Download Voice Over Internet Protocol (VoIP)

Voice Over Internet Protocol (VoIP) – “Crossing the Chasm”
MKTG 6525
E-Commerce and High-Technology Marketing: Strategic and Cultural Considerations
Prepared for Professor Detlev Zwick
Dante Cardenas
Jaspal Dhillon
Joseph George
Aashish Jain
Table of Contents
EXECUTIVE SUMMARY .........................................................................................................................................2
INTRODUCTION .......................................................................................................................................................3
TECHNOLOGY OVERVIEW ...................................................................................................................................4
ADVANTAGES ............................................................................................................................................................4
DISADVANTAGES .......................................................................................................................................................5
CULTURAL AND SOCIAL IMPACT ......................................................................................................................7
REGULATION ............................................................................................................................................................8
MAJOR PLAYERS .....................................................................................................................................................9
SKYPE ........................................................................................................................................................................9
VONAGE CANADA .....................................................................................................................................................9
ROGERS ................................................................................................................................................................... 10
YAK ......................................................................................................................................................................... 10
LESSONS FROM OTHER TECHNOLOGIES ..................................................................................................... 11
RESEARCH IN MOTION AND THE BLACKBERRY ....................................................................................................... 11
Implications........................................................................................................................................................ 13
FUEL CELL TECHNOLOGY........................................................................................................................................ 14
Implications........................................................................................................................................................ 16
ERICSSON AND 3G ................................................................................................................................................... 16
Implications........................................................................................................................................................ 16
CONCLUSION .......................................................................................................................................................... 17
APPENDIX ................................................................................................................................................................ 20
APPENDIX 1 – CUSTOMER MENTALITY AND REQUIREMENTS ................................................................................... 20
APPENDIX 2 – SKYPE PRODUCT PROPOSITION ......................................................................................................... 21
APPENDIX 3 – VONAGE PRODUCT PROPOSITION ...................................................................................................... 21
APPENDIX 4 – ROGERS PRODUCT PROPOSITION....................................................................................................... 22
APPENDIX 5 – YAK PRODUCT PROPOSITION ............................................................................................................ 22
BIBLIOGRAPHY ...................................................................................................................................................... 23
1
Executive Summary
Voice Over Internet Protocol (VoIP) is a telephony technology used to transmit ordinary
telephone calls over the Internet. VoIP takes analogue audio signals and turns them into digital
signals (packets) that are transmitted using Internet Protocol (IP) networks. VoIP’s advantages
include low cost, flexibility, and mobility. Conversely, VoIP’s disadvantages include sound
quality such as latency (delay), jitter, and packet loss. VoIP has a number of cultural, social, and
regulatory impacts that solution providers must consider when marketing their services.
The major players in the VoIP market in Canada are Skype, Vonage Canada, Rogers, and
Yak. Each player has its own separate marketing mix; however the majority are mainly targeting
the technically savvy and small business niche segments. Even though the mass market is the
ultimate goal for these players, much of their current business is found within these segments.
Therefore, in order for the technology to cross the chasm from the niche to the mass market, the
industry would do well to learn from other technologies that were in a similar position. For
example, RIM’s Blackberry gives suggestions on how to properly market to your target segment.
At the basic level, it is to fulfill user needs and wants. However, it also includes fulfilling needs
and wants that are sustainable for the solution provider (i.e. not just a low cost solution). In
addition, the Blackberry also teaches VoIP providers the importance of using the purchaser vs.
influencer model and the development of key partnerships to increase adoption. Fuel Cell (FC)
technology has important lessons for VoIP providers in terms of the marketing message. FC
technology shows that in order to reduce the appearance of risk in adopting a new technology,
communication, education, and customer involvement are critical. Ericsson and 3G highlight the
need for a complementary set of goods for the core technology. Overall, the implementation of
these factors is vital for VoIP to “cross the chasm”.
2
Introduction
VoIP is a revolutionary new technology that could bring dramatic changes to the
telecommunication landscape. However in terms of consumer adoption, the technology is at a
crossroads and it is unknown whether it will be able to cross it. Author Geoffrey A. Moore has
defined this crossroad as a “chasm” which has been successfully adopted by early adopters, but
the late adopters are still left to be converted. The chasm can be described as follows:
Figure 1 – The chasm
The set of individuals involved in each stage have their own set of requirements and mentality
towards the technology.
