Product Planning Essentials

Kenneth B. Kahn

• Publisher: SAGE Publications, Inc
• Year: 2000
• Print ISBN: 9780761919995, 9780761919988
• eBook ISBN: 9781452238135
• Edition: 1
• Topic: Business
• Subtopic: Marketing
• Index: Business

Concise yet comprehensive, Product Planning Essentials addresses the complex, interdisciplinary nature of product development and product management. It covers strategic issues that emerge during the product life cycle, including identifying opportunities, idea generation and evaluation, technical development, commercialization, and eventual product dismissal. Special topics include public policy, international issues, and intellectual property. An interesting summary of product development best practices from several companies appears at the end of the book. Instructors, students and practitioners will appreciate the balanced managerial and how-to orientation.

CHAPTER ONE

INTRODUCTION

Companies represent themselves in the marketplace by way of their offerings. These offerings can be in the form of products, services, or ideas and, in many cases, a combination of all three.

The objective in providing such offerings can derive from many reasons. Profitability is often a key objective, directly corresponding to a company’s bottom line. Other objectives, such as company image, company awareness, customer satisfaction, and market share, are common as well, and these are important for long-term viability and competitiveness. In light of these objectives, it should be evident that the success of a company offering has strategic implications. However, as will be discussed later in this chapter, success is not guaranteed. Special efforts are necessary to increase the likelihood of success.

Such efforts are part of a company process called product planning. Product planning is formally defined as the process of envisioning, conceptualizing, developing, producing, testing, commercializing, sustaining, and disposing of organizational offerings to satisfy consumer needs/wants and achieve organizational objectives. By this definition, product planning is certainly a broad and complex endeavor, comprising numerous issues and activities, many of which are cross-disciplinary in nature.

To simplify one’s understanding of the topic, product planning can be characterized as comprising the two processes of product development and product management. Product development represents the “up-front” process, where the product/service is conceived, developed, produced, and tested. All these activities occur prior to the formal offering of the product/service to the marketplace, which is termed the “launch.”

Product management represents the “back-end” process, where the product/service is commercialized, sustained, and eventually withdrawn. Product management includes the launch endeavor along with all activities that occur after the launch.

Although distinguishing product planning into two phases of product development and product management is useful in understanding the endeavor, separating the two processes can lead to certain unfortunate results. For one thing, the separation of product development and product management implicitly assumes a break between the two processes, which overlooks the necessary transition. Various new product offerings have failed to reach their potential because product development was not properly linked to product management, and thus, misunderstanding about the new product offering abounded. Separating the two processes also implies that product development has a stopping point, which is not really true. Even after launch, product developers should work with product managers to improve and possibly broaden the brand or product line. Conversely, product management should not be seen as just a launch and postlaunch activity. In fact, product managers can work with product developers on delineating market trends and customer needs that future offerings should serve. Overall, a philosophy of product planning should acknowledge the important processes of product development and product management, as well as the necessary link between them, to secure a full “inception-to-termination” view of company offerings.

PRODUCT PLANNING ROLES

Product planning serves various key roles in the company. One of these roles is resource allocation. Product planning analyzes each product/service, whether current or new, to determine the resources that it will need to be successful and to prioritize the impact that it has for the company. The company’s finite resources are then apportioned to those products deserving of investment and support. Assuming most, if not all, products are deserving of resources, product planning forces the company to optimize the division of its resources across products.

Related to the role of resource allocation is that of product mix coordination. Here, the objective is to balance the various products that the company offers to ensure that a particular type of product is not overwhelming the company’s offerings or diluting customer interest. The role of product mix coordination is to provide a product mix that comprises distinguished products where some or all are complementary products and that provides the strongest market presence possible.

Another role is marketing program support. Product planning can provide market information based on the current performance of existing products. Product planning also can inform the marketing function about customer comments regarding current products and customer needs. As a result, new marketing programs can be better focused to meet the intended target market(s), and current marketing programs can be refined.

A fourth role is the appraisal of company offerings. Product planning evaluates the performance of current products (and services) to reveal their impact on the business. In many instances, this impact is measured in terms of cash flow. Products are found to be either generating a profit or losing money for the company. In the former case, product planners consider how to increase the profit being generated; in the latter, product planners consider actions needed to turn the product around.

Of course, one action that could be taken is the termination of the product. This is another role of product planning, that is, product deletion. Product planners identify products that should be deleted and chart a course of action for proper termination of the product. This course might include programs to transition customers to alternative products, and possibly, a plan to maintain a spare parts inventory for the product being deleted so as to not alienate customers of the product.

PRODUCT, SERVICE, OR BOTH

In the above paragraphs, I have described a company offering as a product, service, or even an idea. Although historically products and services have been considered distinct, they have become innately intertwined in today’s market scenarios. For example, the product components of a car include chassis, engine, tires, and windows—among other things. But the buyer also receives warranties on various components of the car, gets a customer service telephone number for complaints, and may participate in a special program for car financing or servicing (e.g., free oil changes, tire rotation). Together, these items serve as the total package of what the customer gets when “buying a car.” Truly distinguishing products and services can be purposeless or even misleading.

Aside from slight nuances associated with their inherent characteristics, products and services should be considered equivalent in terms of the issues related to their development and management. Henceforth, the term product is used in this book, but the term service could be easily substituted, if preferred.

