What is a Product?

The PRODUCT is the need-satisfying offering of a firm. Consumers buy satisfaction not parts. Therefore a product is the sum total of the benefits or attributes that consumer get from the firm. Providing satisfaction requires a Total Product that entails a complex combination elements.

Five Product Levels

Core Product

Basic Product

Expected Product

Augmented Product

Potential Product

Product Quality and Customer Needs

Since customers buy satisfaction marketers must be concerned with product quality. QUALITY: a products ability to satisfy a customers needs or requirement. This focuses on how the customer sees the product. When comparing competitive products, focus on RELATIVE QUALITY because product features must meet the needs/wants of the target market. Quality and satisfaction depends on the Total Product offering.

Goods and Services Are Products

A product may be a GOOD or a SERVICE or a blend of both. Since a product can be a good or a service its important to think in terms of the needs it satisfies.

Goods Versus Services

A GOOD is a physical tangible thing that can be stored. Producers can be far from consumers A SERVICE is intangible (deed or action) that cannot be stored. Its used, experienced, consumed upon production. Most products are a combination of tangible and intangible elements. Services cannot be stored or transported. Service providers often work in the presence of the customer.

Products and Product Lines

Product Line: a set of individual products that are closely related. Product Assortment: set of all product lines and individual products offered by the firm. Individual Product: a particular product within a product line. Its usually differentiated by brand, price, etc.

Product Classification
Consumer Products: those meant for the final consumer. Consumer products based upon how consumers think about and shop for products. Consumer products divided into FOUR groups: (1) convenience, (2) shopping (3) specialty, (4) unsought goods. Business Products: meant for use in producing other products

Convenience Products: those that consumers need but is not willing to spend much time or effort to acquire. They are purchased often, with little selling or service, do not cost much, bought by habit. Three types of convenience goods - staples, impulse products, emergency products. For convenience goods view how customers think about products, not product features. Staples - routine, regular purchase. Impulse - bought immediately on sight Emergency - bought when urgently needed.

Shopping Products Shopping Products: those that consumers feel are worth the time and effort to seek out and compare. They may be a) homogeneous - seen as basically the same and lowest price is important b) heterogeneous - seen as different and quality and suitability important.

Specialty Products Specialty Products: those that consumers really want ands makes a special effort to find. They are the products that consumers are willing to search for because they must have the specific product or brand.

Unsought Products Unsought Products: those that consumers do not yet want or know they can buy. : New unsought products - products not yet known. Regularly unsought products - not really wanted but sometimes purchased. Different consumers may view [classify] the same product differently. Product class may vary by country. Products could also be classified as durable versus non-durable goods:

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Durables tangible goods that normally survive many uses Non-Durables Goods normally consumed in one or a few uses.

Business Products Business Products determined based on how buyers see the product and how it is used (capital versus expense item, durables versus non-durables). Capital items (long-lasting, expensive, depreciated product) and expense items (cost viewed as a business expense against short-run profit and taxes) treated differently by firms. The demand for business products is DERIVED (based on the demand for final products). Slight increases in price might not reduce the quantity demanded for business products. Suppliers may face almost pure competition if there are many sellers with similar products.

Classes of Business Products Installation - long lasting, very expensive products, may form part of the service, not regularly purchased. Accessories - short lived capital item used in the production activities. Raw Materials - unprocessed expense items moved to next production process with little handling. Becomes part of a physical good and are expense items.

There are two types of raw materials: 1) Farm Products - grown by farmers 2) Natural Products - those occurring by nature. Raw materials are sold based on GRADE and are seldom branded (Ref: Chiquita, Dole). Large buyers want long-term contracts.

Components Parts and Materials Components - processed expense items that become part of a finished product. Components parts include: (1) finished and ready for assembly; (2) nearly finished. Components must meet specifications. Quality is extremely important since they affect the quality of the final product.

Supplies and Services Supplies - expense items that do not become part of a finished product. They are called MRO (maintenance, repair and operations) supplies. Professional Services - specialized services that support the firms operations, usually an expense item.

Branding and Strategy Brands are important. What is a brand? BRAND - use of a name, term, symbol, or design (or a combination) to identify a product. Brandname: word or letter, or group of letters. Trademark: Only words, symbols or marks legally registered for use by a single firm. Service Mark - same as a trademark but refers to a service offering (the umbrella, good hands).

Why Brand? Brands provide identification Makes shopping easier Helps firms differentiate their products, reduces selling time, improves firms image. Conditions Favorable To Branding Product easy to identify by brand. Product quality is best value for price and quality is easy to maintain. Brand dependable and widespread. Demand for product class is large. Branding profitable. There are economies of scale - costs drop and profits increase Favorable shelf location or display space will help.

Brand Familiarity Brand Familiarity: how well customers recognize and accept a brand. Five levels of familiarity -1. Rejection - wont buy unless image changes 2. Non-recognition - brand not recognized 3. Recognition - customers remember brand 4. Preference - brand chosen over others 5. Insistence - insist on brand and will search

Brand Equity - value of brand overall strength in the market. View Characteristics of a GOOD Brand Name (Exhibit 9-7, p. 295) Brands protected by the LANHAM ACT (1946). Firms do not want brands to become the common descriptive term for its kind of product.

The common descriptive term for a kind of product is PUBLIC PROPERTY and cannot be used as a brandname (aspirin, shredded wheat).

KINDS OF BRANDS Family Brand: same brand name for many products. Licensed Brand: sellers pay fee to use a well-known brand name. Individual Brands: separate brand name for each product Helps to avoid confusion and makes segmentation and positioning easier (Cheer and Tide). Generic Products: those with no brand other than contents identification. MANUFACTURER BRAND: created by the producer (a.k.a. national brands since they are promoted across the country or region). Dealer or Private Brand: created by middlemen. Dealer brands sold ONLY at dealers outlet.

Importance of Packaging PACKAGING: promotes and protects the contents. sends a message and may lower distribution costs. improves convenience but increase cost. Federal Fair Packaging and Labeling Act (1966) - goods must be clearly labeled and easy to understand.

ETHICS and Product Development Should marketers use any packaging? What type of packaging should marketers use? Product comparison and UNIT-PRICING (stating price per ounce for comparison purposes). Universal Product Code (UPC): machine readable code with price & other info. View advantages and disadvantages?

Warranties US Common Law requires that sellers stand behind their products. Warranty: explains what marketer promises about the product and promises more than common law BUT may reduce producer responsibility under common law (MagnusonMoss Act 1975). Warranties may improve the marketing mix. Service guarantees may be used to attract and keep customers. Warranty support can be costly especially where customers abuse products. View extended warranties and service contracts.

The Product Planning Process

The product planning process is one of the most controversial within any company. Everyone wants a hand in new product definition and almost everyone will have contributions that will make a new product successful. With all these interested parties, you are going to need a system to help you through the product planning process and a way to decide which ideas have the most merit. This system also needs to incorporate customer feedback, assure that important new product ideas are approved, and that development of them initiated immediately. What follows is a product planning system that works well for most companies.

The above diagram outlines the phases in the product planning cycle. In any given company, these steps may be condensed or combined. For example, some companies may use a single document to cover both the Market Requirements Document and the Functional Specification. The steps are important because they allow you to gather input from all possible resources, evaluate the potential of each idea and gather input from all involved parties about which ideas will work and their ease of implementation.

Input
There should be no shortage of new product ideas. If you are doing regular customer councils and customer surveys, you should have a long list. (Please see Chapter 2 for more information on gathering regular input from customers and your sales channels.) You will also have ideas from sales, engineering, technical support, and management. The biggest job is narrowing down the list. A regular poll of sales, tech support, engineering, and customers for product ideas may help you prioritize. Be sure everyone in your company knows to feed product ideas to you. Often times the tech support organization has a unique insight to customer requirements because they are in contact with customers who need help daily, but no one ever bothers to ask them. When you need to narrow the list further, run it by your customer council. You can ask them to vote on the product ideas they think are most valuable. You should also understand your current products, what is selling, what isn't, and why. Finance should be able to provide you with a breakdown of sales by product. A couple of phone calls to key sales people should provide you with an earful of information on why certain products are selling well and why others are not. Product managers are also called upon to do customer presentations to major accounts. These presentations should be open communication sessions. It is an excellent opportunity to learn first-hand what the customer needs and how they are using your product. (For more information please see Chapter 2, "Customer Presentations") Competitive analysis is also an important part of product planning. Your customers, sales channels, and prospects evaluating your product will tell you where you fall short competitively. Additionally you may want to take an existing strength that you have over your competitors and lengthen your lead with improvements to that strength. Remember that a competitor won't release a feature that is just on par with your product, they will be trying to exceed your strength. Also understand where your competitors are going and what products they have in the works. You won't get this information directly from them, but you may hear rumors or see press on their strategic directions. Additionally listen to your prospects when they are asking you about your product features and directions. Often times they are parroting back information that your competitor's have given them. The World Wide Web is also an excellent place to gather competitive information. Often times competitors will publish their strategic directions and, for software companies, actually have beta versions of their new software releases available. Market analysis is also important. Trends in the industry need to be factored into your product plans. Professional market analysts can help you with this if you want a third-party perspective. Your engineering group will also provide some good ideas in this area; they are generally on top of many of the new technologies. Don't forget the possibility of discontinuing a current product. Discontinuing a product is a tough decision, but many companies have failed because they have spent too much of their resource trying to maintain a product with old, difficult technology. (Please see the product discontinuation section for more information on when to discontinue a product.) Narrow down the list to a handful of ideas that you want to investigate further. Remember that the most important criteria for your company is return on investment. The top ideas that you

select must either have broad market appeal (within your current market) or enable you tap a new market.