To get a greater understanding of these customers mentality and
requirements please refer to Appendix 1. The purpose of this paper is to give insights and
recommendations into how VoIP providers can go about successfully crossing the chasm.
The paper starts with a technical overview of VoIP which includes the advantages and
disadvantages of the technology. The second part highlights the cultural and social impacts and
the regulatory issues that VoIP providers have to consider when marketing the solution. The
3
third section gives a brief introduction into the major players in the Canadian marketplace and
their individual marketing mix. The next part discusses other “chasm” technologies and the
lessons VoIP can learn. Finally, the conclusion gives final recommendations for VoIP providers
to take in order to cross the chasm.
Technology Overview
VoIP is a new form of communication that takes analogue audio signals and turns them
into digital signals, or packets. This is an innovative alternate to the traditional circuit-switched
method of telecommunication, where a dedicated circuit between two parties is maintained. In
order to set up a traditional phone call between two telephones, the switched and the intervening
network establish a dedicated route from one end of the call to the other. Conversely, VoIP uses
a packet-switched method where audio signals are converted into digital data at the originating
end, which is then transmitted over the Internet and converted back to analog signal at the
receiving end. In other words, VoIP digitizes voice, inserts the digitized data into discrete
packets, and sends them over the IP network.
The packets have a destination address, but no
fixed path through the network. The packets arrive at the address, where they are put back
together and converted back to analog audio signals.
VoIP integrates voice and data
communications and turns any Internet connection into a phone call. VoIP is a revolutionary
technology that has the potential to drastically change the way people communicate and talk on
the phone around the world.
Advantages
VoIP has a number of advantages. First, the major advantage is related to cost. VoIP has
tremendous savings potential for anyone who communicates over long distance. For instance in
a corporate environment, the cost for leased lines no longer exist if phone calls are transmitted
4
over the Internet. In addition, if an employee moved to a different location within the same
office using a regular phone system like the Public Switched Telephone Network (PSTN), fees
would be incurred in that move. To make such a move with a VoIP system, however, employees
would only need to plug their IP phones into their office’s Ethernet jack, with no extra cost. A
digital private branch exchange (PBX)1 system already provides for the integration of traditional
telephone services and thereby eliminates the aforementioned costs of moving.
Secondly,
flexibility and mobility are also utilized with the adoption of VoIP. Individuals can simply plug
in their laptops, access the Internet, and talk on the phone, potentially improving organizational
communication and customer service. In terms of customer service, VoIP has some advantages.
Using VoIP’s capabilities with different enterprise software, when a customer calls they can be
routed easily to whom they want to talk, and the service representative will have easy access to
pertinent information that will improve customer service.
Disadvantages
VoIP also has its share of disadvantages when compared to the functionality of PSTN. A
major disadvantage of VoIP is that it is a new technology. As a result, the long-term benefits and
risks are not yet known.
These risks include unknown service life of hardware and
infrastructure, and details surrounding reliability and quality. The factors that affect the sound
quality during transmission include latency (or delay), jitter, and packet loss. 2 In terms of
latency, human ears can withstand a delay of 150-250 ms and not be able to notice the delay.
The PSTN meets this standard with a nominal delay of 150; however, VoIP cannot meet this
PBX – is a private telephone switch that provides switching (including a full set of switching features) for
an office or campus. PBXs often use proprietary digital-line protocols, although some are analog-based.
2
Hui Min Chong and H. Scott Matthews. “Comparative Analysis of Traditional Telephone and Voice-overInternet Protocol (VoIP) Systems”, IEEE
1
5
standard of delay for a consistent period of time.3 Jitter is defined as the variability in packet
arrival at the destination.4 Voice packets are transmitted over the same IP network as normal
data packets and therefore voice packets have to compete for bandwidth with data packets.
When a situation arises whereby there is a burst of network traffic (mostly in the form of data
packets) voice packets arrive at sporadic times to the destination. The consequence of sporadic
arrival time of the packets is sound distortion at the receiver’s end - jitter. Lastly, the issue of
packet loss occurs when voice packets that are transmitted over the network do not arrive at the
destination. Along the same lines as the causes of jitter, the IP network is to blame for this
drawback because it does not guarantee delivery of any packets (data or voice).
The
consequence of packet loss is distortion at the receivers end as sounds and words may actually
never reach the receiver.
With regards to availability, VoIP must meet the “five nines” availability demanded of
phone services (i.e. VoIP must be available at least 99.999% of the time).
