Chapter 15
IN THIS CHAPTER
Getting a handle on marketing fundamentals
Using forecasting to look ahead
Making your marketing plan the best it can be
Tracking marketing activities
Adjusting your plan to increase success
This chapter discusses the phase that your product is likely to stay in the longest: maximize. Many products in the mature phase of the four-phase product life cycle (see Chapter 3) stay there for years or even decades. Maximizing revenues requires working through all aspects of marketing to continually improve the message, marketing programs, pricing, channels, and possibly the product itself.
Marketing is a vast topic, and it’s covered in-depth in books such as Marketing For Dummies by Alexander Hiam (Wiley). In this chapter, we focus on the marketing knowledge and tools that allow you as a product manager to have an effective conversation with your sales and marketing colleagues. In the end, product management, marketing and sales all want to maximize sales and profits. This book can’t possibly cover every possible situation and all the in-depth concepts of marketing, so this chapter concentrates on core marketing concepts.
By getting some basic marketing know-how, you can effectively contribute to the marketing plan and track whether the marketing campaign is a success. This chapter introduces the fundamentals of both marketing and forecasting and shows you how to put them into practice after your product has launched.
Marketing basics give you the vocabulary to talk to the folks in your marketing department and effectively work with them. You often work closely with marketing people (more often known as marcom, short for marketing communications), so speaking their language is important.
The following sections give you some insight on what goes on in the marketing department so you can be an active participant.
Marketing mix is the interplay of several different factors you can act on to change how your customer perceives your total product offering. The marketing mix is traditionally known as the four Ps, although there are actually seven Ps worth considering. We spell them out in the following sections. As you work through your marketing plan, you look at all aspects of your whole product offering and adjust it so that everything works together to tell your story to the customer.
When you plan your marketing activities and all the associated services (or review a plan being created by someone else), keep these seven marketing mix variables in mind as you build up a picture of how to best both sell the product and have customers remain satisfied with it after purchase.
The four traditional Ps are product, price, place (which is really distribution, but that word doesn’t start with a p), and promotion.
To better address your target markets’ needs, you can vary or adjust your product in the following common ways:
Most product changes are made earlier in the development process. But as you sell your product, new target markets arise and you should be ready to adjust your offering accordingly. You would typically go back to the beginning of the product life cycle process and start with conceive. Instead of marching through every step of the detailed process, however, you would quickly move through the phases to reach a final product because you are basing your revision on a pre-existing underlying understanding of the market.
To get the base price, start with the manufacturer’s suggested retail price (MSRP). Most products are then discounted depending on volume and location. One additional service product to consider offering customers is financing. Financing enables customers to buy big-ticket products and pay them off over time. This increases the number of customers who can afford your product. For a more in-depth look at pricing, head to Chapter 10.
Sometimes prices are discounted for a certain time only. This promotional pricing creates artificial urgency, meaning customers will tend to buy earlier than they otherwise would because they want to take advantage of the good price. Each industry has its own special pricing vocabulary. Your salespeople are great sources of information on how they vary price to generate sales faster.
Product managers have more or less control over pricing depending on regulation, complexity of pricing in a particular industry, and the amount of control that the finance organization demands over pricing. When product managers are able to, they recommend pricing which is then approved by management and finance.
Your product is typically distributed according to where your customers are used to buying your type of product. If you don’t have (or don’t want) direct relationships with everyone who sells your product (such as stores or online sites), you can use distributors. Distributors sell a range of products through to the outlet that sells your product to the end user. A strong interplay exists between distribution and what the end user pays because a distribution partner introduces one more intermediary. The more intermediaries requiring margins and profits from the product, the higher the price to the end user.
Product managers do not decide which distribution mechanism a company uses. Sales is the key decision maker on distribution. However, you should know how much information customers need to be comfortable buying your product from a particular reseller, channel partner, or website. In high-end goods, the type of experience that customers get from the reseller is also a factor. For example, you may find a product cheaper on Amazon, but you don’t get nearly the retail experience as you would through a high-end retail shop, which may handle returns or product setup or allow you to try out the product more easily. Certain high-end brands have extremely limited distribution because in their cases, being hard to find is part of the attraction.
