Monday, October 15, 2012

Product Management - How to increase Product Value

Product management is not just about looking at new requirements and new development. The major role of product managers is to increase the value to the product - i.e., increase profitability of the product, thus increase shareholder returns.

From a product management perspective, there are several levers one can exercise to improve the value of a product.

1. Change Product's Price 

Increasing or lowering a product price will change the customer's perceived value of a product. Often times, we see prices being lowered to encourage sales volume increases.  But there are cases when the price is increased to reposition the product into a different market segment. For example Hyundai increased the pricing of Sonata car  to India reposition the car as a premium product.

A common way to change product pricing is to introduce a new SKU at a different price point and withdraw a similar SKU. For example, in consumer products such as Soaps, companies introduce a different package - say pack of 3 instead of 4, and lower the price per pack - which effectively increases the actual product price.

2. Improve Current Product

Adding new features or functionality that customers will truly value enhances the product value - which can translate to higher sales or higher margins. Many times, even improving product design for esthetics and/or for usability will give the biggest bang for the buck.

3. Introduce New Products or Product Variants

With time all products become old and stale. To keep up the product's relevance to market, new products has to be introduced. These new products can either be:

a. New product or product variants that fill gaps in the current price/performance space.
b. New products or product variants that address the needs of  new market segments;
c. Existing products with new designs and/or with updated features;
d. Radical innovative products that leapfrog existing products;
e. New SKU's that create new market segments or create new value segments;

4. New markets for current products

Finding new markets for current products is also a popular way to enhance the product value. Initially, the product is often sold only in the home markets, later new opportunities can be found by exporting, or setting up marketing/sales/manufacturing in other countries.

5. Improve Customer Service & all aspects of customer interactions

The value perceived by customers can be drastically enhanced by improving customer service. For example, setting up a toll free number to address all after sales issues, or providing after sales training, or support in product installation, or on-site service etc. Improvements in on time delivery, streamlined ordering, billing, & other transactions will enhance the product value with customer and thus strengthen customer relationships.

6. Supply Chain optimization 

Once the product is released and has customer acceptance, it is time to optimize the cost of operations. This is done by supply chain optimization - by finding out new ways to reduce manufacturing/distribution/sales costs - without impacting the quality of the final product or the customer service/interactions.  Optimizing the operation costs directly adds to the bottom line and hence to the value of the product.

7. Marketing & sales initiatives

Marketing & Sales initiatives can create new markets for the product. New advertisement campaigns can increase sales, New sales channels can increase market penetration and address new markets. Marketing messaging and product positioning has be constantly monitored and tailored to create positive image for the product, reinforce the competitive advantages, and influence/change the way customer's purchase decision.

Closing Thoughts

Product managers can use any of these levers in any combination to increase the product value. How these levers can be used and what parameters to choose is often guided by the overall product strategy.

As there are no easy way to choose these levers, it takes a whole lot of experience, customer interactions and deep business knowledge to be successful product managers.

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