A common
misconception is that VoIP will have lower dependability and availability than standard PSTN
systems because of power failures, internet service provider ‘down-time’, security issues, etc.
Nevertheless, it is has been demonstrated that it is possible to build VoIP systems that are more
reliable than circuit based PSTN platforms. Adaptive routing ensures that packets reach their
designation using multiple network lines.
Overall, the disadvantages of VoIP are not significant enough to hamper its ability to
compete with traditional PSTN. In addition, advances are being made for the technology to get
over some of these stumbling blocks. For example, the problem of jitter has been shown to
decrease by using specialized gateways that determine whether large network data bursts are
3
4
Hardman, Dennis. “Noise and Voice Quality in VoIP Envrionments.” Agilent Technologies
Ibid.
6
currently affecting throughput and the gateway adjusts to decrease jitter. The technology has
matured to a state where major players are now offering VoIP solutions as alternatives to
traditional telecommunication solutions.
Cultural and Social Impact
The cultural and social impacts are important in order to understand the customer base
and must be taken into account in order to increase market penetration. VoIP brings in a change
of social behaviour patterns similar to that of text messaging on mobile phones. Individuals can
take their VoIP connection along with them as long they have a broadband connection available
at their location. In addition, the long distance VoIP charges are cheap enough to open up new
market segments such as small businesses, students, teenagers, and even children. For example,
youth TV channels could adopt VoIP and video streaming to deliver interactive shows to youth.
The availability of new products and services which leverage the use of VoIP will be a major
driving force in increasing adoption of VoIP by the general public.
Security offered by VoIP systems vs. traditional phone systems is still an issue. This will
affect the confidence of the users in adopting a VoIP system, especially in a business
environment where confidential matters may be discussed.
Also, other risks and fears of
adoption include complicated installation, and the threat of viruses and hackers. These fears and
risks must be addressed in order to improve the likelihood of adoption.
As work groups continue to become distributed across several time zones, they
increasingly need to interact and conduct business in a virtual environment. Studies have
revealed that alternative method of communication such as email is not very effective for
bringing people together. The combination of instant messaging with VoIP has been found to be
very effective in such situations. The addition of “presence awareness” enables employees to
7
show whether they are online or offline. These visual clues enhance productivity by letting
people “locate and connect” with people when they have to resolve a problem in real time. The
availability of a VoIP service tied to the instant messenger really helps distributed teams connect
with each other. It also allows users to be available to their coworkers wherever they are.
Finally, people also tend to be online during their non-work hours. The availability of
VoIP and instant messaging gives them a chance to overlap work hours with their peers in
another time zone, and thereby increase the overall productivity of the team. The factors above
play an important role in understanding the cultural and social factors (i.e. virtual teams) driving
the current wave of early adopters and the factors (i.e. security) that will affect the next wave of
adopters. The marketers who are able to capitalize on the trends and mitigate the risks for the
end user will be the most successful in the end.
Regulation
The effect of regulation on how VoIP providers market their solutions is important. On
April 7th 2004, the Canadian Radio-television and Telecommunications Commission (CRTC)
provided preliminary views on the regulatory issues surrounding VoIP. The commission stated
that voice communication services using IP that provide access to PSTN and utilize phone
numbers that conform to the North American Numbering Plan have characteristics that are
functionally the same as circuit-switched voice telecommunications services.5 As a result, the
existing regulatory framework and tariffs should apply to VoIP. Although long distance phone
calls are currently free using VoIP, the CRTC might implement charges and taxes which will
result in an increase in price. The players offering VoIP solutions have to consider these changes
5
Canadian Radio-television and Telecommunications Commission. Regulatory Framework for voice
communication services using Internet Protocol. April 7, 2004.
http://www.crtc.gc.ca/archieve/ENG/Notices/2004/pt2004-2.htm. Site accessed October 11, 2004.
8
to the regulatory environment when marketing the solutions. The views of the CRTC show that
providers cannot market VoIP as a low cost solution forever. The long term sustainable benefits
of VoIP have to be conveyed to the end user in order to extract as much producer surplus as
possible.
Major Players
In order to understand the Canadian marketplace for VoIP offerings, we took a
representative sample of the major players Rogers, Yak, Vonage Canada, and Skype, and
analyzed them in terms of the 4P’s (price, promotion, place, and product). In general, we found
similar methods of place (i.e. online) and promotion (i.e. word-of-mouth) strategies to target
their key customer segments: technically savvy and corporate customers.
For a further
comparison, please refer to the overview below and added appendices.
Skype
The Skype service is used normally to maintain a conversation between 2 and up to 5
people using a computer. It does not require any additional hardware except a computer,
broadband internet connection, speakers, and a microphone. Skype is used extensively in Europe
and Asia by technically savvy end users. In addition, it is being used by teams of employees that
are geographically based in different locations.
Vonage Canada
Vonage Canada is an early pioneer into the Canadian broadband phone industry. It is
setting the standard for pricing, features, call quality, and reliability for the entire VoIP category.
Vonage's award winning service is sold online and through national retailers like Office Depot,
CompuSmart, Best Buy, and Future Shop, etc… In order to access this service, the user needs a
broadband internet connection and an analog phone. Vonage supplies a phone adapter so users
9
can use their analog phones without any additional change. Furthermore, the firm provides both
personal (residential) and business service plans, catered towards tech-savvy consumers.
Partnerships with OfficeDepot, CompuSmart etc reinforce Vonage’s commitment to servicing
small business enterprises and entrepreneurs.6
Rogers
Rogers is one of only two Canadian providers of TV services, cell phones, cable, internet
and now phone services (Bell Canada is the other). It is the biggest mobile phone provider (now
owner of Sprint Canada) and brings more credibility to the VoIP residential telephone business
than the average cable operator. Rogers marketing efforts are directed to attract massive home
telephone users. They are selling their product as an alternative to low cost long distance calls or
as an additional phone line in the house.
Yak
Yak Communications Inc. (Yak) is an Integrated Communications Provider (ICP)
offering: a full array of long distance (1+, toll free and dial-around) services, local lines, travel
cards, cellular long distance services, data services, and broadband voice (VoIP) to residential
and small businesses in North America over high speed internet access. Yak currently serves
approximately 860,000 customers for its traditional telecom services. Yak’s marketing efforts
are targeted for both home and business telephone users. They differentiate their business
service by including a set of functions that work together with the Data Transmission service.
They target small and middle size companies looking for savings in their telecommunications
costs.
6
http://www.vonage.ca/canada/corp_english/press.html?PR=2005_08_31_0
10
Lessons From Other Technologies
In analyzing the different players in the VoIP market and the segments that have adopted
the technology, we have come to believe VoIP can be classified as a technology on the brink of
entering the mainstream market.
Author Geoffrey A. Moore would define it as a typical
“crossing the chasm technology”. Moore identifies the transition between early adopters and
early majority pragmatists as a chasm that many high-tech companies never cross. VoIP is a
perfect example of a chasm technology because it is currently being adopted by a small segment
of the market defined as technically savvy and to a small extent corporate user base. In order for
the technology to make the next leap, it needs to determine a set of marketing strategies that will
enable it to cross the great divide. Therefore, we looked at other chasm technologies to see what
lessons could be learned for VoIP.
Research In Motion and the Blackberry
In early 1998, Research in Motion (RIM) was at a crossroads in its history. Although
achieving success as a manufacturer of two-way pagers, wireless PC cards, and OEM radio
products, RIM management was contemplating adding an entirely new line of business by selling
end users two-way email solutions that encompassed a hardware and telecommunications
service.7 This new line of business, now popularly known as the Blackberry, was based on an
innovative “push model” where users would be alerted upon receiving an email through their
mail exchange servers. This contrasted the traditional “pull” approach, where users had to
periodically check their email inbox themselves to see if any new email arrived.
As is currently the case with VoIP, RIM faced several obstacles in “crossing the chasm”
and marketing this new service so that it would meet their goals. Moving into the email
7
Ryans, Adrian. Research In Motion Ltd. Richard Ivey School of Business. June 2000.
11
solutions market was risky as, up until that time, RIM had dealt primarily with wireless hardware
products. Consequently, RIM would have to acquire new capabilities in several key areas of
their operations and expand their managerial skill set to leverage such capabilities in a strategic
manner. Rapid time to market was another issue, as first-mover advantage would be important
to build the type of relationships required from partners, suppliers, and ultimately customers.
Lastly, customer targeting was another critical issue as widespread adoption of this new wireless
email service could only be attained by marketing it to a large and sophisticated base of
consumers.
With these issues in mind, RIM made key strategic decisions in regards to its rollout and
marketing plans. First, they positioned themselves by moving to a 2.5G network service which
gave them access to customers outside the USA. This was an important strategy as it exposed
them to a market that was absent of major competitors. Secondly, RIM focused on the consumer
and defined who they envisioned as the ultimate end user – mobile workers who spent “big
blocks of time away from their desks” (and resultantly their desktop computers) and to whom
email communication was critical to satisfying their roles and responsibilities.8
Just as
importantly, RIM also distinguished the end-user from the purchaser, using the end-user as an
influencer in the purchasing decision. This strategy was supported by a mass purchasing pricing
model for corporate consumers. Essentially, RIM understood the power of the influencer and
leveraged this effectively. Thirdly, RIM initially targeted select consumers in order to build
relationships that it could leverage in a sustainable manner. This was exemplified by RIM’s
procurement of Morgan Stanley as a client, which went on to sign as an underwriter for the
company. With Morgan Stanley on board, RIM found it much easier to generate interest out of
venture capitalists and other investors.
8
Ibid.
12
The key to crossing the chasm for RIM was twofold: (i) create relationships with key
stakeholders (partners, suppliers, and customers) and (ii) sustain them for long term profitability.
In the first step in the model, RIM focused on the consumer and developed acceptable pricing
strategies while marketing the core benefits to end users – not necessarily the purchasers. The
issue of price fell more so on the IT managers who were making the purchasing decisions, whose
concerns were addressed by RIM’s mass-purchasing sales model. The second step of the model
was ensured by producing a product and service that had solid features and a strong and robust
design. The bottom line was that the service simply worked. This made sure that consumers
focused on the unique features of the service and not so much its price, and this ultimately
translated into sustainable consumer relationships.
Implications
The key implications from RIM and the Blackberry revolve around fulfilling user needs
and wants that are sustainable for the producer, the usage of purchaser vs. influencer, and the
development of key partnerships. First, consumers are very price sensitive however; unique
features that provide value are the keys to developing long-term demand. Secondly, the target
consumer has to be well understood. In particular, the producer must understand the role of the
purchaser vs. influencer and identify who the end-user is. Important questions include “what
benefits will our service provide the end-user? What matters to the purchaser? Are these two the
same individual?” Lastly, the development of important relationships with key partners early
can be a source of sustainable competitive advantages. Therefore, identify who these players are
and target them quickly and assertively. This will provide the firm with a safety-net of resources
that will be needed to cross the chasm.
13
Fuel Cell Technology
FC technology has many parallels with VoIP and a number of lessons can be drawn from
the marketing and commercialization of the technology. FC is a replacement technology for
powering electrical appliances, homes, businesses, and buildings.
technology for analog telephone communication.
VoIP is a replacement
In addition, the knowledge of FC as a
technology, its advantages and disadvantages are not well known in the general public.
Similarly, VoIP’s familiarity is only identified in the corporate segment and the leading edge
technology adopting consumers. The difficulty this creates is customers are not able to assess
the product application possibilities and the requirements for product and system integration.9
Customers can be resistant to adopt technology due to unfamiliarity. 10 Consequently, VoIP
marketers must reduce the perceived risk of adoption by educating customers about the
technology and the benefits of adoption.11
In terms of developing and maturing FC technology both from a technology and
commercial point of view, a dependence on customer expertise to develop new products for FC
is vital.12 In the midst of VoIP being at the same stage, VoIP developers have to combine their
R&D activities of improving quality and reliability with the development of VoIP applications.13
VOIP developers have to combine their strength of core R&D activities with the application
expertise that customers bring to the product. Furthermore, in a study on commercializing new
technologies, the interaction between technology suppliers and the adopters serves to articulate
Hellman, Hanna L. (2005), ‘Front End Activities for Radical Product Innovation The case of fuel cell
technology development’, oikos Ph.D. summer academy 2005 – Sustainability Management and Innovation, 9
10
Ibid.
11
Ibid.
12
Ibid, 10.
13
Ibid.
9
14
demand and facilitate the learning process of commercialisation.14 The reasoning is that
successful innovation is related to the integration of supply and demand driven factors and that
interactive development enables this integration. 15 Therefore, VoIP developers need to initially
tap into the early adopters to extract new product ideas that will also satisfy the needs of the
majority.