Product Ideas Refined

After narrowing down the list of potential new products or features enhancements for an existing product, you will want to refine some of the more promising ideas. Before a product idea is funded, some basic information needs to be gathered about who is going to buy the product, how much they will buy, and how much it will cost to develop it. This is the information that will eventually be expanded upon in the MRD (Market Requirements Document) but should be gathered and presented in summarized form to seek product approval. Here is the type of information you will need:
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Product Description - You need enough information so that the product can be easily described in one or two sentences to customers or other people within the company. Also position the product. Who buys the product? Why is the product of value to the buyer? Why is it better than the competition? One over-used, but effective measurement of your description is the "elevator test". Can you sell the product idea to potential customer in the short time that you would have them as a captive audience on an elevator. Market Justification - Why should the company build this product? Who needs it? How much will they buy? Including market numbers and real sales projections will help you determine the size and the viability of the market. These will initially be very rough estimates until you have time to determine competing products' marketshare. Resource Projection - Work with the engineering organization to get an initial very rough estimate on what it will take to build the product in terms of people-years. You will probably meet some resistance with this. No engineering manager wants to sign up to a schedule for a product that is not well defined. You will need to assure the engineering manager that no product will be defined until management can be assured of the return on investment and you can't figure out ROI without having an estimation of the investment. Be sure to use these schedule numbers with the caveat that they are rough estimates and real schedules will be defined after the product is specified.

Products Approved
Once you have gathered the above information for you product proposals, you need to get the project approved. I recommend using a product planning meeting for this because it allows you to present all the appropriate information to everyone at once. It is also a great forum for discussion of the merits of the product. (See "Running an Effective Product Planning Meeting" below for more information.) In some companies, you may need a full market requirements document before the project is approved. This is not the most effective method of product planning for the following reasons:

At this point, the product manager's time is best used looking at the broad picture and narrowing down the most promising product ideas. To do the research work required for a full MRD wastes time before the project is approved. Projects are better refined by all parties involved. There should be an open discussion of the project's viability before a detailed MRD is generated. The company should have an "Approved Projects List" (some companies call this a Plan of Record or POR) that is either published regularly or located centrally where everyone can access it. If your company doesn't have one, then create one. This is a list of all projects that are approved and currently being developed in the company or division. Having one central list will provide a point of focus and clarify the priorities for all involved. Ideally the list should be updated regularly and posted in a central location. When a project is added to the list, it should be funded with development resources.

Market Requirements Refined

Once the product is approved you can refine the market requirements, adding more detail on the desired features of the product and how the customers will use the product. (See the "Market Requirements Document" section of this chapter for more information.) There will be two types of MRDs, one for new products and a second for new releases of a current product. The new product MRD will require Development Initiated Once the MRD is complete, the developers can start to work on a functional specification and prototypes. Some companies combine the MRD and Functional Specification into one document to help them decrease time to market. To do this, you must work very closely with engineering to make sure that the functional design of the product will indeed meet customer requirements. (Please see Chapter 4 - The Product Development Cycle for more information on working the Product through the development cycle

Running a Successful Product Planning Meeting

Why have a product planning meeting? Everyone hates meetings and adding one more won't be popular. You need a meeting because time-to-market is the key to success in the high-tech industry. Anything that delays your time-to-market hurts your company. If you can gather everyone in a room and get them to agree that a new product must be funded and development started immediately, you have decreased your time-to-market. The meeting gives you a forum to formally add and remove products and projects to the approved projects list and to make sure that everyone involved is clear on the priorities. It also gives them visibility to why the priorities are what they are.

I initially started product planning meetings when I was working in a CEO-driven company. This particular CEO would wander over engineering and together with a couple key engineers they would come up with a great idea and suddenly we had a new product that was funded. The problem was that the product was not necessarily something our customers wanted and the products our customers wanted most, didn't have the resources assigned to them. I put the product planning meeting in place so that all ideas were researched, discussed, and approved or rejected at this meeting with everyone's input. This process may seem like a lot of work, and frankly it is. By comparison, you wouldn't just start writing code on a software product without doing the structure and design work first. When you compare the effort of product planning to spending hundreds of man-hours of development resource for a product that sales can't sell and customers won't buy, the planning work is nominal. How often you run product planning meetings depends upon the size of your engineering group and the dynamics of your market. Once every six weeks to once every quarter, should be often enough to reset priorities. Although the market may change overnight, product development can't and shouldn't be asked to. Changes to development plans, schedules and priorities need to be carefully measured.

Attendees
The objective of the meeting is to obtain product approval, so you need to invite everyone who has a say in such things including the President, CEO, VP of Marketing, VP of Engineering, VP of Finance, and VP of Manufacturing. You also want to invite anyone who will provide lively but productive discussions. (It is also your job to keep these discussions under control and not let the meeting get side-tracked.) Invite as much of engineering as you can get away with. You don't want the meeting to become unwieldy, but at the same time you don't want someone coming back later saying that the product should not have been approved or rejected without their input.

Meeting Format
Everyone should be notified well in advance of the meeting about which potential products or features are to be discussed. This will allow concerned parties to give you their input well in advance of the meeting. The idea is not to "spring" new product ideas in the meeting, but give people time to think about the new ideas and how it will affect their aspect of the business. Here is a sample agenda.
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Overview of the market and significant changes in the market since the last product planning meeting or within the last quarter. This is done so that the audience has complete exposure to all the changes and trends in the market. It will allow them to be better prepared to make product decisions. Review of company direction. A very quick review of the company's long term goals will help everyone keep the strategy in mind when making product decisions.

Review of the current approved products and schedules, preferably by the VP of Engineering. This lets the audience understand the current workload and how time is already allocated. If current projects are slipping it makes no sense to add new projects without removing some. Discussion of new project proposals or changes. Each product should be given 45 minutes to an hour for presentation and discussion, so you should only try to do four to six products in a single meeting. You will probably need to run the meeting through lunch and ideally have it off-site where there are no interruptions. It is important to drive the meeting to conclusion. This should be your primary purpose in the meeting. The meeting should end with a review of all projects and which were approved, rejected, or need further investigation. Also included should be a list of proposed projects for the next meeting. Product planning meeting minutes should be published immediately following the meeting. Meeting minutes are painful and it is always easy to put them off, however for this meeting the decisions are so critical to every aspect of the business that I would recommend getting the minutes out the night of the meeting. For projects that are approved, work should commence on a Market Requirements Document

The Preparation
The outline below shows you what information should be included on the product planning slides for each product. You need to prepare all the slides in advance of the meeting. You will want to schedule some time with engineering to review the slides before they are finalized. This is necessary for the following reasons:
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Engineering needs to provide resource estimates. Engineers may have great ideas on a particular implementation of a product or even a good target market for the product. Engineers may have strong opinions on a given project. It is best to understand those before trying to get the project approved. For the meeting you will want to have the room set up in a round table format to encourage discussion. Have copies of the slides and back-up documentation for everyone involved. New products are controversial and anything you can do to make the meeting run smoother is important to the overall objective of the company working on projects with the best return on investment.

Outline of Presentation
I recommend using only one or two slides per product. You can hand out any back-up material. A simple standard format will allow anyone to look back at the slides and recommendations without becoming lost. Sample Presentation

Project Name- Come up with a name for the project that is easy to identify, but don't spend a lot of time on it, this isn't the final product name. Product Description - Give a brief bulleted description of the product and its positioning (why it is of value to the customers and why it is better than anything else on the market). Recommendation - Most people would want the recommendation last, but I have worked with plenty of unruly groups who would get sidetracked long before the product manger could talk about their recommendation. So I put it as far up to the top as possible. If you are working with a more civilized group of people, you can put it at the end. The recommendation should be one of three things: Add the project to the approved projects list and fund it, reject the project (removing it if it was on the list), or hold for further investigation. If a project is a fairly new idea and you haven't had the opportunity to run it by your customers,

you may want to recommend that you spend some more time on the market justification before it is approved. The only other statement that may be made here is the recommendation to discontinue a current product. If this is a recommendation then there should also be a discussion of the replacement product. Market Justification - Why should the company build this product? Who needs it? How much will they buy? Include market size numbers here and real sales projections. Just remember that the VP of Sales isn't going to sign up to these preliminary numbers! Resource Projection - This should be a rough estimate from engineering on what it will take to build the product.

The Decision
Getting a decision from the meeting is crucial, even if the decision is that more information is needed. The ultimate decision generally falls into one of four categories:
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Approved - If there is sufficient information to approve a product, then it is added to the list of approved products and the next step, whether it is writing a market requirements document, or writing a functional specification, is started. Canceled - If there is not sufficient justification for a product, or it does not fit into the company strategy then it should be canceled and removed from the list of approved projects (if it was there to begin with). Hold pending further investigation - No matter how much research you do on a project, questions may come up that you don't have ready answers for. Sometimes a decision will need to be delayed pending further market research information or an investigation from development. In any case, the additional information should be gathered and the project should be discussed at the next product planning meeting. Hold for future - If the product fits into the company strategy, but the resources are unavailable to work on it, it may be a good idea to put it on hold until some determined future time. The decision should take into account the following criteria:

y y y y y y

Does the project fit into the company's long term strategy? Does the target market for the project align with the company strategy? Will there be sufficient revenue from the product to justify the work required? If there is not sufficient revenue, are there other highly compelling reasons to justify the work? Are the resources available to do the work? If the resources are not available, should this project take precedence over another? The person who ultimately makes the decision should be determined in advance of the meeting. This is generally the CEO, President, or CTO of the company. The forum should allow adequate discussion before the decision is reached.

Product life cycle (PLC)

Like human beings, products also have a life-cycle. From birth to death, human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert three things:
 

Products have a limited life, Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, Products require different marketing, financing, manufacturing, purchasing, and human resource strategies in each life cycle stage.

The four main stages of a product's life cycle and the accompanying characteristics are: Stage Characteristics 1. costs are very high 2. slow sales volumes to start 1. Market introduction stage 3. little or no competition 4. demand has to be created 5. customers have to be prompted to try the product 6. makes no money at this stage 1. costs reduced due to economies of scale 2. sales volume increases significantly 3. profitability begins to rise 2. Growth stage 4. public awareness increases 5. competition begins to increase with a few new players in establishing market 6. increased competition leads to price decreases 3. Maturity stage 1. costs are lowered as a result of production volumes increasing

and experience curve effects 2. sales volume peaks and market saturation is reached 3. increase in competitors entering the market 4. prices tend to drop due to the proliferation of competing products 5. brand differentiation and feature diversification is emphasized to maintain or increase market share 6. Industrial profits go down 1. costs become counter-optimal 4. Saturation and decline stage 2. sales volume decline or stabilize 3. prices, profitability diminish 4. profit becomes more a challenge of production/distribution efficiency than increased sales Request for deviation In the process of building a product following defined procedure, an RFD is a request for authorization, granted prior to the manufacture of an item, to depart from a particular performance Market identification Termination is not always the end of the cycle; it can be the end of a micro-entrant within the grander scope of a macro-environment. The auto industry, fast-food industry, petro-chemical industry, are just a few that demonstrate a macro-environment that overall has not terminated even while micro-entrants over time have come and gone products need to be recognized in the market based upon the characteristics it has. Lessons of the product life cycle (PLC) It is claimed that every product has a life period, it is launched, it grows, and at some point, may die. A fair comment is that - at least in the short term - not all products or services die. Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not. Limitations The PLC model offers some degree of usefulness to marketing managers, in that it is based on factual assumptions. Nevertheless, it is difficult for marketing management to gauge accurately where a product is on its PLC graph. A rise in sales per se is not necessarily evidence of growth. A fall in sales per se does not typify decline. Furthermore, some products do not (or to date, at

the least, have not) experienced a decline. Coca Cola and Pepsi are examples of two products that have existed for many decades, but are still popular products all over the world. Both modes of cola have been in maturity for some years. Another factor is that differing products would possess different PLC "shapes". A fad product would hold a steep sloped growth stage, a short maturity stage, and a steep sloped decline stage. A product such as Coca Cola and Pepsi would experience growth, but also a constant level of sales over a number of decades. It can probably be said that a given product (or products collectively within an industry) may hold a unique PLC shape, and the typical PLC model can only be used as a rough guide for marketing management. This is why its called the product life cycle. The duration of PLC stages is unpredictable. It is not possible to predict when maturity or decline will begin. Strict adherence to PLC can lead a company to misleading objectives and strategy prescriptions.

When a product reaches the maturity stage of the product life cycle, a company may choose to operate strategies to extend the life of the product. If the product is predicted to continue to be successful or an upgrade is soon to be released the company can use various methods to keep sales, else the product will be left as is to continue to the decline stage. Extension strategies Examples of extension strategies are:
   

Price reductions Repackaging and redesigning Launch in new markets Promotion

Repackaging and Redesigning This is a widely used extension strategy. Large companies, in particular food producers, will slightly alter a product to make it seem new and attract new attention to the product. An example being a soft drink company producing a limited edition flavour of the product. This renews sales levels and gives the product continuing interest. Launch in new markets Along with the other options, companies can also look at new markets for their old products to extend the PLC. A classic example of this would be Toyota's Qualis, which was close to being

obsolete in its major markets worldwide. The car was launched in India and turned out to one of the biggest hits, thus extending its PLC.

Promotion Revised promotional activities such as advertising can help to remind customers about the benefits of purchasing the product. This can help to boost demand, at least for a little while longer.

Product Adaptation Strategy The term "product adaptation" can be used to describe a "follower mentality" in product innovation strategy or a particular aspect of business development. The need to develop an adaptation strategy can lead to changes in pricing, delivery and packaging. Ultimately, creating an effective product adaptation strategy is a critical factor for all businesses that wish to attract a dynamic customer. Set Your Goal o For exporters, product adaptation is a primary concern. The decision for moving forward on a product adaptation should be based on the incremental sales gained from altering the product. Any strategy must reach back to creating value for the business. This can include taking a follower product innovation strategy or tweaking your product to meet the needs of different market segments. The former will lower expenses, the latter will increase your sales footprint. Velocity of Adaptation
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The main driver behind product adaption efforts is profitability. The secondary driver is often feasibility. Research your market, create effective customer surveys that focus on the customer from marketing to logistics. The speed of adaption can also drive strategy direction. Agile organizations can adapt to changes in consumer demand faster than their peers. Common Adaptations A foreign retailer or distributor will require product modifications to please their customers. The question for the exporter is whether the incremental revenue is sufficient enough to justify the cost of adaptation. If manufacturing product, compare the final price to the competition before agreeing to adaptations. Product adaption is also based on the degree of commitment your organization has in that market. A good adaption strategy will consider quality, appearance, purchase, end-user experience, translations, tastes, ingredients (and prohibited ingredients), regulations and colors.

Project Management Life Cycle

The Project Management Life Cycle (PMLC) addresses the project management needs for all systems development projects. It is applicable to new system development projects and to maintenance projects for existing systems.

What is a Project Management Life Cycle?

A system development project is a set of activities that starts and ends at identifiable points in time and that produces quantifiable and qualifiable deliverables. Projects are staffed by people using processes and technology to design, develop and deliver a product package. People, processes and technology all have to be managed during the life of a project. Project Management is the process by which a project is initiated, planned, controlled, and brought to a conclusion to support the accomplishment of business and system objectives. Since a project has a defined beginning and end, with numerous activities and deliverables that have to be managed, we are calling the aggregation of these management methods a Project Management Life Cycle (PMLC). Not all projects are the same. So, to develop a set of rules (methods) for project management, we must realize that these rules must be adaptable for all types of projects and for all types of system developers and product groups. Additionally, different system development techniques will sometimes require different sets of rules for managing the resulting development activities. For example, a standalone- PC application product requires less detailed management control than a workstation product integrating other applications and running in a large networked environment. It is important to note that the PMLC and Product Development Life Cycle (PDLC) can be considered repositories of reusable methods that can be selected and integrated to meet the demands of projects varying in size and complexity. Relationship of PMLC to the Product Development Life Cycle (PDLC) The scope of project management is not the technical work which prepares the information technology based products. Rather, the domain of project management is the management of all the factors which surround and enable the technical development work to be accomplished. These factors include project resources, time, cost, schedule and quality. Project success is often defined as meeting the project cost, schedule and quality constraints. The scope of the Product Development Life Cycle (PDLC) is all of the project technical functions that have to be performed to produce, maintain and support the expected

product deliverables. These functions include business analysis, functional and technical requirements definition, system design, construction, rollout/release and maintenance. During the formation and execution of a project, the activities in the PMLC and PDLC are integrated, i.e., all technical activities are planned (using the PDLC as a source of technical activities to be performed) and executed using the planning, execution and control methods defined in the PMLC. If PMLC and PDLC activities are integrated during a project, why are they separated in the methodology? They are separated in order to: Recognize the natural separation of project work between technical and project management activities. And to facilitate the training and use of these activities by the project members responsible for them. Recognize the importance of both the technical and management work. And ensure that project management activities are clearly identified and performed. Too often the technical work is stressed and the project management work is "forgotten". Through practical project experience, the implementation of systems engineering standards, and development of systems engineering theory, the software industry has recognized the importance of project management. Facilitate the effective maintenance (improvement) of both life cycles. If they are kept separate in the methodology, the changes in one life cycle are much less likely to affect the other. Relationship of PMLC to Supporting Processes The PMLC documents project management phases, tasks, activities, expected inputs and outputs (deliverables) and organizational participation in these. The PMLC does not contain the detailed description of every method used within the life cycle. These detailed method descriptions are contained in the Supporting Processes section of the methodology. When needed, the PMLC references these Supporting processes. Methods such as project planning, project estimation, project scheduling, risk management, resource management, cost management, time management, project reporting, configuration management, incident reporting, tracking and resolution, etc. are part of the Supporting Processes. What Needs to be Managed? Projects are organized and staffed by people of varying skills, responsibilities and roles. In order to perform their work, these people use processes (ad hoc or standardized) and tools. Projects are constrained by many factors. The common ones are time, cost, resources, product requirements and quality. The ultimate goal of a project team is to deliver a product on time, within budget, that meets the product requirement and quality constraints. To achieve this goal the team must use effective methods to manage the people, processes and tools used for the project. The following need to be considered for each:

People Identification of roles, responsibilities, and skills needed for the project. Identification of types and numbers of people resources needed to meet project roles, responsibilities and skill requirements- technical development (architects, analysts, programmers, etc.), managerial (senior management, project management), quality assurance, product marketing, operations, etc. Identification of staffing sources - use of existing organizational resources, contractors, new hires Organization of people resources into effective teams with the necessary communication interfaces. Communication of project mission and individual team assignments Communication of project values/expectations - quality, quantity of work, communication, teamwork, etc. Training on project methods (management and technical), communication skills, technology and tools Communication on project status, issues, problems and changes. Effective communication to all project team members. Communication on effectiveness of project methods, tools and work environments. Implementation of methods, tools and work environment improvements Measurement of team and individual performance (based on project values/expectations); implementation of performance improvements. Monitoring of project staffing/skill needs; maintaining necessary staffing levels and/or re-assigning roles and responsibilities Processes Definition of the management and technical methods needed for the project Selection of the appropriate management and technical methods from the organizational Product Development Process Acquisition and/or development of project specific methods not available in the organizational Product Development process Implementation of process effectiveness measurements Monitoring of process effectiveness, implementation of process improvements Tools Evaluation of project tools required to support chosen management and technical methods Selection, implementation and administration of project tools. Tools to be considered include: Process Management

Estimating Risk Management Project Management Prototyping Requirements Definition Technical Analysis and Design Code Generation Code Library Generation and Maintenance Data Base Managers QA (Test Management, Reviews, Inspections, Audits) Configuration Management Document Control Incident Reporting, Tracking and Resolution Product Installation Phases of Project Management The Project Management Life Cycle naturally breaks into three major phases - Project Planning and Initiation, Project Execution and Control, and Project Closure. These are described briefly below. Project Planning and Initiation This phase includes important planning, organization and administration tasks. The phase begins when authorization is given by management to formally start a new project. In order to start this phase, the necessary up-front business planning and cost justification analysis that occurs in the Business Analysis Phase of the Product Development Life Cycle (PDLC) should have taken place and been approved by management. The key deliverables from the Business Analysis Phase - the beginning Project Charter and product functional requirements - should be available as input into this phase. The key to project success is the adequate planning of the project. The planning tasks include the definition of project scope, deliverables and constraints (what will be done), the selection of management and technical methods that will be used (how it will be done), the definition and organization of the project team (who will do it), the estimation of effort and resources required (how much it will cost), and the determination of project milestones and schedules (when it will be done). This project planning foundation has to be laid to ensure the success of the project execution. The planning information will be documented in the key deliverable of this phase - the Project Charter. The Project Charter is reviewed and approved by the designated participants before the project team is formed and the project is initiated. After approval of the Project Charter, the project team is formed and the project is initiated.

Project Execution and Control This phase is primarily focused on carrying out the project plans documented in the Project Charter. All of the work required to define, design, construct, test and deploy the product is done during this PMLC phase. Successful project execution will require the use of the management and control methods identified in this phase. The primary purpose of project management during this phase is to monitor, evaluate and communicate project progress and to define and implement corrective measures if progress does not meet the expectations defined in the Project Charter. These include expectations for product functionality, performance, quality, cost of development, and development/deployment schedules. Project issues, problems and change requests have to be identified, evaluated and resolved. These have to be communicated to all project team members (organizational technical and management, and contractors) involved in evaluating and resolving them. Improvement measures may be applicable to individual project teams, working environments, processes and tools. Organizational Product Development Process methods employed during this phase include those for Project reporting, Verification and Validation, Risk Management, Configuration Management, Document Control, Project and Product metrics, Contractor Management, Project Estimation, Project Scheduling, Tools Evaluation and Acquisition, peer Reviews, Audits, Incident Tracking, Reporting and Resolution, Time Management, and Cost Management. The Project Charter continues to serve as the primary communication vehicle for project plans and progress. It is a dynamic document during this phase and is updated when necessary to reflect changes in project scope, constraints, deliverables, and progress. Project Closure The primary purpose of this phase is to administratively close down the project and to evaluate how effective the project execution was. Administrative closure includes the updating of project metrics, cleanup and archiving of all project documentation, libraries and repositories, and the release of project resources. Evaluation of project effectiveness includes a Project Post-Mortem evaluation. The purpose of the evaluation is to determine "what went right" (and to carry this forward to other projects), "what went wrong" (and to keep it from happening again), and what was produced that may be reusable by other projects. This evaluation serves as a primary improvement vehicle for all organizational projects. A Project Post-Mortem Report is generated that contains evaluation findings and recommended actions.

_______________________________________________________________________ _____________________________ Heinsights 5 01/07/04 Role Definitions For Product Management and Product Marketing

This document provides a high level overview on the challenges typically encountered in defining the roles of Product Management and Product Marketing. It also contains job and task descriptions that can help you determine the best way to structure these roles within your own organization.

Overview

If you are looking for the demarcation points between the roles of Product Management and Product Marketing you are likely to find many different variations. Often the following questions arise.

y y y y

Does Product Management belong in Marketing or Development? Is Product Management an Internally facing role and Product Marketing an externally facing role? What responsibilities belong to each and who ultimately owns accountability for product? Are these 2 roles or 1?

There is no universal answer because what will work best in your organization has dependencies on these and other variables.

y y

y y y

How many products do you have? How mature are your products? o Are you trying to innovate and launch new products? o How competitive is your market?  How many competitors are there?  How rapidly are they releasing new capabilities? How large is your organization and how many resources do you have/can you have? Who is your products primary buyer and how technical is the sale/solution? Where is your product development being done (local, offshore etc.)?

Do you have stovepipe organizations?

If you can find an individual that excels at project management, has a strong technology aptitude, good customer facing skills and has the creativity to do product marketing, a single individual owning all aspects of the product is certainly possible. For many companies this skill set can either be difficult to find, or the magnitude of activities this individual has to perform is simply too overwhelming for one person. In that case, the job can be divided, typically along the lines of Marketing activities.

The challenge with having a separate Product Marketing function is that your Product Marketing Manager may not have the market knowledge, product knowledge or technical aptitude. Or, confusion can arise between the Product Marketing Manager and Corporate Marketing in terms of who owns aspects of producing or delivering collateral and other deliverables.

If you plan to separate the roles, it is recommended to keep the two functions in the same organization (Marketing). Your Product Manager should have seniority and overall accountability for all product deliverables while the Product Marketing Manager acts in a supporting role. Establish clear responsibilities and approval authority between all groups.

With Product Management in the marketing organization, you will also need a strong working relationship between your product manager and your development organization. Your Product Manager will need their respect and have the ability to manage individuals in an organization they have no authority over.

Responsibilities Research and Analysis Market Research and Analysis Competitive Research and Analysis- Business Competitive Research and Analysis- Product Buy VS Build Analysis Standards Research Participation in Standards Bodies Business Case Product Planning and Management Product Capabilities - Market Requirements Functional Requirements Writing Technical Specification Writing Product Capabilities -Review/ Approval Technical Specification Review/Approval Beta Program Definition Beta Program Management Product Pricing Product Policies Product Cost and Profitability Analysis Feature Testing/Feature Validation Product Development Plan Management Documentation Definition Documentation Writing Documentation Review and Approval

Typical Owner

Both/Collaborative Both/Collaborative Product Management Product Management Product Management Product Management Product Management

Product Management Product Management Engineering Product Management Product Management Product Management Product Management Product Management Product Management Product Management Product Management Product Management Product Management Technical Writer Product Management/QA

Roadmap Planning and Management Product Launch Launch Planning and Management Product Messaging Demo Development Collateral Development Marketing Program Plan Press Briefings Analyst Briefings Product Training Train the Trainer Train the Trainer SE Training Release Management Product Packaging Fulfillment Internal Distribution Service Releases (When/What) Bug/Enhancement Tracking Ticket Review Enhancements Tracking Customer Interaction New Release/Product Evangelist Strategic Client Meetings Customer Support Inquiries

Product Management

Product Marketing Product Marketing Product Marketing Product Marketing Product Marketing Product Marketing Product Marketing

Product Management Product Marketing Product Marketing

Product Marketing Product Marketing Product Marketing Product Management

Product Management Product Management

Product Management Product Management Product Management

Sales Inquiries and Support

Product Marketing

PRODUCT MANAGER JOB DESCRIPTION Duties & Responsibilities

y This position will be responsible for managing the entire product life cycle from

strategic planning to tactical execution y Develop market requirements and maintain feature requirements for current and future products by conducting market research and on-going visits to customers and prospects y Develop and write product requirements, maintain and develop all product documentation including business case, product requirements, pricing and policies. y Analyzing potential partner relationships for the product. y and implement a company-wide go-to-market plan, working with all departments to execute

Knowledge & Experience:

y y y y y

5+ years of software marketing/product management experience. Strong Project Management Skills Experience in communicating with all levels of staff and field professionals. Knowledgeable in < Type > technology. Willing and able to travel up to 25%.

Education: Computer Science or Engineering degree a strong plus.

PRODUCT MANAGER JOB DESCRIPTION (Both Functions)

y y y y y

y y y y

This position is responsible for Managing software products through complete life cycle, from strategic planning to end-of-life Establish product roadmap across multiple product releases Build and maintain prioritized feature lists from requests from partners, customers, internal findings, existing product analysis, and industry trends Participate in formal product development processes by working with product development team to provide guidance Develop product management documentation, including, product concept proposals, business cases, formal product requirement specification for each release, launch plans, product collateral, sales training material and product marketing collateral Establish relationships with sales and sales engineers to position and sell product successfully, providing training and leadership on strategic opportunities Work closely with Marketing group to optimize marketing of product/solutions through all marketing channels and provide guidance on all product collateral Support financial requirements of product management including pricing, budgets and forecasting Other duties as assigned

Knowledge & Experience:

y y y y

3-5+ year Product Management/life cycle experience in mobile networking software products or related field Proven planning, prioritization, implementation and marketing skills Excellent verbal and written communications skills Excellent interpersonal skills Ability to work in fast paced competitive environment

Education:

BA/BS degree required

PRODUCT MARKETING MANAGER JOB DESCRIPTION Duties & Responsibilities

y y y

This position will be responsible for generating product-based messaging and collateral for <company As products> The position will work closely with Product Management in order to understand and articulate the value of <company As Products> Candidate must be knowledgeable of <company As or similar companys products> and have experience developing marketing materials (i.e., product brochures, technical fact sheets, demonstrations, website content, technical presentations, etc.) to articulate <Company As> value to prospective customers. The individual will be responsible for understanding competitive solutions and work with the Vice President of Marketing to create strategies to differentiate Company As solutions. Other duties as assigned.