Another distribution issue has to do with logistics and inventory. If you don’t want to pay to keep your product in your own warehouse and don’t want to have the hassle of dealing with stores and resellers directly, the distributors will do it for you. This distribution service is paid for with the margin that they take as they sell the product on.
Promotion is probably what you first picture when you think of marketing: ads, sales campaigns, and press tours, among others. Yes, promoting your product is fun. It’s even better when you’re really clear on the message that causes customers to buy (quickly, and at the highest reasonable price) and you communicate that message through the right marketing vehicle. It’s a complicated juggling act — one you get better at it over time. Look to “Fitting into the sales and marketing funnel” later in this chapter to better understand all the parts of the promotion sequence.
If you work with service products like airlines, banks, churches, and car rentals, the following three Ps are also very useful. In fact, they’re useful for any product because virtually any sale requires an interaction which relies on one of these Ps. For service products, however, understanding them can mean the difference between success and failure since these three Ps represent the only interaction that a customer has with the product.
The employees who deliver a service to your customers are sometimes the only contact a customer has with your product or brand. Your people (employees) and their ability to consistently and carefully deal with a wide range of customer requests determine the success of your company. Training in how to treat customers consistently and well is critical to your success as a service.
Because a service is by and large intangible, consistency in how you provide that service makes your customers feel confident that you know what you’re doing. If they call to accomplish a task, they want to be able to expect certain procedures and processes are being followed. For example, if you call your bank, the correct process is to verify your identity through a variety of checks. Calling a bank isn’t the core banking product; however, by following a consistent process, customers are confident that their bank can be trusted with the entirety of the banking products that they use. The bank, is after all looking after the customer’s money! If you receive lots of negative feedback from customers, dissect how your people are following the given process. The process may need to be updated, improved, or simply followed more closely.
In today’s online world, you have very little evidence that a transaction has taken place. The physical evidence (or even the user interface or online receipt, for that matter) is the only manifestation that a transaction occurred. If the evidence available is unclear in any way, it substantially devalues the product that was provided.
Here are a few examples of physical evidence supporting the value of a service product:
Keep physical evidence in mind for anything that the customer looks at. The physical evidence is what determines their assumption of whether a product is good, viable, and valuable.
Marketing collateral refers to all the virtual, printed, videoed, and other pieces you use to communicate about your company and your product. Your marcom people know how best to create the entire pack of materials in the most cost efficient way. For example, if they insist that a piece of collateral be a particular size, it may be because they know that increasing it by half an inch doubles the cost. They know how long it takes to create and print something or make a web page available online — including design time. They know the role of fonts, layout, and design and how best to communicate the message so the customer can actually understand and use it. Work closely with them; you’ll gain a huge appreciation for their specialized skills, and they’ll help greatly in your product success.
Much like picking out an outfit for a special event, the marcom person will propose a range of marketing materials to choose from. Marcom creates some of the collateral items. Some items like the product presentation may be created by you, the product manager. However, marcom’s catalog of the most common marketing items created can guide you as to what salespeople find useful. If you aren’t convinced by what marcom has proposed, go ask a few salespeople directly what they find useful. Based on our experience sales never even uses about 40 percent of all marketing material, so you may be able to save money by researching what exactly sales and customers need and then just focus on key marketing pieces.
The following team prepares marketing collateral
Here are a few possible collateral pieces:
Updated FAQs: Capture all the questions you get during your presentations and from talking with customers and use them to create your product FAQs (frequently asked questions). You may have to generate one for internal audiences like sales and support and another one for customers with less sensitive information. Depending on your company, your product and how you sell it, FAQs are emailed, uploaded to internal information databases and posted on websites. As the product manager, you’re often the only person who has the answers, so having FAQs you can refer others to will save you a lot of time in answering questions for each person who has them.
Instead of approaching a marketing plan as a monolithic set of tasks, break down what you need to do during each phase of the purchase process (awareness, interest, evaluation, commitment, and referral) using a sales funnel as shown in Figure 15-1. If you look over a salesperson’s shoulder, you may see this information displayed in their sales software. However, marketing also has a role in the different stages of this funnel.
