LECTURE/NOTES** **BASIC CONCEPTS AND TOOLS OF PRODUCT DEVELOPMENT/MGT. IS DIVIDED INTO FOUR PARTS** A. Introduction to product development B. Conducting product development C. Organizing for product development D. Managing product development **WHY IS PRODUCT DEVELOPMENT/MGT ESSENTIAL?** The product is the center of the marketing and production system of an enterprise. Without the product, there is nothing to sell. Without the product, there is no business. The business exist because there is a product to produce and sell. Products do not last forever in the market. They have life cycle; they are born, they mature and they decline. Think about many products that were popular once and are not seen in the market now. **M -** issing (kulang) **A** -- nnoying (nakakabwisit) **D --** isappointing (nakakadismaya) **I --** rritating (nakakainis) **Product Development/Management** -- is about creating new products and adapting existing ones to keep the business going. **Product Development/Management** -- is a set of techniques and principles that will help you avoid market failures (products that sold very little or did not sell at all) by helping you design products to match market needs and wants of the buyers. These techniques will help you identify a product with right materials, the right specifications, right features and aesthetic quality for your target market. By selecting the right product for the right market you will save the effort and money that you spend for producing and marketing the wrong products. The right product also means more sales and income for your company. **Product development techniques are designed to help you think about:** - What your customers need and want. You will need to understand what features and characteristics the buyers or users expect from the product - What your competitors are doing. You need to study your competitors' products and find out what makes them successful (or unsuccessful) - Your own mistakes. You need to analyze your past product failures by examining which one(s) of the customers needs and wants were not met - The characteristics of products that the customers need and want and the ones you are the most capable and competent to produce. **Information from product development:** - Your customers - Your competitors - You **Proactive thinking** means thinking about buyer needs and wants and a careful analysis of products. **Product development and strategy design** are closely linked activities. **Strategy design** process is often defined in terms of the study conducted to find a match between what you produce and what the market needs. If you are successful in the match in such a way that you do it better than your competitors, then you will have an advantage. If not, then you jay incur losses and sometimes even be forced to close your shop. Thus, product development is also about finding the right strategy that will satisfy the selected market needs and demand. **Product development and the business functions** The business has two functions: **marketing and production**. The ***objective of marketing*** is find customers who will buy from you. Customers will buy if they are satisfied with your product or that they are happier with your product when they compare it with the offers of your competitors. By implementing proper product development processes, you will be able to focus on your intended market and would achieve your marketing objectives. On the other hand, the ***objective of the production*** function is to provide what the customers want in terms of quantity, quality, time and cost or some combination of these. Product development processes will be helpful to the achievement of these objectives because it studies and designs the process of manufacturing the required product. Product development is expensive but it should not be viewed as a cost without returns. Good market research is essential for product development. Product development is the overall process of strategy, organization, concept generation, product and marketing plan creation and evaluation and commercialization of a new product. **Factors Why Products Do Not Get Enough Sales And Do Not Stay In The Market For A Longer Time** - Negative market research findings are not considered - The idea is good but the market is overestimated - The product is not well-designed - The product is not well positioned in the market or not well advertised - Development costs are very high - Competitors introduce a similar product first, introduce a better product or fight back with other means - New to the world products. Entirely new products that create a new market - New product lines: new products that can allow the company to enter an established market for the first time - Additions to existing product lines: new products that supplements company's current product lines - Improvements to existing products. Existing products that are improved or have increased value - Repositioning: existing products that are targeted to new markets - Cost reductions: new products that provide similar performance at a lower cost **PRODUCT DEVELOPMENT PROCESS** The product development process involves sets of activities that follow a particular logic. Each of these activities, in turn generate actions that are more detailed. The product development process is cyclical. It needs to be conducted in a systematic and focused manner while minimizing the cost of product development. Assumption, short cuts or incomplete analysis must be avoided for a successful product development process. Preparation for the implementation of the process is important. In preparing for the implementation you would need to study your chosen market first. Some questions you need to answer are: - In which market are you? - What do you know about this market? - How many individual and company buyers are there in this market? Where are they located? - How many companies and products are there in this market? - What are the needs, buying habits and expectations of these buyers? These and a lot more other questions are necessary to establish if there is a need or demand in the market that you can satisfy. To understand the market, market research is needed. Market research allows you to know more about your market and competitors. Proper market research involves a detailed search of the market potential and a discovery of the strengths of your competitors. Other venues are also available. - Attending trade fairs - Researching the Internet - Researching specialized publications and magazines - Receiving help from institutions such as Chambers of Commerce **Identify an opportunity or demand for a new market** Identifying a possible opportunity in the market in the form of an "untapped segment" is not a simple task. There is no assurance that the best idea that comes to mind will be a success. Therefore, one begins with generating as many ideas as possible so that the chance of finding a good one is high. **IDEA GENERATION** There are several reasons why new products are identified customer requirement satisfaction, high cash flow, increased market share, better company