Knowledge & Experience:

y y y y y y

Minimum of 7+ years proven Product Marketing experience required; individuals with experience in a high technology setting/software industry setting, strongly preferred. Prior experience as a solutions consultant (e.g., demonstrating software solutions to prospects) a plus. Experience in communicating with all levels of staff and field professionals. Excellent written, verbal, and customer communication skills. Ability to understand software applications/toolkits a must. Willing and able to travel up to 10%.

Education:
y

B.A. or B.S. degree in a related field.

Planning Product Marketing This project introduces you to basic Marketing Theory, the 5Ps or principles (product, package, place, price, and promotion). Marketing is usually defined as the planning and executing of ways to price, promote, and distribute one's goods, services, or ideas to the largest audience of customers. An effective marketing plan must address all of these 5 P's. Your team will use all of the 5P's to begin marketing their product or service.

Effective Marketing Plans: The 5 P's Marketing theory is made up of 5 P's or principles that all businesses or companies need to follow in order to be competitive in the marketplace. 1. Product: What does your company have to offer its customers? How does your product (or service) stand out from those of your competitors? 2. Package or Packaging: How does your company 'package' or present an attractive and identifiable image for your product? 3. Place: (also known as Positioning) Where does your product or service fit into the marketplace? How is your product or service distributed to the consumer? What are the channels through which you want your product made available, e.g., nationally or internationally, on-line or in local stores, etc.? 4. Price or Pricing: How much does your company charge for its products or services? How can the product be creatively offered so that price comparisons with other companies' products won't be easy to do? 5. Promotion: How will your company remind, persuade, and inform consumers about its products? 4. Price How much does your company charge for its products or services? How can the product be creatively offered so that price comparisons with other companies' products won't be easy to do? Justify the product's pricing, in terms of the product's features. The pricing mustn't be too high (or it will scare away potential customers) nor too low (customers may feel something is wrong with a cheaply-priced product). It is important to understand your products' positioning in the market before you set a fair and reasonable price that will still make a profit. Product pricing usually includes three kinds of calculations: y y y Price/cost for producer (total expense of production) Price/cost for retailers (wholesale price) Price/cost for consumers (retail price)

Exercise 2.5: Product Development Costs and Pricing Worksheet Using Microsoft Excel, your team must calculate what the pricing should be for its product. A sample worksheet is included here, in table form, which shows the kinds of elements that should be included in basic pricing estimates. Note: The sample pricing estimates below are based upon a product ultimately being sold to the consumer for R2.28. Production/Development Costs and Pricing Worksheet for One Item (or Unit)

Costs and Expense Items for One Unit

Estimated Amount (Sample amounts given below) R0.20 R0.60 R0.10 R0.25 R0.40

Estimated Amount (Place your teams estimates below)

Cost of Marketing Research/ Basic Cost of Product itself/Product Cost of Product Packaging (including printing, materials, etc.) Cost of Distribution/Place or Positioning Cost of Advertising/Promotion (include sales promotion and publicity, could include expense of celebrity endorsements)

A. Total Expense of Production (calculate by adding all costs above) B. Profit Percentage to Product Manufacturer Each team must decide what percentage of profit they want for each product. C. Profit to Product Manufacturer (calculate by multiplying A by ___ % called "company profit margin") D. Total Cost to Retailers (Wholesale Price) (calculate by adding A and B) This is the wholesale price of the product as it is sold to distributors/retailers. E. Profit Percentage to Retailers Each team must decide, hypothetically, what a normal retailer 'marks-up' their products in order to make a profit.

R1.55 (13%)

R0.20

R1.75

(30%)

F. Profit to Retailers (calculate by multiplying C by ___ % called "product markup") G. Total Cost to Consumers (Retail Price) (calculate by adding C and D)

R0.53

R2.28

The step-by-step guide, Excel Pricing Worksheet, provides instructions on how to set up your spreadsheet and create formulas for calculations. Your team will also present something about its product's sales goals. Be ready with answers to the following: y y y How many potential customers are expected to be interested in this product? ________________ How many products do you plan on selling in the first six months, or in the first year? ______________ How much actual profit (income minus expenses; multiply B by the number of products sold) does that mean for your company? _________________ The product developed:
y Fits potential

Product Development Requirements

The product developed:

y Fits potential

Product Plan Requirements

products or services from your animal y Fulfills the needs and wants of potential customers y Addresses competition with potentially related products y Provides a new and innovative angle The product plan includes each of the following

products or services from your animal y Fulfills the needs and wants of potential customers y Addresses competition with potentially related products

The product developed does not consider one of the following:

y Fits potential

The product developed does not consider two of the following:

y Fits potential

products or services from your animal y Fulfills the needs and wants of potential customers y Addresses competition with potentially related products The product plan is missing three or four components from

products or services from your animal y Fulfills the needs and wants of potential customers y Addresses competition with potentially related products The product plan is missing five or six components from the

The product plan missing one or two components from the

areas:
y The product to

following areas:
y Description and

the following areas:

y Description and

following areas:
y Description and

be sold y Description and features of the product y Price y Warranty and service y Target market and probable customers y Distribution method y Promotional strategies for your product y Competitors Product Development Evaluation Basic Audit Objective

features of the product y Price y Warranty and service y Target market and probable customers y Distribution method y Promotional strategies for your product y Competitors

features of the product y Price y Warranty and service y Target market and probable customers y Distribution method y Promotional strategies for your product y Competitors

features of the product y Price y Warranty and service y Target market and probable customers y Distribution method y Promotional strategies for your product y Competitors

Product development is not a review of the overall marketing strategy but a review of the implementation of a strategic product plan. Keep in mind that the product development process is typically composed of inputs from other departments beyond the marketing function including: research and development, engineering, sales, customer service, marketing analysis, and in some instances an executive sponsor. The product development function will have responsibility to perform significant creative and quantitative analysis to achieve objectives. Evaluating the creative innovation process will include assessing information inputs, procedures, and documentation to evidence effectiveness of deliverables. For example, a new product is conceptualized for an intended test market and approved by management. The strategy calls for one new product introduction and several re-launches of existing products. The product planning and development process is typically delineated into broad product categories and lead by Product Managers. Therefore, the audit team may consider a general review of the strategic planning process and create review scopes around several different product lines. This approach will allow the team to understand controls incorporated into the entire product development process from planning to execution. Potential Areas of Risk in Product Development Effectiveness The following are potential areas of risk to be considered when evaluating product development and planning. The risk indicators listed are organized into basic categories for consideration during audit planning and testing. Primary risk attributes of ineffective product development programs are generally founded in root causes associated with the following areas: leadership

and organization, market analysis, and customer requirements/wants. See appendices for KPI suggestions. Leadership and Organization y The organization does not consider product development or planning a priority in the organization. Executive sponsorship and participation is a key success factor to ensure allocation of resources and alignment with overall strategy. Nonexistent, unrealistic, irrelevant or unreliable budget and planning information may lead to inappropriate conclusions and decisions. Management does not recognize gaps between goals and required resources/expertise to execute strategy. Inability to perform successfully in terms of quality, costs and/or cycle time performance due to inferior internal operating practices and/or external relationships. The people within the organization are unable to implement process and product/service improvements quickly enough to keep pace with changes in the marketplace. Inefficient operations threaten the organization's capacity to produce goods or services at or below cost levels incurred by competitors.

y y y

Market Analysis Decision Support y The company does not benchmark against competitors or industry measures. Actions of competitor(s) or new entrants in the market threaten the organization's competitive advantage or even its ability to survive. Poor product development impedes the organizations ability to meet expectations; instances of product launch failure are not adequately investigated to identify and mitigate the root cause. Lack of relevant and/or reliable information supporting pricing decisions may result in prices or rates that customers are unwilling to pay; subsequent revenues do not cover development and other costs or do not cover the costs of risks undertaken by the organization.

Customer Requirements y y y y A lack of focus on customers threatens the organization's capacity to meet or exceed customer expectations. Ineffective product development threatens the organization's ability to meet or exceed customers' needs and wants consistently over the long-term. The company is slow to solicit customer feedback to learn about preferences and means of improvement. Faulty or non- performing products or services expose the organization to customer complaints, warranty claims, field repairs, returns, product liability claims, litigation, and loss of revenues.

Test Steps Planning Audit Objective: Developing an understanding of the product development process, related measurements, and interfaces. 1. Obtain management reports for product development by: y Marketing Research SLA for each product y Product Managers/Segment and Sales (as applicable) y Web sales/customer service (where applicable) 2. Review product development policies and procedures. y Product Lines y Product Channels y Product Managers 3. Meet with product planning team to identify strategy. y Review how function fits into overall entity y Discuss the recent accomplishments and future plans for products or organizational changes y Review and discuss mission statements, roles and responsibilities, budgets and staffing y Refine detailed audit objectives based upon session; consider following up on discrepancies from prior discussions with management and understanding to date based upon planning activities or other data like the financial statement MD&A or footnote disclosures.

