Marketing Of High-Technology Products and Innovations Jakki Mohr, Ph.D. Professor of Marketing...
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Transcript of Marketing Of High-Technology Products and Innovations Jakki Mohr, Ph.D. Professor of Marketing...
Marketing Of High-Technology Products and Innovations
Jakki Mohr, Ph.D.Professor of Marketing University of [email protected]
May 26-27, 2004Volterra, Italy
Objectives
Overview key ingredients for effective high-tech marketing
Provide opportunity to develop the outline of a basic marketing plan for your company
Provide well-rounded foundation on marketing as a critical factor for high-tech business success
Agenda
Day 1 – Foundations of high-tech marketing success– Begin development of marketing tools
Day 2 – Overview critical barriers to success– Continue development of marketing plans
Barriers to Effective High-Tech Marketing
Corporate culture that worships technical skills and de-emphasizes marketing – “Engineering does its thing and then marketing
helps get it out the door.”– “Customers don’t know what they want’ – “Marketers don’t know what they’re talking about”
Why is this important?
Higher level of success is the result of close, formal linkages between R&D and marketing
When these two functions interact sequentially, only 1 of 60 ideas is commercialized successfully.
When these two functions interact in parallel cross-functional teams, 1 in 7 ideas is commercialized successfully.
Critical Barriers/Sticking Points
Focus on sales– “technology push”
Functional silos with incompatible metrics for success
A manager and an engineer…
A man is flying a hot air balloon and realizes he is lost. He reduces altitude and spots a woman down below. He lowers the balloon further and shouts,
"Excuse me. Can you help me? I promised a friend I would meet him half an hour ago, but I do not know where I am."
The woman below says, "Yes, you are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 and 42 degrees north latitude and between 58 and 60 degrees west longitude."
"You must be an engineer," calls down the balloonist. "Yes, I am," replies the woman. "How did you know?"
A manager and an engineer (continued)
"Well," says the balloonist, "everything you have told me is technically correct, but I have no idea what to make of your information, and the fact is, I am still lost."
The woman below says, "you must be a manager." "Yes, I am," replies the balloonist, "but how did you know?" "Well," comes the answer from the engineer, "you did not know
where you are, nor where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is, you are in exactly the same position you were in before we met, BUT NOW IT IS SOMEHOW MY FAULT."
Cross-functional integration(Interfunctional coordination)
Rank your company on the following attributes (1-5)
– I understand the role of marketing in the product development process
– Marketing is an integral part of the product development process
– Marketing is more than an afterthought to product innovation– Marketing and engineering have a common language for talking
about customer needs– There is mutual respect for the knowledge my
marketing/engineering counterpart brings to the table
Development of Marketing Plan/Tools (Continued)
– Additional Sources of Revenue Licensing, Service Strategies
– Market Segmentation – Pricing – Distribution – Marketing Communications (Advertising & Promotion)– Customer Relationship Cycle
Product considerations
Licensing Service Strategies
QFD and Kano Concept
“What to Sell” Decision
Continuum of options based on the additional expenditures customers must
incur beyond the cost of the purchase to derive the intended benefits of the technology
– Know-how only– “Proof of concept”– Components to OEM– Final products to end-user– End-to-end solution, service bureau
Service StrategiesHigh-Tech
Low-Tech
Product Service
Relationship between Entries in the Market and Quality
ONE-DIMENSIONAL QUALITY
Model 1
Model 2
Model 3
Time
Development Overall Revenue Incr. Revenue New Models
Attractive Quality
Must be quality
QFD—Using the Kano Concept
Satisfaction
Dissatisfaction
Dysfunctional Functional
Attractive One-dimensional
Know vs. UnknownSpoken vs. Unspoken
Must-be
Marketing is…
The High-Tech Pricing Environment
Customer fears of obsoleting
prior purchases
Short, volatile product life
cycles
Pressure on Price/performance
ratios: Moore's Law
Rapid pace of change
Networkexternalities
Competition
Unit-onecosts
The Internet
Customer's perceptions of cost/benefit of new
technology
Investments in R&D
Backward compatibility, derivatives
The 3 Cs of Pricing
Competition
Customers Costs
Unit-One Costs
When the cost of producing the first unit is very high relative to the costs of reproduction– Due to R&D/embedded knowledge – Ex: development vs. reproduction of software
Additional Customer Considerations
Total Cost of Ownership– Ex: Lifetime cost of owning a corporate PC is
$6,400 per year (in 2002; average life of 3-5 years) Including hardware, software, installation, training,
maintenance, infrastructure, and support Purchase price accounts for only 10% of total cost
Implication: – Show total cost of ownership lower than
competitor’s, despite higher initial outlay
Customer Perceptions of Benefits/Costs
Benefits: – Functional– Operational– Financial– Personal
Costs: – Monetary– Nonmonetary
Customer-Oriented Pricing
How will the customer use the product? What are the benefits the customer will receive
from using the product? Calculate customer costs and understand
customer’s trade-off between costs and benefits.
Analyzing customers for profitability
High
Passive Carriage trade
Net Price Paid
Low
Bargain basement
Aggressive
Low High Cost-to-Serve
Implications of Customer-Oriented Pricing
Pricing decisions are part of product design decisions
Different segments value the product differently
Therefore, different customers yield differential profitability
The 3 Cs of Pricing(Hands-on Exercise)
Recall our discussions of – CRM, – customer value, – competitive analysis, and – compelling benefits that enhance customer
productivity on a critical success factor.
Provide some insights into your company’s price strategy.
