Analyzing Your Products & Services

Your company generates free cash flows and financial value by selling its products and/or services to its consumers. Essentially, each product and/or service is a ‘business within a business’ and must be treated as such. From another perspective – as an investment project complete with the corresponding KPI – breakeven point, payback period, net present value (NPV) and the internal rate of return (IRR).

Therefore, your product management system – like your brand management system which is somewhat similar in nature– must be built around a financial valuation model for the product in question. Properly structured model based on a solid methodology and containing accurate and up-to-date content. Model developed by a highly competent and experienced financial analyst.

Speaking of competence. You will need a highly competent manager for each of your corporate products. Ultimately – the whole product management team. The team that will utilize the optimal and highly efficient product management methodology, corporate process and tools. For each individual product and for your whole product portfolio (a mature business entity rarely has just one product). Obviously, you need to make sure that the synergy between products in your portfolio is maximized at all times.

It is well-known that product management is very information-intensive. Therefore, you will need to develop – and keep relevant and up-to-date at all times – a comprehensive knowledge base on your corporate products.

As any business, your product has four fundamental financial performance indicators: its financial value, economic profit (which determines if the product in question has economic sense), ROIC (return on invested capital) and WACC (weighted-average cost of capital).

The latter reflects corporate risks associated with a specific corporate product. Typically, due to diversification effect, an individual product is riskier than your business as a whole; therefore, its WACC is higher than the corporate one.

As for non-financial KPI, a product has three – market share (in monetary and unit terms), Aggregate Competitiveness Index (aggregate and relative to each competing product), and the degree of product loyalty – number of consumers staying loyal to your product over time.

Actual values of these KPI must be compared with each other (those of the other products and with the average values for product portfolio), benchmark values (general or specific) and those of your competition (when you can legally obtain data for comparison).

Obviously, your corporate products must match your KEF, your corporate vision statement, your corporate strategies, strategic objectives, strategic plans, your UVP system, your target markets, your core competencies and competitive advantages,  needs and desires of your corresponding stakeholders, your brands and – very important – your corporate culture as well.

Regardless of whether you have declared (written) product attributes, you always have the actual ones. Clearly, the former must match the latter. This is especially true for your services – intangible products.

Also, perceptions are the only reality; therefore, attributes and qualities perceived by your stakeholders do not necessarily match actual (or declared) ones. It is your product manager job to make sure that they do.

And again, your product management system by itself is useless. To be useful and valuable to your company they must be tightly integrated into your strategic and operational management process. In other words, you need to develop and deploy a highly efficient corporate process of using your corporate products in your strategic and operational management.