It’s a funnel because a lot of customers start out in the awareness stage. As they investigate product solutions, they start focusing down on fewer options that really seem to meet their needs. They then may evaluate even fewer options before making a final commitment to one solution.
Depending on your product type, the transition between marketing and sales may be simpler or more complex and may happen rapidly or slowly. For example, when was the last time you had a sales conversation to buy a book online? You most likely didn’t. You probably completed the sale entirely through a hands-off set of marketing activities that didn’t involve a salesperson. If you were buying a new roof for your house, though, you’d most likely go through a complex sales cycle that would include a lot of interaction with salespeople.
When your marketing plan is taking shape, a good tool to use is the marketing activity by stage in Figure 15-2. For each stage of the sales and marketing funnel, you have a goal and a list of the marketing needed to achieve that goal. The right-hand column is the call to action — what the marketing piece specifically asks the customer to do.
Here is what to look for in marketing activities at each stage of the marketing and sales funnel:
Awareness: What activities are generating awareness of your brand and your product? Are they generating awareness in the right places to reach your customer personas (which we describe in Chapter 5)? What do customers need to know to get them to move to the next step? What type of information is overkill at this point? Is your message compelling enough to make potential customers aware of your product?
Another factor is whether your marketing is persistent enough to catch people when they enter the buying cycle. For example, you see a lot of car ads. Most of the time, you ignore the ads — until you want or need to buy a car. Then you find yourself watching intently, trying to decide which car gives you the features you need and matches the image you have of yourself.
Commitment: All of your sales and marketing activities won’t matter unless the customer says yes. At this stage, your focus is on what tips the scales for a sale and prevents the customer from backing away.
A key concept here is frictionless purchasing. You don’t want the customer to need to go through a lot of steps to actually buy your product. You want to make saying yes as easy as possible. Amazon 1-Click is a great example of how a company reduced the purchase process to only one click of a button.
In the digital arena, if customers visit your website, respond to your emails, or click on your ads, you can keep reminding those people about your product for an extended period of time by using a technique called remarketing ads. You can set up remarketing ads so they appear as often as you want, reminding your customer to keep considering your product. Unfortunately, these tools don’t distinguish between people who bought and people who didn’t, so, you may keep reminding people to buy a product that they already purchased.
Marketing activities are focused on motivating customers to change their behavior (that is, get them to buy your stuff). Sales enablement is where you pass the baton from impersonal mass communication to the salespeople. To do their jobs and complete the sale, salespeople need materials that help them communicate the value proposition effectively and easily. A value proposition defines the key reasons that cause a customer to select your product over another offering. The positioning and messaging statements from Chapter 10 for the basis of your value proposition. At a basic level, you need to help sales sell your product by doing the following:
Giving them whatever tools will help make the sale: written documents, spreadsheets that help them calculate the customer’s return on investment, demo scripts, competitive selling sheets (how to sell against specific competitive offerings), email templates to use under various scenarios, and much more. These sales tools go much deeper in content and are above and beyond the customer-oriented marketing collateral covered earlier in this chapter.
What you share with sales is sometimes material that shouldn’t be given to customers, so you need to be careful. If something is highly confidential and shouldn’t be shared (such as a road map of your product’s future or a controversial competitive analysis), always mark it clearly so it doesn’t get shared inappropriately. In some countries and industries, you aren’t allowed to publicly compare your products to the competition. And in many instances, you don’t want to draw attention to the competition either.
The big problem with sales enablement is that marketing often builds a one-size-fits-all set of collateral for both customers and salespeople, and not all parts are useful to both parties. To really boost your sales, you need to get proactive and build the most effective tools with a sales enablement improvement plan. A sales enablement improvement plan is a series of changes in marketing and sales activities that leads to increasing sales success. Here’s how to put a plan together:
Visit customers who have bought and not bought from you.
Find out why they really bought/didn’t buy the product. Find out what sales tools influenced their decision and which they find most useful.
Interview successful salespeople and work out the process they use to close the sale.
Probe them to find out what they actually use when selling and what they need the most.