WHAT IS A PRODUCT?

Having clarified the issue of product versus service, the term product needs to be defined. Basically, a product is a particular offering that a company provides to customers. This does not mean that the product is in a form that would be recognized by the final consumer market; the product may be a raw material for the buyer’s product planning process. For example, integrated circuit chip manufacturers such as Intel and AMD sell their products to computer manufacturers such as Dell, Gateway, and IBM, who in turn produce desktop computer systems to be sold to businesses and final consumers. Just because the product in a business-to-business market differs from the product in a final consumer market does not mean that it is not a product. Following the definition used here, it is just as much a product and requires equal attention to systematic product planning.

With this said, it is necessary to clarify what product means across different contexts. This is because product can mean different things to different people based on the given context. Three particular contexts are considered: the nature of innovation, the nature of market demand, and the nature of the company’s internal perspective.

Defining Product by the Nature of Innovation

One way to define product is by the nature of innovation underlying the respective product. Specifically, the terms of invention, innovation, and imitation can be associated with product.

Inventions are not products. They are technical devices that contain features, are packaged into some form, and provide a function. The distinction of inventions is that these features, forms, or functions may or may not match a need, want, or desire in the marketplace. Crawford (1987) defines inventions as taking pre-existing knowledge and combining it in such a way as to develop something that never before existed.

Innovations are basically inventions around which a marketing program has been built to clearly offer a benefit to customers, a benefit that satisfies a market need, want, or desire. Innovations are considered products because customers clearly understand how they satisfy a need, want, or desire. In other words, innovations represent a total package of features, forms, and functions concentrated on delivering the benefit to customers.

Innovations can be classified as continuous and discontinuous innovations. Continuous innovations involve slight product changes that customers can readily understand and use. Such innovations can be the result of the normal upgrading of products, and in most cases, they do not require a change in customer behavior. New flavors or brands of potato chips would be continuous innovations. Discontinuous innovations revolutionize the market infrastructure, making other technologies obsolete and, in many cases, changing the lifestyles of consumers. A technology like fusion-powered vehicles would be a discontinuous innovation.

At this point, it should be recognized that many new products do not succeed because they were not actual products but rather inventions. Even famous products may have inauspicious beginnings. One example is the photocopier.

Plagued by the need for copies of patent drawings and specifications, Chester Carlson investigated ways of automatic text and illustration reproduction, working out of his apartment. Whereas others sought chemical or photographic solutions to “instant copying” problems, Carlson turned to electrostatics. In 1938, he succeeded in obtaining his first “dry copy,” and 2 years later, he was awarded the first of many patents. However, he was initially unsuccessful in convincing companies that the technology would be preferable to the use of carbon paper. In fact, Carlson had called on 20 companies when the Batelle Development Corporation agreed to invest in his concept in 1944. Batelle’s investment provided the necessary resources to “commercialize” the technology. In 1947, the Haloid Corporation acquired a license for Carlson’s basic xerographic patents from Batelle. In 1948, Haloid and Batelle announced the development of “xerography,” and a year later, the first xerographic printer, the Model A, was introduced. Of course, today, the photocopy machine is an invaluable business tool.

So why did 20 companies pass on the idea over a period of 4 years? In short, Carlson’s patent was an invention. As previously stated, inventions lack clear benefits and are not in a recognizable form. Batelle’s vision and resources took the invention and transformed it into an innovation, which Haloid Corporation then realized it could use. As defined, an innovation is a product because the marketing component clarifies the benefits and helps prospective customers understand the offering. Customers do not buy inventions, they buy innovations. This corresponds to the general marketing tenet that customers buy benefits, not features.

Various versions of the photocopy machine have emerged since the 1950s. Some of these were branded by different companies and, more or less, were imitations of photocopiers on the market. Yet, imitations are products, too. Imitations are copies of innovations, which may or may not have enhanced features, enhanced form, and/or enhanced function. Successful products can and, in many cases, have been imitations or “me-too” products. Their success might derive from a lower price or an enhanced feature, even though the product is essentially the same as the original innovation.

Defining Product by the Nature of Market Demand

Product also can be defined from a market perspective. This perspective is based on the premise that all products extend from a core benefit and that products can be represented as building on the core benefit. Product, therefore, can be portrayed as a group of concentric circles building on the issues of the inner circles, as shown in Exhibit 1.1.

The essential component of any product is the core benefit. The core benefit represents the fundamental service or benefit that the consumer is really buying and is derived from the consumer’s need or want. However, consumers cannot buy just a benefit. The benefit must be put into some form or given some features through which the benefit can be delivered. Based on this framework, decisions regarding products (or services) must begin with what the core benefit is (or should be).

The secon...

Table of contents

• Cover Page
• Dedication
• Title Page
• Copyright
• Contents
• Preface
• 1. Introduction
• 2. Strategy and Process
• 3. Organizing People
• 4. Opportunity Identification
• 5. Concept Generation
• 6. Concept Evaluation
• 7. Technical Development
• 8. Market Planning
• 9. Commercialization and Launch
• 10. Life Cycle Management
• 11. Special Topics in Product Planning: International Issues, Public Policy, and Intellectual Property
• 12. Product Development Best Practices
• Appendix A: Situation Analysis Data Sources
• Appendix B: Reference Sources for Product Planning
• References
• Index
• About the Author