Download Marketing Of High-Technology Products and

Marketing Of High-Technology
Products and Innovations
Jakki Mohr, Ph.D.
Professor of Marketing
University of Montana-Missoula
[email protected]
May 26-27, 2004
Volterra, Italy
Objectives



Overview key ingredients for effective hightech 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 Strategies
High-Tech
Product
Service
Low-Tech
Relationship between Entries in
the Market and Quality
Attractive Quality
Model 3
ONE-DIMENSIONAL
QUALITY
Model 2
Model 1
Development
Overall Revenue
Incr. Revenue
New Models
Must be quality
Time
QFD—Using the Kano Concept
Satisfaction
One-dimensional
Attractive
Dysfunctional
Functional
Must-be
Know vs. Unknown
Spoken vs. Unspoken
Dissatisfaction
Marketing is…
The High-Tech Pricing Environment
Rapid pace
of change
Short, volatile
product life
cycles
Pressure on
Price/performance
ratios: Moore's Law
Investments
in R&D
Backward
compatibility,
derivatives
Network
externalities
Customer fears
of obsoleting
prior purchases
Unit-one
costs
Customer's perceptions of
cost/benefit of new
technology
The Internet
Competition
The 3 Cs of Pricing
Competition
Costs
Customers
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
Passive
Carriage
trade
Bargain
basement
Aggressive
High
Net
Price
Paid
Low
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
Blurring of distinctive members
in the supply chain
Need for indirect channels to
provide value to manufacturer
Evolution of hightech channels
Supply chain
management software
High-Tech
Channels
Gray markets
Vertical hubs
The Internet
Black markets, piracy
and export restrictions
National Acct.
Mgmt.
Acct. Mgmt.
Post Sales
Service
Presales
Close Sales
Channels
Qualify Sales
Task
s
Lead
Generation
Matching Tasks to Channels,
By Segment
Big
Direct Sales
Medium
Telemarketing
Small
Direct Mail
Retail Sales
Distributors
Dealers/ VARs
Advertising and Promotion Pyramid
HIGH
Salesperson
Cost per Contact
Telemarketing
Catalog Literature
and Manuals
Trade Shows, Seminars,
Training
Direct Mail
Public Relations /Publicity
Media Advertising
LOW
Narrow
Broad
Coverage of Target Audience (Reach)
What hi-tech salespeople say and what
they mean by it

All new:
–

Field-tested:
–

It's different from our competitors.
Breakthrough:
–

Manufacturer lacks test equipment.
Revolutionary:
–

Parts not interchangeable with previous design.
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:
–

Re-designed:
–

Previous faults corrected, we hope.
Customer service across the country:
–

A different shape and color than the others.
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
Sure
Marketing
Engineering
Would you
like a rock?
Find me a big, cheap,
fast, dense,
sharp...rock
Wrong
rock
OK
Here’s a
blue rock?
Do you have a
red rock?
What’s wrong
with blue?
OK, but only
if its square
I can make a
purple one
We don’t have
square ones
Product Technology
Rock Pile
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
Customers
Internal Considerations
Core Competencies/Core Rigidities
Funding Considerations
Market Orientation
Relationship Marketing
R&D/Marketing Interactions
Understanding Customers
High-tech Research
Forecasting
Customer Decision-Making
Adoption Diffusion of Innovations
Target Marketing
Societal, Ethical, and Regulatory Concerns
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 TechnologyDriven Businesses
Keeping in mind the reason for being
in high-tech: