5 lessons a product or market manager can learn from a master chef.
The typical industrial manufacturer sells through multiple channels and produces hundreds or even thousands of various product SKUs for dozens or hundreds of customers from several facilities. Basically, there’s a lot of moving parts to the product and market manager’s job role that includes channel, product, customer, end-use segment, and product asset. There is a lot to unpack to get the job done ‘right’. When done ‘right’, effective mix management can yield truly significant profit gains. Just like a master chef that has to serve a 5-course meal to some of their finest guests, it takes strategy and teamwork to produce a successful and profitable night. Creating a culinary masterpiece can seem almost impossible without having the right tools to back you up.
I hope you’re hungry because you’re about to learn five lessons on how a product or market manager should serve a heaping plate of tasty profits from the perspective of a chef.
To kick off a meal, it usually begins with an appetizer. We like to call ours ‘analyzing the market’ served on a silver platter. Weird name for an appetizer, but it brings up some pretty crucial questions you should be asking yourself first. How are you planning to draw in your consumers? It’s important to establish that first impression to create a clear preview of what’s to come. You should wonder about what’s happening in the external market. What market conditions are we facing? What business are we in? How do we want to play in that market, strategically, versus the competition?
Now that you’ve gotten the ‘wow’ factor taken care of, it’s time to decide the main course: Define mix strategy and structure. At this moment, you should decide if your business needs a new strategy or, in this case, if you’re going to go with the steak or possibly a vegetarian option. If a new strategy isn’t what you need, what tweaks need to be communicated to get all of the functions aligned? What structural changes (asset footprint, product range, organizational structure, etc.) are required? Do we need to rationalize the product range? How will this help optimize our cost structure? While you get the strategy and structure decided with the main course, it’s crucial to the flow of the dining experience to decide what pairs well with the protein you landed on.
For product and market managers, the sides on the plate are to continuously and ingeniously identify potential mix change opportunities. The third lesson is making choices to drive tactics that align with your strategy and structure to optimize profit. Where are the pricing outliers for price adjustments to be made by sales to optimize profit? What incentives or support is required to get the sales team and your channel partners to over-weight their time and effort selling the most profitable products? You get to decide if rice or steamed vegetables best complements the filet mignon or flawlessly seared tuna, which leads to the fourth lesson of the dining experience.
While the meal in itself is crucial, it’s the plating, serving, environment, lighting, and even background music that creates the ultimate customer experience. Implementing mix adjustments is where the mix manager must translate their decisions to choreographed actions by the supply chain and commercial teams. What actions are required for your business to ‘digest’ the decisions made in the previous course? The four lessons we’ve gone over have finally led you to the very best part: dessert.
The final step in mix management is taking stock of the entire meal—measure results. While hot coffee and your signature dessert are making their way out to tables, you unwind and assess what worked and what didn’t throughout the night. Here you need to bring world-class data and analytics to factually quantify the results. For the chef-owner of a restaurant, it’s like reviewing the receipts at the end of a busy night. Which items were selected? How fast did the kitchen generate those items? Which recipes need to be adjusted because they slow down the execution of the meals getting served? By measuring the results, you check out if the changes you made during the previous courses improved your business.
Here’s a simplified visual to show the 5-step process to managing your mix:
Setting aside the dinner analogy, for now, you have to be able to measure mix, figure out what worked and what didn’t, and adjust accordingly on the daily, monthly, and even annually now that you have a tool to do so. It’s about finding a strategy to make something that can be as complicated as running a popular, fine-dining restaurant, and turning it into something that is repeatable and profitable.
As the arrows in the image depict, it will remain a continuous loop to efficiently and accurately shift your mix. Surprisingly, the great thing about the ‘mix effect’ is that, even if you keep your prices, costs, productivity, and volume (utilization) absolutely unchanged, proactively shifting your customer/product mix can drive up your revenue and profits quite significantly.
Truth be told, very few manufacturing firms know which mix of products they need to be selling at what prices to what mix of clients through which mix of channels to maximize their overall bottom line. Profit Velocity assists manufacturers through the entire mix management journey – from analyzing their ‘as is’ situation to identifying the most lucrative ‘can be’ opportunities to implementing and tracking changes.
Creating the ultimate dining experience that’s meant to serve dozens or thousands of consumers can seem practically impossible, but it doesn’t have to be. By measuring the speed of profitability per product with our solution, companies can truly measure mix at a more precise and more insightful level than traditional cost accounting that was mentioned in the last blog. You can read more in our Mix Management eBook that examines the ‘5 Profit Levers’ that manufacturers must understand and manage in order to have complete control of their business and their bottom line.