Comments

WK REF

4. Create product development process maps: y High-level process maps for products, sales, promotions y Detailed process maps for product development: programs, systems, protocols y Create or obtain organization chart that incorporates those responsible for product planning and development Note: Product Development may be segregated by product line, marketing feedback, product promotion or delivery channels (web, channel/partner sales, etc.) This may create a scope consideration to ensure critical components of product development are incorporated or risks adequately managed.

Test Steps Fieldwork Audit Objective: Determine if the product planning group is operating in compliance with entity policies and procedures including contract approvals (contractor and application vendors), travel and expense policies, desktop security, and project budget reporting. 5. Review five vendor contracts (contractors, research information, software) for compliance with applicable policy and procedures including: y Contract review and approval (authority limits) y Adequate SLA such as deliverables, service, etc. y Billing and payment terms with contract 6. Select 20 expense invoices and/or employee expense reports to determine compliance with related procedures. y Approvals, expense type, expense limits y Services/products received for amounts paid y Consistent with related contracts for price, quantity/duration, and deliverables 7. Review project budgets and compare results to actual budget y Determine if variance are reasonable y Budgets approved y All related costs/cost centers incorporated y Note: time and expenses for product development efforts for all related personnel should be included as resources from other departments may generate inaccurate results by allocation to other cost centers. 8. Determine if desktop security policies and procedures are being adhered to including: y Use of passwords: no sharing, posting, etc. y Access/data security to LAN/desktop related files as sensitive product plans, designs/patents, etc. y Back up & disaster recover procedures y Change control documentation to proprietary or customized applications is controlled/secured/stored and appropriate. Note: The PCs and applications are often segregated from the network due to the sensitive nature of data and proprietary applications. Audit teams should be sure that IT controls are in place. Audit Objective: To ensure that new products are developed in accordance with market factors and the strategic objectives of the

Comments

WK REF

Test Steps Organization. 9. Who is in charge of product development?

Comments

WK REF

10.
y y

11.

12. 13.

14.

Review the long-term objectives of the product planning function. Discuss with group management the consistency with corporate strategy and executive management objectives Review the process for aligning/establishing priorities, allocation of funding (to budget approval), and alternative product planning projects Has management established, authorized and implemented documented procedures for the development and evolution of all product ranges? How can management be assured that their product plans remain adequate, appropriate, and viable, etc.? Review the number of product planning projects in the past year (& three year periods) considered successful versus those considered failures. Review and discuss the product planning decision process including measures for determining success and product initiation. Comment as appropriate. Consider in light of organizational goals, related budgets, and decision criteria. Determine if appropriate measures are in place to ensure that product design and specification stages are effectively conducted to avoid problems during later development stages Inquire about production issues identified in the design phase or later that prevented or delayed product release

15. What project reporting controls help ensure that development problems, design shortcomings, cost overruns, and production issues would be promptly detected and reported in a timely period? 16. What type of status reporting is utilized to keep related managers informed? y Does reporting provide management with relevant information y Budget to actual y Accounting treatment and line item costs to date according to plan; exception reporting

Test Steps Audit Objective: To ensure that the activities of all the involved functions (i.e. production, advertising, quality control and sales team) are coordinated in order to achieve the defined objectives; 17. Review the roles and responsibilities of product develop team resources including those committed from peripheral departments or functions y Are roles and resource allocations clearly defined? y What are the measurement processes or departmental agreements for participation on deliverables? y Review related documentation and interview a sample of participants to determine if there are adequate number of check points or milestones to report/evaluate progress y Do research projects and other product development stages have defined starting and stopping procedures to ensure resources are directed effectively and efficiently? 18. Determine whether product development processes incorporate appropriate participation from functional groups y Consider failure/success analysis and applicable root cause analysis for instances of poor coordination y Examine available information and functional group participants about the time allocation, level of participation, and matrix reporting structure y Assess the level of communication with product planning and other function in the company to comment on any perceived weakness in the process y Develop cross-functional work flow process documents y Evaluate the work flow understanding or established agreements between functional areas involved in the process: a. Understanding of mutual deliverables b. Agreement on quality measures c. Acceptance of roles and responsibility d. Instances of work replication 19. Are processes to plan products designed to ensure that all required resources to undertake development are accurately identified, cost justified, and authorized by appropriate level of management y Perform review of 10 product development budgets to determine if any instances of cost/time budget over runs were deemed the result of poor resource planning Determine the adequacy or effectiveness of the project management framework for directing resources to meet

Comments

WK REF

20.

Test Steps product development objectives

y Utilization of project management software y Allocation of duties and responsibilities y Effective reporting on budget to actual, progress towards

Comments

WK REF

milestones, and inclusion of quality testing

y Determine how individuals are assigned to product

development projects y How are resources evaluated and performance reviews/reports utilized? Audit Objective: To ensure that all product developments are fully assessed in relation to the potential market, estimated production costs and selling price. 21. What forms of market research are undertaken? y Can management be sure that the target product has a viable market? y What measures are taken to ensure that the costing criteria are accurate? y Is appropriate account taken of competitor analysis and are critical market timing considerations identified and planned? 22. Evaluate if product development projects are fully assessed with respect to: y Technical implications y Product profit potential y Equipment and tooling costs y Production costs y Timescale to launch y Research costs tools, vendor, analysis 23. Document narrative of process for evaluating market and environmental conditions. y Review most recent evaluation report y Are policies and procedures standardized and followed for this process? y Does the analysis include the following: a. Environmental concerns b. Regulatory considerations c. Legal Patent infringements, etc. y Document the process to ensure regulatory and legal implications of products are evaluated and signed off. d. Is the legal advice internal and/or external 24. Evaluate the pre-launch Go No Go decision process y Interview and document a narrative and the process for determining review and authorization

Test Steps
y Does it include all stakeholders as appropriate? y Are both market and financial considerations included and

Comments

WK REF

signed off? Audit Objective: To ensure that all information about the firm's product developments remains confidential 25. Determine if policies and procedures are adequate to ensure that product details and development plans and business development strategies remain confidential y Is information about new products and strategies shared on a need to know basis? y Determine if security considerations include: a. Physical security in work area b. Logical access security for workstations and related applications, databases, etc. c. Document shredding and retention procedures and related policies d. Data transmission encryption (where appropriate) e. Adequate confidentiality measures for print outputs and meeting rooms, etc.

26. Are employees trained on code of ethics and code of conduct mandates? y Vendor/contractor provisions for strict confidentiality and control of access to information 27. Are key staff involved in product development subject to fidelity bonding or commercial confidentiality clauses in their employment contracts? 28. Document process for ensuring adequate protection of intellectual property. y Legal analysis involved in the process y Appropriate patent protections in place

Bonded warehouse

A Bonded warehouse is a building or other secured area in which dutiable goods may be stored, manipulated, or undergo manufacturing operations without payment of duty.[1] It may be managed by the state or by private enterprise. In the latter case a customs bond must be posted with the government. This system exists in all developed countries of the world. Upon entry of goods into the warehouse, the importer and warehouse proprietor incur liability under a bond. This liability is generally cancelled when the goods are:
   

Exported; or deemed exported; Withdrawn for supplies to a vessel or aircraft in international traffic; Destroyed under Customs supervision; or Withdrawn for consumption domestically after payment of duty.

While the goods are in the bonded warehouse, they may, under supervision by the customs authority, be manipulated by cleaning, sorting, repacking, or otherwise changing their condition by processes that do not amount to manufacturing. After manipulation, and within the warehousing period, the goods may be exported without the payment of duty, or they may be withdrawn for consumption upon payment of duty at the rate applicable to the goods in their manipulated condition at the time of withdrawal. In the United States, goods may remain in the bonded warehouse up to five years from the date of importation.[2] Bonded warehouses provide specialized storage services such as deep freeze or bulk liquid storage, commodity processing, and coordination with transportation, and are an integral part of the global supply chain.

Product Cost Planning Cost Estimator This Business Scenario Map illustrates how standard cost estimates are used to establish new standard prices for materials. Several people are involved in the process to establish the standard cost within an organization. Once the price has been estimated, the impact of the estimate on inventory valuation is determined. If the new inventory value is deemed to be acceptable, the cost estimates are released and material stocks of those materials with standard price control are revalued with the standard price. Product Cost Planning is a planning tool that helps you predict the cost incurred when you manufacture a product or provide a service. Organisations use it to: 1. set prices for the valuation of finished and semifinished goods in the Materials Management application component 2. set prices for the valuation of finished and semifinished goods in the Sales and Distribution application component 3. Calculate the cost of goods manufactered or the cost of goods sold for the profitability analysis function in Controlling 4. Set a standard to measure production efficiency in Cost Object Controlling Price Determination Under Perfect Competition

In prefect competition, price is determined by the market forces of demand and supply. All buyers and sellers are price takers and not price makers. Buyer represents demand side in the market. Every rational buyer aims at maximising his satisfaction by purchasing more at lower price and lower at higher price. This is called demand behaviour of buyer i.e. Law of Demand. Seller represents supply side in the market. Every rational seller aims at maximizing his profits by selling more at higher price and lesser at lower price. This is called supply behaviour of seller i.e. Law of supply. But at a common price, buyer is ready to demand a particular quantity of goods and seller is also ready to supply exactly the same quantity of goods to buyer, such common price is called 'Equilibrium Price' and such quantity is called 'Equilibrium Quantity'. "Equilibrium Price is a price which equates both demand and supply".

Table - Sample Demand and Supply Schedules

It is the price at which total demand is exactly equal to total supply. Graphically it is the point where DD curve and SS curve intersect each other.

