Improving Product Profitability

27 Jan

Revenue minus expenses equals profit. It’s a simple equation, but not always simple to influence.

As a role that is closely related (and frequently within) the marketing team, Product Managers & Product Marketers can get caught up in focussing on efforts to drive more revenue: supporting customer meetings for new business development, training the sales team, developing collateral, selecting the best feature that will make us the most money etc.

Spending some time focussing on the other side of that equation can also create a direct boost to the business cases of the products we manage. As a hardware product manager, the products that I work with have an actual cost of components, plus other overhead/indirect expenses which are allocated against the product. Expenses also of course come in the form of funding the development team to create the product as well.

Over the past few months, I have been systematically identifying the largest cost contributions to my products and ensuring they are reviewed/justified by the internal team responsible for that line item.

Through this scrutiny, I was recently able to achieve a meaningful improvement in the profitability of the whole product. That of course meant gently persuading internal stakeholders to reassess their assumptions or improve the costs being charged to my product line.

A similar effect can also be achieved by ensuring that development expenses are only being spent on feature developments that meet a market need. Not recommending that you try to push your developers to do more with less – although that may save some $$, it will aggravate your best ally!

The beauty of improving the cost basis on the expense side of the equation is that is provides an immediate boost to the product profitability (including revenue from existing customers). Improvements in this regard flow directly to the bottom line.

How have you improved your product profitability?

also see: Influencing without Authority by Jennifer Doctor http://outsideinview.com/2011/01/26/11-ways-to-influence-without-authority/

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One Response to “Improving Product Profitability”

  1. Stewart Rogers February 3, 2011 at 1:41 pm #

    I have many ideas on trimming expenses for my products. Probably best I not write them publicly though. 🙂

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