Channel Considerations in High-Tech Markets
High-Tech Channels
Need for indirect channels to provide value to manufacturer
Blurring of distinctive members in the supply chain
Evolution of high-tech channels
The Internet
Gray markets
Black markets, piracy and export restrictions
Supply chain management software
Vertical hubs
Matching Tasks to Channels, By Segment
Lea
d G
ener
atio
n
Qua
lify
Sal
es
Pre
sale
s
Clo
se S
ales
Pos
t Sa
les
Serv
ice
Acc
t. M
gmt.
National Acct. Mgmt.
Big
Direct Sales
Telemarketing Medium
Small Direct Mail
Retail Sales
Distributors
Dealers/ VARs
Tasks
Channels
Advertising and Promotion Pyramid
Salesperson
Telemarketing
Catalog Literature
and Manuals
Trade Shows, Seminars, Training
Direct Mail
Public Relations /Publicity
Media Advertising
Narrow Broad
Coverage of Target Audience (Reach)
Cos
t p
er C
onta
ct
HIGH
LOW
What hi-tech salespeople say and what they mean by it
All new: – Parts not interchangeable with previous design.
Field-tested: – Manufacturer lacks test equipment.
Revolutionary: – It's different from our competitors.
Breakthrough: – We finally figured out a way to sell it.
Futuristic: – No other reason why it looks the way it does.
What hi-tech salespeople say and what they mean by it
Distinctive: – A different shape and color than the others.
Re-designed: – Previous faults corrected, we hope.
Customer service across the country: – You can return it from most airports.
Unprecedented performance: – Nothing we ever had before worked this way.
Media Considerations
Wasted Coverage Message Strategy Impact and Repetition Measurement/leads/follow-up Customer Experience!
– Moments of truth– Post-sales encounters– Trust and Word-of-Mouth
Advertising and Promotion Pyramid (Hands-on Exercise)
Identify– Your company’s current approach to A&P– Tools that could be usefully added to the mix– Additional information that would be useful
Using the Internet
Search engine positioning
Branding in High-Tech Markets
Advantages of strong brands to firms: – Command premium prices – Have credibility which can be leveraged in new markets
Can lower customer acquisition costs
– Reduces risks with new product introductions Advantages of strong brands to customers:
– Signal of a safe choice: trustworthy and long-lived– Decision-making heuristic
Branding in High-Tech Markets
Short product life cycle and customer fear, uncertainty, and doubt put a premium on having strong brand names.
Strategies to Develop Strong Brands
Supply steady stream of innovations that deliver value
Emphasize traditional media advertising and PR tools rather than sales promotion
“Influence the influencers” to credibly stimulate word-of-mouth via opinion leaders
Strategies to Develop Strong Brands (Cont.)
Brand the company, platform, or idea (rather than the individual product)
Rely on symbols and imagery to create brand personality
Effectively manage all points of customer contact Work with partners in co-branding Effectively use the Internet
Moments of truth…
A software manager, a hardware manager, and a marketing manager are driving to a meeting when a tire blows. They get out of the car and look at the problem.
The software manager says, "I can't do anything about this - it's a hardware problem."
The hardware manager says, "Maybe if we turned the car off and on again, it would fix itself."
The marketing manager says, "Hey, 75% of it is working - let's ship it!"
Develop Brand Equity for Small High-Tech Start-Ups
Conclusion and Wrap-up Exercises
Exercise: Key Take-Aways– What are the three most important take-aways that you learned
today? – What three things will you do differently in your job tomorrow and
the next day, based on these insights? – What do you need to implement these ideas successfully? – What will prevent you from adopting a market-orientation your
company? – Identify three “next steps” in development marketing.
Customer Value Creation and the Role of Employees
Manage through the values of the organization
Customer is key All systems/structures focused on it. Marketing MUST be integrated with other
business functions to share in meeting customer needs effectively.
Keeping the Customer In Mind
Customer Marketing Engineering Product Technology
Rock Pile
Would you like a rock?
Sure
Here’s a blue rock?
OK Find me a big, cheap, fast, dense, sharp...rock
Wrong rock
Do you have a red rock?
What’s wrong with blue?
I can make a purple one
OK, but only if its square
We don’t have square ones
The “Far Side” of Product Development
Customer Value Creation Through Alliances
Customer value proposition only as strong as the weakest link.
Disparate firm cultures can be fatal. All partners must embrace the marketing
concept and focus on creating superior customer value.
Framework for High-Tech Marketing Decisions
Marketing – 4Ps and the Internet
High-Tech Firm Internal Considerations Core Competencies/Core Rigidities Funding Considerations Market Orientation Relationship Marketing R&D/Marketing Interactions
Customers Understanding Customers High-tech Research Forecasting Customer Decision-Making Adoption Diffusion of Innovations Target Marketing
Societal, Ethical, and Regulatory Concerns
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Conclusion and Closing Insights
Success factors – Marketing philosophy must pervade the entire enterprise. – R&D/Marketing integration– Know your customers – Segment effectively– Know their perceptions of value– Don’t assume tactical marketing = marketing – Customer relationship management for the long-term
Marketing Tasks and Responsibilities
Core competencies Hire an expert,
– but don’t give authority Generate leads, publicity, follow up with
customers, manage Website, etc. etc. Downside:
– Can you afford not to devote sufficient time to marketing activities?
Additional High-Tech Resources
Moore, Geoffrey, Crossing the Chasm Ryan, Rob, High-Smartups (Lessons from
Rob Ryan's Entrepreneur America Boot Camp for Start-Ups)
Ryans, Adrian, Roger More, Donald Barclay, Terry Deutscher, Winning Market Leadership: Strategic Market Planning for Technology-Driven Businesses
Keeping in mind the reason for being in high-tech: