- Jim Barksdale
An evolutionary path
Metaphors aren’t always helpful; sometimes they can lead to misunderstanding the nature of a challenge by oversimplifying it or otherwise misrepresenting it, leading to failure. They can mask a subtle but significant factor by excluding it from the metaphor. For the same reason, an apt metaphor can aid the understanding of an otherwise difficult problem, not because the problem itself is inherently complex, but because it is obscured by irrelevancies.
Product management is one such challenge; its wheels and cogs are often obscured by many seemingly telling factors that often turn out to be irrelevant. Over the years, I have toiled over issues in the pursuit of product success, only to find a small handful of significant driving factors behind product success. To that end, I have come up with a simple metaphor that portrays the essential elements of a Product Category.
Imagine you are at the edge of a dense forest you wish to cross. Pathways open up and close again over time with the changing vegetation, animals and weather. Where and when do you start your journey? How will you know how far you have gone and how far there is left to travel? How many of your resources may you safely consume, and perhaps more importantly, how much might you be able to forage along the way to sustain you? What path will regularly present the most likely supply of such sustenance, and yet still allow you to cross the forest in optimal time?
When I look at a Product Category, I do not see a stationary challenge or opportunity, but rather a path through a forest; a path which, in its early stages of growth, changes under the very feet of the traveler; or it may have a beginning but no obvious end; or it may have an end, but no longer any beginning. It may even have lost its beginning but the end is not yet clear.
The Product Manager will lead his team down this path. He must make good progress, yet guide his team to ensure optimal replenishment of supplies as they progress. Thus, he must know where the next fruit tree grows while maintaining appropriate reserves. He must negotiate obstacles, inspire his fellow team members, protect against predators, partner with natives, and avoid false and dangerous distractions. Vision regarding where Nature and Climate will open the forest will assist him towards a safe and fruitful journey and destination. Losing his way, on the other hand, will spell loss, pain and perhaps oblivion.
- The path of the traveler is not a straight line through the forest.
Fresh as the morning dew, the traveler may start the journey with a full pack, eating heartily from the seemingly bottomless supply of trail mix, snack bars and sports drinks. At great expense, he might even airdrop supplies to him at various points in the forest, but the traveler who forages as he goes will fare best on this long journey. To live off the forest is to know the forest’s secrets; to know its secrets is to know how to traverse it.
The following pages will help you stay on that path through the forest. It will explain why real customer revenue, the “foraged food” of business, is more nutritious than any foodstuffs you may secure outside the forest.
What is a Product Category?
A Product Category:
- Has an established price range.
- Lasts typically for at least a decade, often decades.
- Consists of at least two competing products.
- Often has one dominant member.
- Is usually distinct from other product categories.
A company can have offerings in several Product Categories and domination in one Product Category does not mean domination in another Product Category.
Let’s parse the above definition into its constituent parts so that it is fully understood.
A list of products…
Your prospect must have a real choice. If your prospect does not have a choice, one of the following may be the reason:
- The Product Category probably does not exist yet.
- The Product Category is in the Embryonic Stage.
The rules governing the care and maintenance of your product will apply to early-stage product development, where prospects don’t fully understand what they should be looking for in your product.
For a Product Category to exist, the list must be of products that are similar, and there must be at least two on the list.
Here is a list that is not a Product Category, although your prospect might have all three written on a piece of paper before they go shopping:
- A table-lamp for under $40
- A Gallon of milk
- A white, button-down business shirt.
A customer is unlikely to be thinking, “Should I get the table-lamp or the gallon of milk…decisions, decisions…”
There will be cases when a person will decide to put off buying that spiffy new white shirt in favor a table lamp, but buying the table lamp does not solve the problem of needing the shirt. Thus, the shirt and the lamp do not belong to the same Product Category.
Purchaser will pick one…
When a customer buys one of the elements within a Product Category, the purchase transaction is closed and he will not purchase another product from the list at this time. The definition of the Product Category is reinforced by the fact that the prospect rejects your offer as soon as he decides to purchase your competitor’s product.
- When your prospect drops consideration of your product when he picks your competitor’s, you know what your Product Category is.
