Companies producing a variety of products and brands often establish a product (or brand) management organization. The product management organization does not replace the functional organization, but serves as another layer of management. A product manager supervises product category mangers, who in turn supervise specific product and brand managers.
A product management organization makes sense if the companyâ€™s products are quite different, or if the sheer number of products is beyond the ability of a functional organization to handle. Kraft has used a product management organization in its Post division, with separate product category managers in charge of cereals, pet food, and beverages. Within the cereal product group, Kraft has had separate sub-category managers for nutritional cereals, childrenâ€™s presweetened cereals, family cereals, and miscellaneous cereals.
Product and brand management is sometimes characterized as a hub-and-spoke system. The brand or product manager is figuratively at the center with spokes emanating out to various departments. Some of the tasks that product or brand managers may perform include:
1. Developing a long-range and competitive strategy for the product.
2. Preparing an annual marketing plan and sales forecast.
3. Working with advertising and merchandising agenci0es to develop copy, programs, and campaigns.
4. Increasing support of the product among the sales force and distributors.
5. Gathering continuous intelligence on the productâ€™s performance, customer and dealer attitudes, and new problems and opportunities.
6. Initiating product improvement to meet changing market needs.
The product management organization has several advantages. The product manager can concentrate on developing a cost-effective marketing mix for the product; he or she can react more quickly to new products in the market place; the companyâ€™s smaller brands have a product advocate. However, this organization has some disadvantages too:
1. Product mangers and specifically brand managers are not given enough authority to carry out their responsibilities. They have to rely on persuasion to get the cooperation of other departments.
2. Product and brand managers become experts in their product area but rarely achieve functional expertise. They vacillate between acting as experts and having to defer to real experts.
3. The product management system often turns out to be costly. One person is appointed to manage each major product or brand and soon managers are appointed to manage even minor products and brands.
4. Brand managers normally manage a brand for only a short time. Short-term involvement leads to short-term planning and plays havoc with building long-term strengths.
5. The fragmentation of markets makes it harder to develop a national strategy from headquarters. Brand managers must increasingly please regional and local sales groups, resulting in a transfer of power from marketing to sales.
6. Product and brand managers cause the company to focus on building market share rater than building the customer relationship. Yet the customer relationship, not the brand, may be the primary lever for value creation.
A second alternative with a product management organization is to switch from product mangers to product teams. There are three types of potential product team structures: vertical product team, triangular team, and the horizontal product team.
The triangular and horizontal product team approaches are favored by those who advocate brand asset management. They believe that each major and should be run by a brand-asset management team (BAMT) consisting of key representatives from major functions affecting the brandâ€™s performance. The company is comprised of several BAMTs which periodically report to a BAMT Directors Committee, which itself reports to a chief Branding Officer. This is quite from the way brands have traditionally been handled.
A third alternative for product-management organization is to eliminate product manager positions for minor products and assign two or more products to each remaining manager. This is feasible where two or more products appeal to a similar set of needs. A cosmetics company does not need separate product managers for each product because cosmetics serve one major need â€“ beauty A toiletries company needs different managers for headache remedies, toothpaste, soap, and shampoo, because these products differ in use and appeal . A fourth alternative for product-management organization is to introduce category management, in which a company focuses on product categories to manage its brands, Procter & Gamble, pioneers of the brand-management system, and several other top firms have made a significant shift in recent years to category management.
P&G cites a number of advantages to a category management structure. By fostering internal competition among brand mangers, the traditional brand management system created strong incentives to excel, but also much internal competition for resources and a lack of coordination. Whereas a smaller share category might have become relatively neglected before (e.g. in product categories such as â€œhard surface cleanersâ€) the new scheme was designed to ensure that all categories would be able to receive adequate resources.