Any successful PM has to understand the business they are operating in as well as keep an eye out for opportunities. In this article, we’ll go through the key business skills that are required of a product manager, as well as how to cultivate them.
For a comprehensive guide on the overall skill-set, any PM should possess and more visit www.myproductmentor.com.
1. Market Evaluation
It’s easy to get so buried in your schedule as a PM that you forget to keep an eye out on the wider business context.
But when you’re thinking of potential new products you should ask yourself some key questions about the size of the market you operate in as well as about your competitors.
1.1. Market Sizing
Before you invest your time in a new product you should determine how big the market opportunity is and then make sensible decisions based on it. What you should be asking yourself is:
- Will my proposed product solve any of the problems of existing clients and, if yes, for how many of them?
- Will my product attract new clients?
- What is the market we normally operate in?
- How big is the new market compared to our existing market?
You should either resort to some business analyst or conduct the research yourself in order to get some numbers that can provide answers to these questions.
You should also ask some questions about your product:
- What is the number of registered users
- How many of them are active?
- What’s the reach of the product, both locally and globally?
- What is your market share compared to your competitors?
1.2 The Competition
One of the things you need to determine is who your direct competition is and how the product you’re proposing is different from the ones which are already out there. It’s also crucial that you understand the pricing strategies of your competitors and how those affect your product. Basically, the two factors you will compete through are:
- Price – you might decide to price your product lower than the competition, which will most definitely lead to a price war
- Differentiation – you will build your product so that it’s different from existing products and rely on the differences to bring value and attract customers
The best strategy combines these approaches and creates a distinct product that is priced lower than the competitors’ products.
Nowadays it’s even more important that you understand your competitors because the loyalty displayed by customers is much lower than it used to be. This means clients switch to different brands more easily if that switch is done without much effort on their part.
What you will need to do is keep tabs on your competition, checking on them every few months but especially before launching a new product.
You should get one or several members of your team involved in this process as well so you can benefit from a fresh perspective as well. They can come up with an overview of the competition to be used as a benchmark to assess the strengths and weaknesses of your strategy.
Having said all this, you shouldn’t be too worried about analyzing your competition, but instead, you should concentrate on ways of adding value to your product which should provide the best experience to your clients.
Although it’s important to add value for your customers, as a good PM you should also be concerned about monetization strategies and how to add value to the business.
The elements you need to understand are your products’ revenue stream and their impact on your business’s overall revenue. You should bear in mind that whether revenue is included in the KPIs differs from company to company.
Start-ups – for example – care more about the product satisfying the demands of the market as opposed to larger companies (where a product-market fit has already been established) who worry more about revenue.
Also, products which are B2B are more focused on monetization than B2C ones. Consequently, you should consider the impact of monetization on the income of your company in particular and how (or whether) you can include it in the product you’re developing.
As a PM you should understand what creating value means since every business strives to do it in some form. Any business offers clients core values as well as some derived value. For instance, the core values that a dance studio might offer are that it teaches dancing techniques and keeps its clients fit. You could find additional value by doing the following:
- Organize dance competitions that attract customers from other dance clubs and charge a participation fee
- Host social dancing evenings which are publics and where again customers pay a fee to enter
The customer’s needs and the market are ever-changing so you always need to watch out for new forms of value. PMs identify a need in the market thus creating value but also delivers that value by creating a product meeting those needs.
As a PM you need to prove to any potential clients that what they’re designing fits their customers’ needs. In most companies, there is a divide between marketing teams and PMs. Having said that, a PM often works very closely with the marketing team therefore you should be aware of how the product is being sold to the target audience.
Because of technological advances, it’s now much easier to target your desired audience, even on a very small budget. What most marketers will do is test a broad number of audiences to determine the impact of your product, then they will use their findings to narrow down that audience.
Here are some channels that you might consider:
- Advertising networks
- Google ads
- Traditional media (TV, radio, etc.)
- Facebook ads
- Email marketing
5. Strategy Development
Coming up with a successful product strategy more often than not means starting with a few hypotheses which you then proceed to test. It’s the best way to decide the direction you want your company to go, where you stand in the market versus your competition, and what you might do to attain your goals.
In order to develop your strategy you should answer some essential questions:
- What issues does your product solve and who is the beneficiary of these solutions?
- What are your goals and objectives and what will show that you have attained them?
- What one thing should your customers associate your company with?
- How are you going to defeat the competition – with pricing, diversity of offers, etc.?
- If your product is unique why is that?
- What’s a good way to simplify your market offering?
- What new thing are you bringing to the market?
- What’s a good way for your products to attract new market segments and what are these segments?
6. Problem Solving
This is really a prerequisite for all the aforementioned skills. The ideal way to solve business problems is to break down the main problem into a subset of problems and come up with a framework designed for the specific issue. This is called root cause analysis and it’s similar to solving a case interview.
We have briefly reviewed the necessary business skills which you both need to possess in order to be a successful PM and which you need to demonstrate in a product management interview. The best way to develop these skills if you’re trying to transition into product management is to get some actual PM experience and also practice them with real PMs.