To solve a problem…
When the customer makes the purchase, his problem is solved, at least for the moment. This last element of the definition is perhaps the most important. The customer is trying to solve a problem, which may be practical: e.g., he bought a microwave oven for his new apartment because he could not cook without one. The problem may be emotional: he bought flowers for his sweet Aunt Gertrude because he wanted to satisfy his need to express love. A mix of both practical and emotional considerations drives many purchases. For example, automobile purchases are often driven (no pun intended) by both transport and self-image needs. Whatever the reason, once the purchase is made, the customer moves on from that problem and the remaining candidates on the list are dismissed, at least for the time being.
Product Category Cycle Time is the approximate time before a customer will need or want to make another purchase of a member of the same Product Category, usually because his previous purchase has expired, been consumed or disposed of in some way.
If you smoke three packs of cigarettes a day, you might consume a pack every eight hours, but the average smoker probably gets through a pack a day. Therefore, the Cycle Time for the Product Category to which that cigarette brand belongs might be about one day. The Cycle Time for a Product Category to which the Toyota Camry belongs might be somewhere in the four or five-year range, I would guess, and in the echelons of product management in the Toyota Motor Corporation, someone has that figured out.
If your prospect is “still in the market"[2] after he purchased what you believed was your competitor’s product, it is probably because your product and the one they bought are not actually in the same Product Category.
Consider the following two situations. One suggests a single Product Category; the other illustrates where Product Category boundaries are unclear.
- Company X has decided to create a software solution “in-house” rather than buy an equivalent off-the-shelf software product.
- Company Y has decided to create a software solution “in-house,” but continues to consider the equivalent off-the-shelf solution, even after committing resources to the in-house solution.
In the first example, Company X’s objective was to solve the same problem that the external software vendor’s product solved. Once it was decided to do the work in-house, the “problem was solved” in management’s eyes, so that Company X could dispense with further consideration of the off-the-shelf product.
Company Y, on the other hand, was actually trying to solve a different problem by developing the solution in-house: they were trying to learn more about what their true requirements were before purchasing and committing to an off-the-shelf product, which means Company Y was trying to solve a different problem (gathering requirements) to the problem solved by the off-the-shelf product. This second scenario is often a symptom of an immature or non-existent Product Category. The prospect might not know enough to be able to jot down a list of solutions to choose from, and that should warn the product vendor that the market might not be ready for their product.
- If your product is still competing with homegrown solutions, you may have arrived at the market early.
Being told by your prospect that you are “still in the running” might get your team excited about how powerful your solution must be, but it is usually bad news. As painful as it might sound, it is often better to lose a race to a competitor early, learn why and stop wasting money on a prospect that you were never going to close in the first place.
This book is a member of a Product Category: Non-fiction, under-four-hour publications for less that $15 relating to product management. Not as crisply defined as the Product Category to which the Toyota Camry belongs, but nonetheless, all the criteria of Product Category membership apply. Its Cycle Time might be as short as 4 hours (the moment you finish reading this, you will buy another publication), but it is probably measured in weeks or months.
Examples of Product Categories:
- Four-door, 25+mpg cars (around $25k)
- Walkman ($100)
- MP3 Players ($300)
- Small SUVs ($25k)
- Large SUVs ($35k)
- Luxury SUVs ($50k)
- Pack of high-tar filtered cigarettes ($5)
- Centralized data backup software programs ($1k+)
- 100-passenger jets ($Ms)
- Low-function mobile phones ($100)
- Desktop word processing programs ($100)
Figure 1 – Product Category: Small SUVs
Figure 2 – Product Category: Luxury SUVs
Figure 3 – Product Category: High tar cigarettes
Each Product Category has its own list of members. Many of them are so familiar that you could list their members.
Product Category Erosion
All good things come to an end and the sun will set on even the strongest Product Category. This happens for many reasons:
- Technology shift: Ever notice how few public telephones there are these days? You can thank the ubiquity of mobile phones for that.
- The problem goes away: For example, some years from now, low-cost gene therapy may eradicate diabetes. This will spell trouble for the synthetic insulin Product Category.
- One player becomes too dominant: A monopoly will hasten the demise of a Product Category because customers will resist making a purchase in the absence of real choice, creating opportunity for others to compete from outside the Product Category, perhaps even spawning an entirely new Product Category. As long as there is an Avis, there will be a Hertz: you need competition to keep you on your toes.