Prepare a sales (increase) enablement plan that uses the messaging actual customers have given you and deliver it in the way successful salespeople have told you works.
Your customers told you why they bought your product. Take their words and create marketing messages from it.
In addition to focusing on customer understanding, practice becoming marketing aware. Pay attention to your reaction when you see an ad (or any marketing — even a datasheet) for all the products you’re exposed to daily. Gauge your reaction to it. Do you think it’s effective? Why or why not? Who do you think the target customer is? Is it the same market segment you’re targeting? If you’re with others, ask them what they think of the ad. What did they notice about it (if they noticed it at all)? Then ask yourself, “What is the intended purpose and target of this ad or marketing?” Also think about the cost of the marketing, its potential return on investment, and so on. Over time, you’ll get better at deciphering the marketing intent behind any kind of communication and at costing marketing material and actions yourself.
Forecasting is an integral part of life for many product managers of physical goods; for service and software product managers, it may or may not be a big part of their work responsibility. The reason forecasting is part of the maximize phase is because that’s when the need to forecast correctly becomes an ongoing part of tracking the success and failure of your products.
Forecasting can be defined as estimating future sales. The first rule of forecasting is very simple: You can’t come up with a perfect forecast. It’s always just an estimate, and no matter how many techniques and how much analysis you use, the answer you come up with will be incorrect. When you get beyond attempting the perfect forecast, here are a few suggestions for getting better at forecasting.
Your historical data is a great starting point. If you sold 100 units last month, all things being equal, you should sell about 100 units next month. This point is why one of your first jobs as a product manager is to research the sales data of your product line (including discontinued products) going as far back as possible. Group products to understand the sales trends at the product line level.
If you have no historical data, try a top-down and bottom-up forecast:
Table 15-1 shows a sample top-down and bottom-up forecasts. In each month, choose the lower of the two estimates — June: 500, July: 600, August: 600, and September 800.
TABLE 15-1 Top-Down and Bottom-Up Forecast Results
Top-Down Monthly Sales Result over 6–12 Months |
Bottom-Up Monthly Sales Results over 6–12 Months |
June: 700 |
June: 500 |
July: 600 |
July: 700 |
August: 600 |
August: 600 |
September: 800 |
September: 1,200 |
Quarterly sales cycles affect how much you sell, because your salespeople want to make their target sales numbers and will push hard to close deals in the last month of the quarter. Seasonality may also hit. Toy sales are big in November and December, but don’t count on those volumes in January after the Christmas rush. Big companies and governmental agencies buy just before the end of their fiscal years to use up budget, which can mean a large spike during this time. The point is that as a product manager you need to have a deep understanding of what drives differences in your product’s sales from one month to the next and across longer periods of time. Your historical data (see the preceding section) helps you get a sense of what those drivers are. And your sales, marketing, and operations counterparts often have great insight into the “why” of the numbers.
Physical products are often planned and built long before they arrive to customers. You need to be aware that submitting a forecast often actually drives production at a different time than what you think. You need to be very aware of the length of time that it takes to order parts, plan manufacturing capacity and transport goods. The total of these activities is your lead time.
For example, in Figure 15-3, the forecasting waterfall chart shows that in December the company submitted a forecast of 1,000 units for the month of July. In other words, in July, the new product will be introduced in the market and in the previous December, the company believes that the unit demand for July will be 1,000 units. This is a complicated concept, so beware of the difference between when a forecast is made (December) and the month that the forecast is for (July). Each month, the company revisits the July forecast number. And it fluctuates between 1,000 and 2,500 units. However, operations and manufacturing stop reacting to forecasting changes after December. They have a lead time for manufacturing of six months (December to June when the units need to be in the warehouse for the July launch). Even if the forecast is changing, the plan for product delivery isn’t changing. It’s still 1,000 units. Since product managers are aware of their product’s lead time, they often control the forecast, especially for the first few months of the product life.