image, among others. By stating the objective of the product development process, the importance of the process is implied and the amount of resources can be allocated to the process. **External or Internal**? Product ideas for small or medium companies may be generated internally or externally. Ideas can come from creative and innovative owner/managers, in house designers and engineers and other employees. Some workers can have ideas that turn out to be good products. Ideas from outside the company, on the other hand, can be obtained from free-lance designers or scientists, competitors and customers. Trade publications, trade fairs and exhibits and websites also offer an abundance of ideas that could lead to other good product ideas. **Some Basic Market Research Techniques** 1. Customer Surveys: A series of questions may be asked from a random set of people who represent your target market segment. Some typical questions include: - Degree of satisfaction with product performance - Degree of satisfaction with product feature variations and options - Degree of satisfaction with price - Degree of satisfaction with delivery time - Degree of satisfaction with after sales service 2. Complaints and suggestion letters: Letters from customers can also be the source of new ideas as they describe the problems they encountered 3. Focused Group Discussion (FGD): a group of randomly selected representative customers are gathered to discuss desirable and/or undesirable features of a product. Questions are asked to the group, and they elaborate, explain and argue their opinions about the product and its features 4. Brainstorming. A group of six to ten people are asked to generate solutions or ideas with each participant giving an idea one after the other and is repeated over and over again. Ideas start flowing as one ideas leads to another. 5. Attribute Listing. The major attributes or features of an existing product are listed and modifications for each feature are suggested for an improved product. Typical questions include: - Are there other uses? - Can it be simplified? - Can it be rearranged? - Can parts be substituted? - Can it be combined? - Can it be adapted? **IDEA SCREENING** The purpose of this step is to reduce the number of ideas that will be converted into real products. The goal is to find good ideas that are expected to bring profits and achieve the stated goals. Thus, screening is intended to drop poor ideas as early as possible. One simple way of screening out poor products is through a product idea rating system. The basic procedure is as follows: **PRODUCT IDEA RATING SYSTEM** 1. Identify the product success criteria 2. Assign a relative weight from 0 to 100 to each criterion. The higher the weight the more importance is attached to the criterion 3. Evaluate each alternative idea according to each criterion and provide a score 4. Sum up all criteria rating to get the product rating 5. As a minimum acceptable product rating is set all ideas below this acceptable rating are dropped. Drop those that do not seem to provide features and benefits that the customer needs or wants. **CONCEPT DEVELOPMENT AND TESTING** This step further reduces the number of ideas. In this step, the product ideas suggested in the previous steps are translated into the product concept. For example, a basket weaver is considering making a three-foot high basket made of local grass. This idea can be made more specific by specifying its function -- as a laundry basket, an umbrella holder or a planter. Product concept gives the physical and extended characteristics given the product idea. Your product should have characteristics that are different from existing products. You need to identify a unique selling point/proposition (USP). If you cannot find your USP in this product, stop nd find another product idea. Concept testing involves presenting the product concept to randomly selected customers within you target market segment. The product concept may be symbolic -- such as a description or physical such as a drawing. Some questions that may be asked: - Are the benefits clearly identified? - Is the product solving a problem or satisfying a need? - Do other products currently meet this need and satisfy you now? - Is the price reasonable in relation to its value? - Would you buy the product? - Would you use this product? **MARKET STRATEGY DEVELOPMENT** After concept testing, a preliminary marketing plan to introduce the product needs to be prepared. This initial plan will be refined later. It first involves describing the target market segment and the planned product positioning. The product positioning shows where your product is in relation toother similar and competing products. It indicates similarities and differences of your product and other products. In this first part, sales, market share and profit goals for the first few years are set. The second part of the market strategy, other extended features of the product such as promotion and distribution strategy and marketing budget are determined. The final part describes long-term sales and profit goals. **BUSINESS ANALYSIS** The objective of the business analysis is to establish the attractiveness and soundness of each product concept from a financial perspective. This sub step involves preparing sales, cost and profit projections. Estimating future sales is usually based on the product life cycle of a product. The product is introduced and has relatively low sales (birth), sales picks up (growth), peaks (maturity) and goes down (decline and later death). Different products will have different slopes and lengths of lives but all of them follow an S-curve. Some of the possible measures of soundness of the investments are: - Maximum investment exposure - Payback period - Break-even figures **CREATE THE TECHNICAL SPECIFICATIONS** If the product concept has been proven to be financially viable and desirable, the next major step in the product development process is the turning of the concept into a real product. This step involves a cycle of technical work and market evaluation until the final product is created. **PRODUCT DEVELOPMENT** In bigger companies, the product concept is sent to the company's research and development (R&D) and/or engineering group to be developed in a physical product. In SMEs, the product concept is sent to a group of workers that are pulled out of the production line to work on product concepts to develop prototypes. The attributes and features included in the product concept are now integrated into a usable prototype or sample. This involves the following steps: 1. Technical capabilities of the product are developed and refined 2. Design the product and integrate all its features and functions 3. Test the feasibility of the technical concepts 4. Prototypes or samples of the product are made 5. Prototypes are tested and modifications are made 6. Design is documented and finalized **MARKET TESTING** When management is satisfied with the tests, the product is ready for branding, packaging and a preliminary marketing program to test it in a more realistic consumer setting. The