- Real competition is good for you.
Why must you know your Product Category?
If you do not know where you are going, any road will take you there
- Lewis Carroll
Your Product Category:
- Defines whom you compete with.
- Indirectly defines your customer.
- Tells you approximately, how much you can charge and suggests a pricing model.
- Helps you differentiate your product.
- Restricts your potential feature set.
- Tells you how big the market is for your product.
You cannot know what the correct price or pricing model is at this stage. When the Product Category is immature, spend less time on theorizing about pricing models and focus instead on what value you can give to your customer and determine where the perimeters of your Product Category might lay in the future. Your objective during the early stages of the evolution of your Product Category is to build a solid customer base. In time, they will teach you all you need to know about the pricing model that works best.
Your Product Category defines the length and breadth of your product’s opportunity in the market. Your Product Category will give you an indication of how much to invest in your product, how to sell it, how to recognize a true prospect, how much they will pay, what you should add to your product, and when you should make changes to your product.
Perhaps most importantly, your customers will tell you what not to add to your product; you won’t get paid well for adding product features that lie outside the Product Category to which the product belongs.
The size of the high-tar cigarette market has no impact on the sales opportunity for the Toyota Camry. This is because the sales opportunity for the Toyota Camry is constrained by the perimeters of the Product Category to which the Toyota Camry belongs, which is Compact, well-appointed sedans getting 25-30 mpg in the $20k - $30k price range. You can easily identify other members of that Product Category.
Regular, Extra or Premium?
As stated earlier, a Product Category determines a price range for the products within it. More often than not, as the Product Category matures, one or more of the products within it are regarded as “Premium.” These Premium products may command a figure in the upper end of the price range within the Product Category, while others may be relegated to the lower end of the price range. The anointed leader within a category does not necessarily command a premium price. A product with a small share of the Product Category can be regarded as the premium player.
What is your Product Category?
Imagine for a moment that one of your prospects has a list of products written on a piece of paper, one of which is your product. They will purchase one item on the list to solve a problem. Jot down the list of products you believe is on that piece of paper. If your prospect has done his homework, that piece of paper contains a list of the members of your Product Category.
It is not good for a product to belong to no Product Category. At least, if your product does not belong to any, know that it does not. A Product Category exists because there is a problem that needs solving--a problem that customers are willing to pay money to solve. If your product does not belong to a Product Category, it may not solve a problem that folks are willing to pay for. It is possible, of course, that your product solves a very tough problem that has been around for eons and only recently has a viable solution been possible. Even in this case, though, you should be able to come up with some weak or primitive members that could belong to your Product Category. It is rare for a prospect to be limited to a single source for a solution to his problem. There are a few examples like that out there, such as
You might hear “We’ve got the only solution available,” or “The customer really has no alternative.” If you truly find yourself in that situation, enjoy it; it will not last. Customers always like a choice, and if a choice is not available to them, they often postpone their purchase rather than risk buying the “only solution”. Either you are ahead of a tidal wave of customer demand, or you have a product few people want to pay for.
Understand this: the existence of competitors is necessary for your success. As counterintuitive as it may be, losing deals to competitors can be good news; it is often proof that the market for your product exists. You just have to make sure you get most of the good deals.
Chapter exercise
1. What problem does your product solve? __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
2. List other products that you are sure your customers considered before selecting your product? __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________
List three ex-prospects that considered your product, but bought a different product and dropped further consideration of your product in the last year? (If they did not drop consideration of your product, it does not belong to the same Product Category.)__________ __________ __________ __________ __________ __________ __________ __________
Write the names of the top five products in your Product Category, including your own product, and their equivalent price [3].
Product name - Equivalent price
_____________________________________________
_____________________________________________
_____________________________________________
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[1] If you provide a service to your customers, that service may also be considered a product in the context of this definition. Often, companies “productize” their service and hire Product Managers to manage delivery of that service.
[2] They are still considering your product.
[3] Equivalent price means how much you would spend on roughly the same amount of product. Example: The base model of a Toyota Camry might be $20k. How much would a similarly equipped Honda Accord cost?
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