Frambach outlines how a supplier can influence the adoption process through marketing
strategy.16 In his organizational innovation adoption model he describes three marketing strategy
factors:

Targeting: choosing a customer that is receptive / has potential for innovation

Communication: create awareness, educate

Risk of adoption: reducing perceived risk of adoption”17
Targeting has been carried out in the case of VoIP with technology savvy and corporate
segment users being targeted. However, the next two steps go hand in hand and are vitally
needed for VoIP to go mainstream. In particular, communication has to sell the consumer on the
VoIP attributes of quality and reliability as being better than the traditional analog method. To
reduce the perceived risk of adoption, marketers have to communicate the message that
switching costs are not too expensive. In the case of fuel cell technology (in particular the hybrid
car), the need to communicate that the costs for not switching (higher fuel prices) were greater
than the costs of adoption (higher priced cars) was vital for greater adoption.
14
Magnusson, T. (2003), ‘Commercializing cleaner new technologies: the case of micro turbine generators’,
Technology Analysis and Strategic Management, 15, 3.
15
Ibid.
16
Frambach, R.T. (1993) ‘An integrated model of organizational adoption and diffusion of
innovations’,pp.22-41, European Journal of Marketing, 27, 5.
17
Ibid.
15
Implications
Overall, the main lessons to be learned from FC technology to advance the adoption to
the mainstream center around communication, education, and customer involvement.
The
combination of these three fundamentals has important implications for VoIP and can lead to
greater adoption.
Ericsson and 3G
Ericsson was founded as a telegraph repair shop in 1876 and by the end of 2002 it was
the largest supplier of mobile telecommunications systems in the world. The first generation of
cell phones had been analog and the second generation (2G) was digital. By the end of the
1990s, sales of 2G phones were beginning to decline. Telecom leaders began to set their sights
on 3G phones that would utilize broadband channels, enabling videoconferencing and high-speed
web surfing. In the late 1990s, Ericsson began focusing on 3G systems, and put less effort on
developing and promoting its 2G systems. However, transition to 3G turned out to be more
complex than expected, and there were worries that users might not value the new services. For
example, research showed picture messaging was only used in the first two months of a new
subscription while videoconferencing drained all the battery power.
Implications
The lessons learned regarding the way Ericsson pushed for this technology shows that the
telecom and the handset suppliers where not prepared to adopt 3G.
Customers did not
understand the direct benefits of this new technology and the first 3G handsets where not
efficient enough to make use of these benefits. Telecommunication companies realized this
situation and stopped the adoption of the technology. Overall, Ericsson’s efforts to implement
16
3G did not succeed because the complementary goods were not completely developed and
customers did not quite understand the benefits of this technology.
Conclusion
VoIP is a new and emerging technology that is on the brink of crossing the new
technology chasm. In order to effectively market to consumers and cross the chasm, the aspects
of defining the target market and the associated marketing message must be understood from the
perspective of the principles of networked marketing.
First, the target market is currently technically savvy users whose requirements and
expectations differ greatly from late adopters. Early adopters’ expectations are driven by the
potential benefits of exploiting the capabilities of the new technology and by being first adopters.
In terms of requirements, they normally demand special modifications and customizations, but
do not require the technology to be mature. On the other hand, late adopters want a product that
is mature, reliable and that can work right “out of the box”. Late adopters look for a product to
be stable.
They are not as impressed by the technology, but by the marketing and user
experience that accompanies it. The RIM and Blackberry example shows that to reach your
target market and cross the chasm, it is vital to fulfill user’s needs and wants in a sustainable
manner and recognize the intricacies of the targeted consumer (i.e. purchaser vs. influencer). In
the case of VoIP, if the target is “an enterprise, you have to show them a productivity gain. If
it’s a consumer, you have to show them entertainment or something worth opening up their
wallet for.”18 This highlight’s the importance of understanding the target market.
Secondly the winning strategy for any new technology will be based more on the strength
of the marketing message than the technology. There are many examples of strong technologies
18
Vittore, Vince. Crossing the VoIP Chasm. Primedia Business Magazines & Media Inc. September 2005.
17
with weak sales and weak demand (Microsoft’s TabletPC for one).
Ultimately, it is the
marketing of these technologies that has failed them. It is also important to note that the
marketing and technology must be synergistic – the marketing message must be an accurate
reflection of the capabilities and benefits associated with the technology. The lessons from FC
technology have shown that communication, education, and customer involvement are key
factors to increase the degree of adoption.
In order for the marketing message to be effective, the elements of networked marketing
have to be understood. This is even greater when attempting to comprehend the differences
between early and late adopters, as the latter require a far more enriched product ecosystem than
the former. As seen with the importance that key partnerships played in the RIM-Blackberry
example, an effective marketing strategy must pay particular attention to the user network within
the product ecosystem. VoIP’s connection with Customer Relationship Management (CRM)
solutions could set up a partnership with CRM providers in order to deepen the penetration into
the corporate world. The example of Ericsson and 3G technology highlights the importance of
recognizing the compliments network, as devices often did not have enough battery power to
make full use of 3G’s benefits. In the case of VoIP, providers must include the compliments
networks in its marketing strategies, as recent surveys have showed that “enterprise users (are)
much more interested in applications” as a direct benefit of VoIP than they have been in the
past.19
The pricing strategy for VoIP will come through both a low cost solution and high
premium services. The low cost solution will enable the major players to penetrate the market to
19
Ibid.
18
get economies of scale. While on the other hand, the high premium services will help recover
the fixed costs of the network, and create an added revenue stream.
As the marketplace for VoIP services evolves into the future, many important lessons can
be learned from the past. Some of these lessons are based on traditional concepts of marketing,
like understating the target market and communicating the benefits and value of the product to
the consumer.
However, as sophistication levels of consumers increase, so to must the
marketing strategies of technologies like VoIP. The principles of networked marketing are one
example of the recent complexities marketers face. VoIP, just like any other technology, must
understand and engage these principles to successfully cross the chasm into sustained adoption.
19
Appendix
Appendix 1 – Customer mentality and requirements
Stage in Life Cycle
Mentality and Requirements



Stage 1: Innovators,
Enthusiasts
Stage 2: Early Adopters,
Visionaries







Need cool and new technology
Want to be the first to try it
Willing to accept the occasional setback when new ideas prove
unsuccessful
Risk takers
Look at technology in terms of ‘what it can do’
The whole product being purchased here is the technology itself and the
ability to customize to meet their needs for enjoyment (minimum as well)
Need to see business value before others see it
Want to see how technology can transform customer experiences
Able to take a managed risk and want to move fast
The whole product being purchased here is the technology (at minimum)
and the potential uses of it (the future ecosystem)
THE CHASM


Stage 3: Early Majority
Pragmatists



Stage 4: Late Majority
Conservatives




Stage 5: Skeptics




Desire a degree of stability in the environment
Don’t need to be the first to see the business value, but the business value
must exist
Want realistic business cases for adopting the technology with impact on
bottom line
Need many easy to use services at low cost that fit into their daily lives
The whole product here is the existing (at minimum) and some potential
uses of the technology (the current and developing ecosystem)
Absolutely must have stability in the environment
Want minimal risk
Need ‘tried and true’ measures of what they can expect from adopting the
technology
The whole product here is the existing uses of the technology (the mature
ecosystem) at minimum as well
Averse to technology in general
Don’t see real value and real results from adoption
Use historical experiences to judge future innovations, questioning not
only the technology but the innovators themselves
The whole product here is the entire fully-matured indestructible
ecosystem (at a minimum as well)
20
Appendix 2 – Skype Product Proposition
Product (Service)
Skype (Windows, Mac OS X, Linux,
Pocket PC) – Skype to Skype call.
SkypeOut – Skype to landline or
mobile phone.
Price
Free
Place
Online
SkypeIn – Landline or mobile call to
Skype phone.
3 month subscription - $14.2020
Promotion
Viral/word
of
mouth, Website
Varies upon landline or mobile destination
12 month subscription - $42.6021
Free with SkypeVoicemail
SkypeVoicemail – Send voicemail
messages to Skype users.
3 month subscription - $7.1022
12 month subscription - $21.3023
Free with SkypeIn
Skype Zones – Access Skype from
hotspots around the world
Two hours - $3.5524
One Month - $9.2325
Skype Groups – Manages Skype
accounts on a group basis.
Free
Appendix 3 – Vonage Product Proposition
Product (Service)*
Premium Unlimited - unlimited, unrestricted calls
anywhere in Canada and the United States
Price
$39.99 per month
Province Unlimited - flat rate on all calls within
your home province, plus a generous 500 minutes
of long distance calling throughout the rest of North
America
$34.99 per month
Basic 500 Plan – 500 'anytime, anywhere' minutes'
for local, long-distance and toll-free calls
throughout Canada and the U.S.