Graph - Equilibrium Price Determination

In the above graphical diagram, the following points have been observed :1. On X axis, quantity demand and supplied per week has been given and on Y axis, price has been given. 2. Buyers are purchasing more at lower price and vice versa. This negative relationship is shown by downward sloping DD curve. 3. Sellers are selling more at higher price and vice versa. This positive relationship is shown by upward sloping SS curve. 4. Rs. 30 is that price at which demand equates supply (300 units). So, Rs. 30 is an equilibrium price and 300 units is an equilibrium quantity.

5. Suppose, price fails to Rs. 20/-, So this results into increase in demand (as per Law of Demand) and decrease in supply (as per Law of Supply). Since DD > SS, i.e. because of low supply, sellers will be dominant and competition will be among buyers, this leads to rise in price level. (i.e. from Rs. 20 to Rs. 30) Again price will come back at original level i.e. equilibrium price (Rs. 30). 6. Suppose, supply exceeds demand (DD < SS) now buyers become dominant and competition will be among sellers. This leads to downfall in price. (i.e. from Rs. 40 to Rs.30). Again price will come back to original level. i.e. equilibrium price (Rs. 30). 7. Such automatic adjustment by demand and supply forces will keep single price in market.

Marketing plan
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use. The marketing planning process Marketing process can be realized by the marketing mix in step 4. The last step in the process is the marketing controlling. In most organizations, "strategic planning" is an annual process, typically covering just the year ahead. Occasionally, a few organizations may look at a practical plan which stretches three or more years ahead. To be most effective, the plan has to be formalized, usually in written form, as a formal "marketing plan." The essence of the process is that it moves from the general to the specific, from the vision to the mission to the goals to the corporate objectives of the organization, then down to the individual action plans for each part of the marketing program. It is also an interactive process, so that the draft output of each stage is checked to see what impact it has on the earlier stages, and is amended. Marketing planning aims and objectives Behind the corporate objectives, which in themselves offer the main context for the marketing plan, will lie the "corporate mission," which in turn provides the context for these corporate objectives. In a sales-oriented organization, the marketing planning function designs incentive pay plans to not only motivate and reward frontline staff fairly but also to align marketing activities with corporate mission.

This "corporate mission" can be thought of as a definition of what the organization is, of what it does: "Our business is ". This definition should not be too narrow, or it will constrict the development of the organization; a too rigorous concentration on the view that "We are in the business of making meat-scales," as IBM was during the early 1900s, might have limited its subsequent development into other areas. On the other hand, it should not be too wide or it will become meaningless; "We want to make a profit" is not too helpful in developing specific plans. Abell suggested that the definition should cover three dimensions: "customer groups" to be served, "customer needs" to be served, and "technologies" to be used.[1] Thus, the definition of IBM's "corporate mission" in the 1940s might well have been: "We are in the business of handling accounting information [customer need] for the larger US organizations [customer group] by means of punched cards [technology]." Perhaps the most important factor in successful marketing is the "corporate vision." Surprisingly, it is largely neglected by marketing textbooks, although not by the popular exponents of corporate strategy - indeed, it was perhaps the main theme of the book by Peters and Waterman, in the form of their "Superordinate Goals." "In Search of Excellence" said: "Nothing drives progress like the imagination. The idea precedes the deed." [2] If the organization in general, and its chief executive in particular, has a strong vision of where its future lies, then there is a good chance that the organization will achieve a strong position in its markets (and attain that future). This will be not least because its strategies will be consistent and will be supported by its staff at all levels. In this context, all of IBM's marketing activities were underpinned by its philosophy of "customer service," a vision originally promoted by the charismatic Watson dynasty. The emphasis at this stage is on obtaining a complete and accurate picture. A "traditional" - albeit product-based - format for a "brand reference book" (or, indeed, a "marketing facts book") was suggested by Godley more than three decades ago: 1. Financial dataFacts for this section will come from management accounting, costing and finance sections. 2. Product dataFrom production, research and development. 3. Sales and distribution data - Sales, packaging, distribution sections. 4. Advertising, sales promotion, merchandising data - Information from these departments. 5. Market data and miscellany - From market research, who would in most cases act as a source for this information. His sources of data, however, assume the resources of a very large organization. In most organizations they would be obtained from a much smaller

set of people (and not a few of them would be generated by the marketing manager alone).

It is apparent that a marketing audit can be a complex process, but the aim is simple: "it is only to identify those existing (external and internal) factors which will have a significant impact on the future plans of the company." It is clear that the basic material to be input to the marketing audit should be comprehensive. Accordingly, the best approach is to accumulate this material continuously, as and when it becomes available; since this avoids the otherwise heavy workload involved in collecting it as part of the regular, typically annual, planning process itself - when time is usually at a premium. Even so, the first task of this annual process should be to check that the material held in the current facts book or facts files actually iscomprehensive and accurate, and can form a sound basis for the marketing audit itself. The structure of the facts book will be designed to match the specific needs of the organization, but one simple format - suggested by Malcolm McDonald - may be applicable in many cases. This splits the material into three groups: 1. Review of the marketing environment. A study of the organization's markets, customers, competitors and the overall economic, political, cultural and technical environment; covering developing trends, as well as the current situation. 2. Review of the detailed marketing activity. A study of the company's marketing mix; in terms of the 7 Ps - (see below) 3. Review of the marketing system. A study of the marketing organization, marketing research systems and the current marketing objectives and strategies. The last of these is too frequently ignored. The marketing system itself needs to be regularly questioned, because the validity of the whole marketing plan is reliant upon the accuracy of the input from this system, and `garbage in, garbage out' applies with a vengeance.
  

Portfolio planning. In addition, the coordinated planning of the individual products and services can contribute towards the balanced portfolio. 80:20 rule. To achieve the maximum impact, the marketing plan must be clear, concise and simple. It needs to concentrate on the 20 percent of products or services,

and on the 20 percent of customers, that will account for 80 percent of the volume and 80 percent of the profit.


7 Ps: Product, Place, Price and Promotion, Physical Environment, People, Process. The 7 Ps can sometimes divert attention from the customer, but the framework they offer can be very useful in building the action plans.

It is only at this stage (of deciding the marketing objectives) that the active part of the marketing planning process begins. This next stage in marketing planning is indeed the key to the whole marketing process. The "marketing objectives" state just where the company intends to be at some specific time in the future. James Quinn succinctly defined objectives in general as: Goals (or objectives) state what is to be achieved and when results are to be accomplished, but they do not state "how" the results are to be achieved.[3] They typically relate to what products (or services) will be where in what markets (and must be realistically based on customer behavior in those markets). They are essentially about the match between those "products" and "markets." Objectives for pricing, distribution, advertising and so on are at a lower level, and should not be confused with marketing objectives. They are part of the marketing strategy needed to achieve marketing objectives. To be most effective, objectives should be capable of measurement and therefore "quantifiable." This measurement may be in terms of sales volume, money value, market share, percentage penetration of distribution outlets and so on. An example of such a measurable marketing objective might be "to enter the market with product Y and capture 10 percent of the market by value within one year." As it is quantified it can, within limits, be unequivocally monitored, and corrective action taken as necessary. The marketing objectives must usually be based, above all, on the organization's financial objectives; converting these financial measurements into the related marketing measurements.He went on to explain his view of the role of "policies," with which strategy is most often confused: "Policies are rules or guidelines that express the 'limits' within which action should occur."Simplifying somewhat, marketing strategies can be seen as the means, or "game plan," by which marketing objectives will be achieved and, in the framework that we have chosen to use, are generally concerned with the 8 P's. Examples are: 1. Price - The amount of money needed to buy products 2. Product - The actual product 3. Promotion (advertising)- Getting the product known 4. Placement - Where the product is located

5. People - Represent the business 6. Physical environment - The ambiance, mood, or tone of the environment 7. Process - How do people obtain your product 8. Packaging - How the product will be protected (Note: At GCSE the 4 Ps are Place, Promotion, Product and Price and the "secret" 5th P is Packaging, but which applies only to physical products, not services usually, and mostly those sold to individual consumers)

In principle, these strategies describe how the objectives will be achieved. The 7 Ps are a useful framework for deciding how the company's resources will be manipulated (strategically) to achieve the objectives. However, they are not the only framework, and may divert attention from the real issues. The focus of the strategies must be the objectives to be achieved - not the process of planning itself. Only if it fits the needs of these objectives should you choose, as we have done, to use the framework of the 7 Ps. The strategy statement can take the form of a purely verbal description of the strategic options which have been chosen. Alternatively, and perhaps more positively, it might include a structured list of the major options chosen. One aspect of strategy which is often overlooked is that of "timing." Exactly when it is the best time for each element of the strategy to be implemented is often critical. Taking the right action at the wrong time can sometimes be almost as bad as taking the wrong action at the right time. Timing is, therefore, an essential part of any plan; and should normally appear as a schedule of planned activities.Having completed this crucial stage of the planning process, you will need to re-check the feasibility of your objectives and strategies in terms of the market share, sales, costs, profits and so on which these demand in practice. As in the rest of the marketing discipline, you will need to employ judgment, experience, market research or anything else which helps you to look at your conclusions from all possible angles. Detailed plans and programs At this stage,you will need to develop your overall marketing strategies into detailed plans and program. Although these detailed plans may cover each of the 7 Ps (marketing mix), the focus will vary, depending upon your organization's specific strategies. A product-oriented company will focus its plans for the 7 Ps around each of its products. A market or geographically oriented company will concentrate on each market or geographical area. Each will base its plans upon the

detailed needs of its customers, and on the strategies chosen to satisfy these needs. Brochures and Websites are used effectively. Again, the most important element is, indeed, that of the detailed plans, which spell out exactly what programs and individual activities will take place over the period of the plan (usually over the next year). Without these specified - and preferably quantified - activities the plan cannot be monitored, even in terms of success in meeting its objectives.It is these programs and activities which will then constitute the "marketing" of the organization over the period. As a result, these detailed marketing programs are the most important, practical outcome of the whole planning process. These plans must therefore be:
 

Clear - They should be an unambiguous statement of 'exactly' what is to be done. Quantified - The predicted outcome of each activity should be, as far as possible, quantified, so that its performance can be monitored. Focused - The temptation to proliferate activities beyond the numbers which can be realistically controlled should be avoided. The 80:20 Rule applies in this context too. Realistic - They should be achievable.