Operations and manufacturing people can pull off what may seem like miracles if you ask them to. They can ship products faster (at a much higher cost). They can source additional parts if demand spikes and delay production if demand falls. If you have lead time issues with your product, work closely with your operations partners to see how flexible they can be. A word of warning: When you ask manufacturing partners for heroic measures, your company pays a price in terms of profits and stress. Your manufacturing and production partners may become less eager to do business with you, and they may even raise their prices.
You need to understand how fast customers will actually buy new products. The sell-in cycle is a time measurement of how long it takes customers to actually buy a product once they know about it. If, for example, you launch your product in July, big customers may take six months to evaluate the product and start buying in volume. So, six months is your sell-in cycle. Until six months are up, you won’t need much volume. How much is enough? Look at historical data for products that came to market before for guidance.
One other technique for forecasting is to get forecasts from a group of experts, let them each know the others’ results, and then ask them to reforecast. Just listening to the differences in points of view gives you insight into a possible forecast. Keep in mind that, generally speaking, experts are more familiar with new product technologies and will assume a faster adoption of new products than that experienced in real life.
The best way to make sure that your forecast is reliable is to be clear on the assumptions you make. Write them each down and let the operations people and salespeople know what they are. They may have different information, so pulling it all into one place is an incredibly powerful tactic to getting a better forecast.
To practice, look at Figure 15-4, which shows Product A’s historical sales data. Answer the following questions:
In reading the chart, notice the following:
There are no right answers, but you can make good assumptions and draw some logical, defensible conclusions.
Marketing plans are the ongoing version of the launch plan — often with less time urgency because the “new” product is finished and released for sale. However, your company has to continue to generate market excitement and awareness for your products. Using the marketing concepts discussed earlier in this chapter and the outline of how to create a plan coming up in this section, you can create and maintain a high level of interest in your product, which leads to meeting your sales and profit goals.
A great marketing plan considers the customer’s decision-making process and also outlines what the most effective communication method or methods are at each particular point in the journey toward buying. Each exposure a customer has to your message is called a touchpoint. For example, seeing an ad is a touchpoint. Reading a review is a touchpoint.
Many marketers and product managers make the mistake of assuming that potential customers will only have to hear about their product once to become interested because the product is so good. For less-expensive purchases or items that are purely impulse buys, one may be enough, but for a larger or more important purchase it’s likely to be many more. A good rule of thumb is to assume a customer needs at least seven touchpoints to become interested and ultimately decide to purchase your product.
As a product manager, the marketing plan most likely isn’t a plan you own or create but rather one that belongs to your marketing department. That said, if you have new product offerings or need ongoing marketing for existing products, the plan should reflect your ongoing requests as part of marketing’s overall objectives. Your input should drive the contents of the marketing plan. Here are the main elements of the marketing plan:
As a product manager, your focus should be on the following key parts of the marketing plan:
Figure 15-2 earlier in the chapter shows what you should have as a marketing component for each stage. To really succeed, you need to add in another column to cover what the metric of success for each stage is and/or what percentage of people should be moving from one stage to another. Use these numbers to drive specific goals for the marketing plan.
Here are some examples of goals that you can set for each stage.
Evaluation: The evaluation goal you set depends on your product. For example, software companies can simply allow customers to sign up and try a product for 30 days. This approach dramatically lowers the risk for customers trying the product. And if they aren’t paying for it, at least initially, they may just give it a try. But what about larger-ticket items that require complex installation, have high costs, or may be mission-critical for a business? How do you convince these customers to evaluate the product?
Many companies offer a free white paper, with in-depth technical details, or other kind of information. Customers give you their contact info, and then the company can send them a list of informative emails over time (called a drip email campaign) or have a salesperson call them. You’re always working toward a certain number of touchpoints. If your metric is a 10 percent evaluation rate and your interest stage goal is 1,000 people, your aim here is to get 100 customers to actually make it through to one kind of evaluation or another.
Because companies have an overall sales goal they need to meet, keeping an eye on actual sales is where product managers spend a lot of time when they aren’t working on the next version of the product.
Traditionally, each step in the sales funnel (see Figure 15-1) has a different success rate for each product. Monitor each stage’s success rate on an ongoing basis and use the data to alter your product revenue expectations, plans, and forecast. Table 15-2 shows an example of sales tracking (including common terms that salespeople often use for each stage) through a sales funnel.