Small Business Unlimited Plan - unlimited,
$19.99 per month
Place
Online
Promotion
Word of mouth, website,
radio
$69.99 per month
20
€1 Euro = $1.42 CDN, “http://www.bankofcanada.ca/en/rates/exchform.html”, Accessed Online: 8th,
October, 2005.
21
Ibid.
22
Ibid.
23
Ibid.
24
Ibid.
25
Ibid.
21
Product (Service)*
unrestricted calls anywhere in Canada and the
United States plus dedicated fax line
Small Business Basic - 1,500 anytime minutes for
local, long-distance and toll-free calls throughout
Canada and the U.S. plus dedicated fax line
Price
Place
Promotion
$55.99 per month
All Vonage service plans include the following list of features for no additional charge: - Voicemail - Call
return ((x)69) - Call hunt - Repeat dialling - Call waiting - Bandwidth saver - Call transfer - Real-time Caller ID inbound/outbound call - Call return ((x)69) record details - Caller ID block ((x)67) - Web-based
account management, - Call forwarding including: - International call block - Online voicemail retrieval Area code selection and real-time billing - Great international calling rates, such as: - Tel Aviv - 6 cents
per minute - London - 4 cents per minute - Sydney - 6 cents per minute - Hong Kong - 4 cents per minute
- India - 21 cents per minute About Vonage(R) Canada
Appendix 4 – Rogers Product Proposition
Product (Service)*
Standard Plan (one feature)
Price
$29.95
$25.46 when Bundle with other Rogers
services.
Enhance Plan (3 features)
$37.95
$32.26 when Bundle with other Rogers
services.
$41.95
$35.66 when Bundle with other Rogers
services.
Ultimate Plan (6 features)
Place
Online,
Rogers
retail stores.
Promotion
Word of mouth,
website, radio, TV,
written media and
mail.
Appendix 5 – Yak Product Proposition
Product (Service)*
Basic Yak
(10 hrs. month calls to the US & CND, yak member-to-member
worldwide calling, free device for 1 year plan, free shipping of
device to US & CND).
Ultimate Yak (Basic Yak + unlimited calls, Choice of public
telephone number, Optional second public telephone number,
Caller ID & Caller ID blocking, Call Forwarding, Call Waiting,
Call Hold, and Call Transfer, Unified Voice Mail & Messaging,
Personal online account manager, Three-Way Calling,
VideoPhone Calling (Requires yak Virtual VideoPhone), 911
service.
Price
$12.95
Place
Online
Promotion
Word of mouth, website
$35.99
22
Bibliography
1. Breznick, Alan (2005, August 1). Rogers Launches VoIP Service in Canada. Cable Digital
News.
2. Crossing the Chasm – Wikipedia, the free encyclopedia. online:
http://en.wikipedia.org/wiki/Crossing_the_Chasm (site accessed: October 7th, 2005)
3. Hayes, B. and Buiron, F. (2005), PMI Global Congress Proceedings, Edinburgh, Scotland
4. Integrated Communications Provider ICP, YAK Communications. online: http://www.yak.ca
(site accessed: October 2nd, 2005)
5. Marketing Week. Analysis: Internet providers prepare for VOIP dogfight. September 2005.
6. Rogers.com. online: http://www.rogers.com (site accessed: October 2nd, 2005)
7. Schilling, Melissa A. (2004). Strategic Management of Technological Innovation. New York:
McGraw Hill.
8. Ryans, Adrian. Research In Motion Ltd. Richard Ivey School of Business. June 2000.
9. Skype – The whole world can talk for free. online: http://www.skype.com (site accessed:
October 4th, 2005)
10. Treloar, Andrew. Just Another Technology? How The Dynamics Of Innovation Can Help
Predict The Future Of The Browser. online:
http://ausweb.scu.edu.au/aw99/papers/treloar1/paper.html (site accessed: October 7th, 2005)
11. Vittore, Vince. Crossing the VoIP Chasm. Primedia Business Magazines & Media Inc.
September 2005.
23
12. VoIP – Understanding and managing the technology risks of adoption, KPMG Advisory
Paper. online: http://www.kpmg.com.au/Portals/0/irm-voice_over_ip_report_2004.pdf (site
accessed: October 6th, 2005)
13. VoIP with Vonage Canada. online: http://www.vonage.ca (site accessed: October 6th, 2005)
14. Warren's Washington Internet Daily. VoIP Providers Battle Marketing Costs, Eye Foreign
Markets. May 2005.
24