objective of this step is to see how buyers and dealers react to the product in terms of handling, usage and purchase of the product. The consumer goods market testing can involve one of the following: - Sales-wave research. Consumers are offered to try the new product at no cost. They are offered the product. The number of customers who select the product again and their satisfaction levels are noted. - Simulated market testing. Qualified shoppers are asked about brand familiarity of similar products including the new product. Later they are given some money (or an opportunity) to shop for these products and the number of buyers of the new product is compared with those who bought competitors' products - Controlled test marketing. A number of stores in selected locations are asked to display the new product following shelf-position specifications, point of purchase promotions and pricing. Sales are tracked at check-out counters. - Test markets. A sales force will advertise and promote the new product in selected locations. Actual sales are tracked down in these locations. Another way of testing the acceptability of the new product in the market is through participation and display in trade fairs or shows. The numbers of people who show interest with the product, their reactions and comments about the product features and functions and purchase intentions are noted. **PRODUCT IMPROVEMENT** The results of the market tests provide input to the final evaluation of the new product. The observer or reported weaknesses of the product can be used for revisions of the product specifications. These changes will help you reach the final specifications -- the generic characteristics, the physical characteristics and extended characteristics of the new product. However, it will be necessary to test these changes until the physical and functional performances are satisfied. **SELLING THE PRODUCT** After the finalization of the specifications, the product is promoted and is offered for sale. It may be offered to current customers who could be interested with this new product as part of their loyalty to the company's brand or the product can be offered to new prospects as part of a promotional campaign. **DEVELOP THE MANUFACTURING PROCESS** In many cases, the product development process ends up with the production of the prototype or sample. Setting up the detailed manufacturing process is usually neglected and taken for granted. Process design is an important as the product design. What is not realized is that the process through which the prototype was manufactured may not be exactly the same when the product is manufactured in large numbers. The production equipment and tools, the skills of production workers may not be suitable. The value of developing the manufacturing process lies in its benefits. The manufacturing process design determines the: - Quality of the product - Uniformity and consistency of the products - Manufacturing process time - Production cost These cannot be left to chance. The process needs to be deliberately designed to allow for efficiency and effectiveness of the entire process. **IDENTIFY THE PARTS OF THE PROCESS** In the garments industry, this step is known as the operations breakdown. The steps in assembling or fabricating the new product are listed, with each step being as simple as possible so that it can assigned even to an unskilled worker. Each step is t be as simple as possible so that it can learned in as little time as possible. If each step is simple and assigned to a worker, it can involve automated motions and efficiency can be achieved in a shorter period of time. **IDENTIFY TECHNOLOGY REQUIREMENTS** By studying the detail of each step of manufacturing, technological needs are also be identified to allow for more reliable manufacturing processes. Opportunities to mechanize or automate can be identified as the steps are assessed for further improvement in efficiency and consistency. **TRAIN THE WORKERS** To obtain uniform and consistent output and manufacturing time, all workers should follow a standard process for doing each task. Otherwise, each worker will follow different ways of doing the tasks. This leads to less coordination between the steps, not to mention, possible non-standard output. **MANUFACTURE THE NEW PRODUCT** The last step in the development process is to implement the designed production process for the new product. During the first production run, technical problems may occur as a result of unfamiliarity of manufacturing workers and managers. Regardless of how much planning is done, there are issues in manufacturing a new product that will continue to occupy production managers daily. They include among others: - Forecasting (how many will be sold, how much to produce, raw materials, etc) - Inventory control and management (when to buy, how much to buy, how much finished goods to keep, etc.) - Production planning and control (allocating machine and labor time, materials movement, etc.) - Scheduling (sequencing and routing of operations, moving semi-finished parts, etc.) - Maintenance management (maintenance of machines, tools, etc.) **FUNCTIONS OF THE PRODUCT DEVELOPMENT GROUP** - Gathering and tracking customer needs and preferences - Gathering information on performance and satisfaction with current products - Coordinating customer requests and requirements - Identifying possible new products or product adaptations - Developing and testing product concepts - Managing new materials testing - Coordinating and supervising prototyping - Coordinating process design **GROUP STRUCTURE** The product development group, which may also be known as R&D, will have a head and assisted or supported by at least one other person. This other person shall be a designer or engineer or someone with enough experience in manufacturing. He will be in charge of: - Translating the product ideas in product concept - Supervising the prototyping of designs and products - See to it that the designed processes for the production lines will uniformly produce the accepted and approved design or product - Updating himself with current trends and needs of the market through readings, Internet research or even customer contact **BUDGET** A major decision in product development is the amount of budget that will be allocated. The budget varies from company, but this is usually measured in terms of the number of employees dedicated to developing and designing products and the time spent. **CONSTANTLY REVIEW THE PROCESS** Finally, the new product is mass produced. Even as the product and process specifications have been established, sooner or later, some problems will arise with respect to any of the inputs of production. However, once the new product is in the production line, it will be considered as any of the current and old products. It will have to face the same problems as other products in the line. The possible improvements to address the possible issues are those any typical production management principles like Just-In-Time (JIT), Material Requirement Planning (MRP), Total Quality Management, Benchmarking and others.