In my years of experience starting from a grounding in product management, I've seen first-hand how effective management of a product portfolio can significantly boost an SME's profitability and foster growth.
For many SMEs, employing a specific product management resource is a luxury. However, understanding how this discipline integrates into the overall marketing mix is crucial for long-term success in product-based organisations.
Understanding and Managing Your Product Portfolio
Many businesses diligently track their revenue and profits but often falter when it comes to deeper insights. Questions like "Which category is most profitable?" or "What is the Gross Margin at a product level?" are sometimes left unanswered. By gaining a thorough understanding of your product portfolio and its financial contributions, you can make informed decisions about future investments, new product development (NPD), and range management.
Key Insights for Effective Product Management
- Lifecycle Awareness: Every product goes through a lifecycle from introduction to decline. Recognising what stage each product is in allows you to strategically manage promotions, adjust pricing, and plan for phasing out or revitalising products. Use your sales volume, value and profit history to assess where each product is in its lifecycle.
- Range Management and Product Rationalisation: Keeping your product range fresh and relevant is essential. This means sometimes making tough decisions about discontinuing underperformers. Introducing a "1 in 1 out" rule can be particularly effective, especially in businesses where range size, warehouse space, and logistical capabilities dictate careful inventory management. This strategy ensures that new product introductions are balanced by phasing out less profitable or slower-moving items, keeping the product range dynamic and financially viable. Implementing a systematic approach to discontinuation can prevent stock build-up of unwanted items and ensure that every product in your portfolio contributes positively to the business.
- Pricing Strategies to Maximise Profit: Pricing shouldn’t be static; it should reflect the evolving dynamics of the market, competition, and the product’s lifecycle stage. Employing pricing strategies such as penetration pricing for new launches or premium pricing for unique features can greatly enhance margins.
- Data Driven Decisions: Utilise data to drive your product management decisions. Understanding metrics such as net margin at the product level helps tailor strategies that boost profitability. Regularly review these metrics to adapt and refine your approach.
- Balancing the Marketing Mix: Product management should not operate in isolation. It needs to be a part of a balanced marketing mix, integrating with advertising, promotions, and customer engagement strategies to maximise reach and effectiveness.
Enhancing NPD Projects Through Strategic Focus and Process
Many businesses often rely on gut feelings rather than robust market data when bringing new products to market, which can lead to a range of underperforming products or outright failures. Additionally, attempting too many projects without proper prioritisation can dilute resources and focus. Introducing a structured process with clear decision points at each phase of a project can significantly enhance outcomes. This process doesn't need to be overly bureaucratic, but it should ensure that projects are continually assessed against market data, customer feedback, and business objectives.
Conclusion
By having a top-level understanding of product management, SME’s, can avoid some of the regular mistakes I observe, achieve better outcomes and sustain competitive advantage in the market.