TABLE 15-2 Sales Funnel Expected Revenue Results
Marketing and Sales Terms |
Calculated Possible Revenue |
Expected Revenue over the Sales Cycle |
Interest or leads |
1,000 × 10% × $100,000 |
$10 million |
Evaluation or opportunities |
100 × 50% × $100,000 |
$5 million |
Commitment or conversions |
50 × 90% × 100,000 |
$4.5 million |
Expected revenue in the pipeline |
$19.5 million |
If you believe that your selling cycle is over six months, you should expect to see about $3.25 million in sales per month ($19.5 million ÷ 6).
This figure is sales revenue. Your focus is on spending marketing funds effectively. If you expected an ROI of 100 times what you spend on marketing, you should be spending no more than $195,000 over six months. This approach averages out to $32,500 per month. In reality, marketing budgets are rarely spent evenly. There are peaks and troughs, which is why marketing spends are calculated over at least a quarter.
Over time, revisiting the expected revenue and profitability of a product and keeping them up to date with actual data from what has occurred is important. (See Chapter 9 for a detailed analysis of how to figure out those numbers.) So is regularly reviewing your revenue, overall profitability, and gross margins (particularly for physical goods). If these numbers leave an acceptable range, create a plan of action for addressing and fixing the problem.
Determining your market share isn’t easy. In some industries, there are analysts who follow and ascertain market share for the overall market. If you’re in one of these industries, you can buy these analysts’ reports and see where you’re ranked. Remember: These market share rankings often are given in revenue terms. You can check their biases given your known revenue to see whether they’re credible sources of information or adjust for their biases.
What happens if you have a very specialized type of product that isn’t tracked by analysts? You can use a few approaches:
Unfortunately, there is no magic market share wand to calculate this figure. However, when you’ve hit on a method that gives reasonable data, keep using it consistently. What you’re really looking for is changes up or down.
Reading through a business case (see Chapter 9) several months after your product launches can be an exercise humility as you come face to face with how incorrect your initial plans were, but it often provides great insight. Your predictions may have been wildly incorrect, but you can now learn from your past mistakes. Plan a meeting to go over actual versus planned sales results. Collectively list all the differences between the plan and the actual rollout. If possible, attribute percentage amounts to each of the variations.
Once you have reviewed your actual results against your planned business case results, determine any changes that are needed in your marketing plan. Reviewing actual versus planned results means you may avoid some of the mistakes the next time around. The more of these business reviews that you do, the more accurate you get. Finally, write up your findings. Whether you ever look at them again or not, you’ll remember it better if you write it down.
Your marketing plan will likely need adjustments as it progresses and you get more data. You need to look for ways to optimize what you’re spending, focus on what’s working, and eliminate what isn’t working.
Figure 15-5 shows two different axes of analysis and possible change you can look at:
Using Figure 15-5, you can investigate sales of a particular product. You can also compare it to other products or product lines; if those products/lines are performing better, determine why and apply those drivers to your product.
When conducting a product performance investigation, you often discover that the issue is localized to a couple of margin drivers. While you’re busy fixing the problems longer-term, you may want to provide better support to your sales folks as a short-term fix. For example, do they need any additional selling tools or information? Can you run a short-term promotion or discount that will fix pricing issues in a particular region? Rely on your salespeople to tell you what may be stalling sales and use this information to react quickly.
If your product is failing across the board, you simply may not have gotten the value proposition right. Now you have the tough job of fixing the product, and managing customer and business expectations until you can deliver the right product. This situation takes you back to the conceive phase of the Optimal Product Process (see Chapter 4), where you need to brainstorm and gather ideas for features and additions to the product to make it more attractive to potential customers. If at all possible, talk to prospects who considered purchasing your product but ended up not buying, and get specific reasons as to why they didn’t buy your product and what they bought instead.
Product cost reductions may be challenging to find. However, if you rely on your team members — such as those in operations — you may be able to cut costs which will increase profitability. These cost savings are an immediate boost to the company bottom line.
Here are a couple of ideas: