I think that you would agree that there is a perception that Canadian businesses are often weaker than their American counterparts in Marketing. This may be generally true but I am sure there are important exceptions in Consumer products and other areas. My experience in hi-tech says yes we may be weaker than some and stronger than other countries but more than anything else the weakness lies in the Product Management area; again a few examples exist of excellence in Product Management even in hi-tech.
When trying to hire Product Managers I find it hard to find even a few that can actually recite something close to the job description. The key job of a product manager is to take his or her product/service and develop/exploit it in every way possible to gain the greatest return for the company (channel and product overlaps not withstanding). This includes all of the classic activities such as Pricing, Positioning, Promotion, etc. but boils down to absolute, passionate ownership of the P&L for the product through its entire life cycle. In response companies must value this position and give the Product Managers the backing he/she needs to make it happen (like being alert to R&D hijacking the product direction).
Poor Product Management is often an invisible but massively costly item for companies and can easily mean the difference between competitive success and great profitability or terrible losses. Here are a couple of the classic mistakes I have seen first hand:
· A company was developing a new product to add to their offerings. The cost of development far out weighed the potential revenues from the product even over many years. No one had done the simple arithmetic with all factors considered. Believe it or not his is much more common than you might think and I have seen it repeatedly.
· A company had developed a product that was entirely unique in their industry but because they had a mind set based on what they had sold before they priced it at about 25% of what they could have (the product later did well at the much higher price). They had not taken a look at the Value the product provided to the client.
· Another company had the unique capability and capacity to build products that would turn a commodity line into a specialty line but thought it was a useless exercise because of the low commodity prices. Good counter examples of this are Cabbage Patch Dolls versus generic dolls and Heinz Ketchup vs. generic Tomato Sauce.
Some observations about marketing, value pricing, differentiation, etc.
· Within 5 miles of my home I can get a spaghetti dinner for $1.99 or $19.95
· In a hotel you can pay about 7 different amounts for a Coke whether it is in a vending machine, mini-bar, pool side service, room service, reception, coffee shop, dinning room, bar, lounge with entertainment, and you can probably think of more.
Each of these simple offerings has its own Value Proposition. So if these commodities can be differentiated and value priced by ambiance, convenience, packaging, etc. then there is hope for all of us in the high tech business.
To excel at Product Management you have to ask yourself lots of questions like:
· Is there really a need for this product/service? Will people pay what I need them to pay for it and can I make a reasonable profit with it
· Who is the ideal target market and what do they want, value and appreciate in my offering? How big is the market and what market share can I aspire to? What are the secondary markets and their opportunity?
· How do I differentiate my offering to make it appeal more to this target audience than any potential or existing competitive offering? What are the competitive offerings (look for non-traditional competition i.e. is there another way to solve the customer’s problem)?
· What is the value of this offering to the target audience and how can I increase the value to demand a higher price, more differentiation, more barriers to entry, reach a broader audience, etc?
· What is the buying behavior of my target audience and how do I reach them (Channels)? Is there a different value proposition and price for each channel and can I manage any potential channel conflicts?
· How do I find my target audience and promote my offering to them - advertising is not always the right or only answer?
· Where can I get impartial market data and analyze it properly?
Pricing is either easy; lots of people make this widget and there is a street price for it or it replaces an existing widget but it is better or cheaper. Or pricing is hard; no one has ever seen one of these. The best strategy with the former is to focus on a segment of the market and differentiate to the needs of a more focused audience (like the $19.95 spaghetti dinner). The strategy on the latter is to come up with at least 3 methods of pricing the offering so that you can do two things.
· Triangulate on an optimal price with room to move if competition arrives.
· Build the base case for defending that pricing to buyers ex. “It eliminates twice as much cost and therefore has an ROI of six months.”
Here is an example of four methods on pricing (more than 4 is better).
· How many people does this offering potentially replace in the customer’s setting and what is the fully loaded cost of those people? (or how many man hours does this save a professional to allow for higher productivity)
· What do other unrelated offerings that promise a comparable productivity improvement sell for?
· If I can break my offering into components (buy pieces now and more later), can I define an entry point that fits within discretionary fiscal budgets or signing authorities so that this does not have to wait until the next budget cycle or require difficult approvals and what is that amount.
· Can I rent/lease them the solution or charge a fee up front and a maintenance fee i.e. what other methods are there to achieve my revenue and profitability goals that might work better for the client.
Now you can triangulate on a price and a rational for the price. Understanding my costs I can now decide if this is a winner and will meet my profitability requirements.
This is all so fundamental and cursory to a Marketing 101 study but I return to my first question - where are all the Product Managers and why don’t they appear to understand the full scope of the job.
A good primer for marketing people that covers some of the requirements of Product Management is “The 22 Immutable Laws of Marketing: Violate them at your own risk” by Al Ries and Jack Trout.
I would like to hear your thoughts on the state of Product Management in Canada and any other thoughts on excellence in this field.