 

Agreed - Those who are to implement them should be committed to them, and agree that they are achievable. The resulting plans should become a working document which will guide the campaigns taking place throughout the organization over the period of the plan. If the marketing plan is to work, every exception to it (throughout the year) must be questioned; and the lessons learnt, to be incorporated in the next year's . Content of the marketing plan

A marketing plan for a small business typically includes Small Business Administration Description of competitors, including the level of demand for the product or service and the strengths and weaknesses of competitors 1. Description of the product or service, including special features 2. Marketing budget, including the advertising and promotional plan 3. Description of the business location, including advantages and disadvantages for marketing 4. Pricing strategy 5. Market Segmentation

Medium-sized and large organizations

The main contents of a marketing plan are: 1. Executive Summary 2. Situational Analysis 3. Opportunities / Issue Analysis - SWOT Analysis 4. Objectives 5. Strategy 6. Action Program (the operational marketing plan itself for the period under review) 7. Financial Forecast 8. Controls In detail, a complete marketing plan typically includes:[4] 1. Title page 2. Executive Summary 3. Current Situation - Macroenvironment
      

economy legal government technology ecological sociocultural supply chain market definition market size market segmentation industry structure and strategic groupings Porter 5 forces analysis competition and market share competitors' strengths and weaknesses market trends

4. Current Situation - Market Analysis

       

5. Current Situation - Consumer Analysis [5]

     

nature of the buying decision participants demographics psychographics buyer motivation and expectations loyalty segments company resources
   

6. Current Situation - Internal



financial people time skills mission statement and vision statement corporate objectives financial objective marketing objectives long term objectives description of the basic business philosophy

objectives
     

corporate culture external threats external opportunities internal strengths internal weaknesses Critical success factors in the industry our sustainable competitive advantage information requirements research methodology research results product mix

7. Summary of Situation Analysis

     

8. Marketing research
  

9. Marketing Strategy - Product



product strengths and weaknesses



perceptual mapping

   

product life cycle management and new product development Brand name, brand image, and brand equity the augmented product product portfolio analysis
   

B.C.G. Analysis contribution margin analysis G.E. Multi Factoral analysis Quality Function Deployment

10. Marketing Strategy [6] - segmented marketing actions and market share objectives
   

by product, by customer segment, by geographical market, by distribution channel. pricing objectives pricing method (e.g.: cost plus, demand based, or competitor indexing) pricing strategy (e.g.: skimming, or penetration) discounts and allowances price elasticity and customer sensitivity price zoning break even analysis at various prices promotional goals promotional mix advertising reach, frequency, flights, theme, and media sales force requirements, techniques, and management sales promotion publicity and public relations electronic promotion (e.g.: Web, or telephone) word of mouth marketing (buzz) viral marketing

11. Marketing Strategy - Price

      

12. Marketing Strategy - promotion

        

13. Marketing Strategy - Distribution

   

geographical coverage distribution channels physical distribution and logistics electronic distribution personnel requirements
  

14. Implementation


assign responsibilities give incentives training on selling methods

  

financial requirements management information systems requirements month-by-month agenda



PERT or critical path analysis

  

monitoring results and benchmarks adjustment mechanism contingencies (What if's) assumptions pro-forma monthly income statement contribution margin analysis breakeven analysis Monte Carlo method ISI: Internet Strategic Intelligence Prediction of Future Scenarios Plan of Action for each Scenario pictures and specifications of the new product

15. Financial Summary

     

16. Scenarios
 

17. Appendix
 

results from research already completed 18. Measurement of progress 19. The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and

timescales into the marketing objectives (for example, to capture 20 percent by value of the market within two years) and into the corresponding strategies. 20. Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and with attention focused on them so regularly - forces both the plans and their implementation to be realistic. 21. Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'. 22. Performance analysis

The most important elements of marketing performance, which are normally tracked, are:
Sales analysis Most organizations track their sales results; or, in non-profit organizations for example, the number of clients. The more sophisticated track them in terms of 'sales variance' - the deviation from the target figures - which allows a more immediate picture of deviations to become evident. `Micro-analysis', which is simply the normal management process of investigating detailed problems, then investigates the individual elements (individual products, sales territories, customers and so on) which are failing to meet targets. Market share analysis Few organizations track market share though it is often an important metric. Though absolute sales might grow in an expanding market, a firm's share of the market can decrease which bodes ill for future sales when the market starts to drop. Where such market share is tracked, there may be a number of aspects which will be followed:
    

overall market share segment share - that in the specific, targeted segment relative share -in relation to the market leaders annual fluctuation rate of market share also the specific market sharing of customers.  Expense analysis  The key ratio to watch in this area is usually the `marketing expense to sales ratio'; although this may be broken down into other elements (advertising to sales, sales administration to sales, and so on).

Financial analysis The "bottom line" of marketing activities should at least in theory, be the net profit (for all except non-profit organizations, where the comparable emphasis may be on remaining within budgeted costs). There are a number of separate performance figures and key ratios which need to be tracked:
  

gross contribution<>net profit gross profit<>return on investment net contribution<>profit on sales

There can be considerable benefit in comparing these figures with those achieved by other organizations (especially those in the same industry); using, for instance, the figures which can be obtained (in the UK) from `The Centre for Interfirm Comparison'. The most sophisticated use of this approach, however, is typically by those making use of PIMS (Profit Impact of Management Strategies), initiated by the General Electric Company and then developed by Harvard Business School, but now run by the Strategic Planning Institute. The above performance analyses concentrate on the quantitative measures which are directly related to short-term performance. But there are a number of indirect measures, essentially tracking customer attitudes, which can also indicate the organization's performance in terms of its longer-term marketing strengths and may accordingly be even more important indicators. Some useful measures are:
 

market research - including customer panels (which are used to track changes over time) lost business - the orders which were lost because, for example, the stock was not available or the product did not meet the customer's exact requirements customer complaints - how many customers complain about the products or services, or the organization itself, and about what

Use of marketing plans



A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for information-rich and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself. Additionally, marketing plans are included in business plans, offering data showing investors how the company will grow and most importantly, how they will get a return on investment.

Budgets as managerial tools The classic quantification of a marketing plan appears in the form of budgets. Because these are so rigorously quantified, they are particularly important. They should, thus, represent an unequivocal projection of actions and expected results. What is more, they should be capable of

being monitored accurately; and, indeed, performance against budget is the main (regular) management review process. The purpose of a marketing budget is, thus, to pull together all the revenues and costs involved in marketing into one comprehensive document. It is a managerial tool that balances what is needed to be spent against what can be afforded, and helps make choices about priorities. It is then used in monitoring performance in practice. The marketing budget is usually the most powerful tool by which you think through the relationship between desired results and available means. Its starting point should be the marketing strategies and plans, which have already been formulated in the marketing plan itself; although, in practice, the two will run in parallel and will interact. At the very least, the rigorous, highly quantified, budgets may cause a rethink of some of the more optimistic elements of the plans.

Product Segmentation
Product segmentation is a flexible way of grouping products. In a similar fashion to a target group, a product segment contains all products that possess a particular combination of product attributes. Unlike product groups, which are a static division of products, product segmentation enables you to work with dynamic attributes. A product segment can, for instance, include products that you have sold in the last three months and with which you have made more than USD 10,000 revenue. Product segmentation simplifies both campaign planning as well as the creation of condition records in trade promotion management:  Campaign planning You can use product segments in a campaign to simplify key figure planning. You assign a product segment to the campaign and can then carry out planning based on all products contained in the segment.  Condition records in trade promotion management If you assign product segments to a condition record, you reduce the maintenance effort required for generating conditions since you do not have to link individual products with conditions. A condition record is then valid for all products within a product segment.

Prerequisites


You have created an InfoSet for the product segmentation. When segmenting products, you do not have direct access to set type data. Instead, you must work with the InfoSet data source. For segmenting product data, SAP delivers the sample InfoSet CRM_MKTTG_PRODUCT_GEN. For more information, see Standard InfoSets for Use in Segmentation and Working with Attribute Lists and Data Sources. You have made the settings in Customizing for Customer Relationship Management (CRM), by choosing Marketing Segmentation .

Features
      

You can merge and intersect product segments or remove the products of one product segment from another. You can split or reduce product segments according to certain rules. You can export the product segment to a file. You can also import products to a product segment. You can schedule the generation of product segments to run in the background. You can also schedule the generation to run periodically in the background. You can deduplicate individual product segments or all product segments of a profile set and can set a priority for the deduplication. You can work with segmentation bases to control user authorization. You can assign the statuses Active, Inactive, and Modeling Completed to your product segments.

Activities
y y Select Product as the segmentation object. The segmentation object tells the system whether the data belongs to a product or a business partner. Create a profile set with the usage Conditions. Open the Graphical Modeler and create a profile based on the product attributes. You can refine the profile as often as necessary and check how many products meet the profile criteria. Create a product segment based on the profile.

y y y y