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Marketing of High-Technology Products and Innovations

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Title: Marketing of High-Technology Products and Innovations


1
Marketing of High-Technology Products and
Innovations
  • Understanding High-Tech Customers

2
Critical Issues in Understanding High-Tech
Customers
3
Chapter Outline
  • Determine Desirable Customers Choose a Target
    Market
  • Market Segmentation Process
  • Target Market and Positioning
  • Purchase Decisions Depend on Adopter Category
  • Factors Affecting Technology Adoption
  • Categories of Adopters
  • The Chasm
  • Timing of Purchase Depend on Adopter Category
    and Customer Strategies to Avoid Obsolescence
  • Migration/Upgrade Decisions

4
Step 1 in Market Segmentation
  • Divide market into groups based on different
    needs across groups and common characteristics
    within groups
  • Demographics
  • Geographics
  • Psychographics (Values and lifestyles)
  • Behavioral Variables
  • Useage Volume
  • Benefits Sought
  • Useage Occasion

5
Step 2 in Market Segmentation
  • Profile (describe) customers in each segment
  • by specifying a typical customer in the segment.

6
Examples of Tech Customer Segments
Technographics
7
Examples of Tech Customer Segments
Technographics
SIDELINED CITIZENS Not interested in technology
8
Examples of Tech Customer Segments
Technographics
HAND-SHAKERS Older consumers typically
managers who don't touch their computers at
work. They leave that to younger assistants.
TRADITIONALISTS Willing to use technology but
slow to upgrade. Not convinced upgrades and
other add-ons are worth paying for.
MEDIA JUNKIES Seek entertainment and can't find
much of it online. Prefer TV and older media.
9
Examples of Tech Customer Segments
Technographics
TECHNO-STRIVERS Use technology from cell phones
and pagers to online services primarily to gain
career edge.
DIGITAL HOPEFULS Families with a limited budget
but still interested in new technology. Good
candidates for the under-1000 PC
GADGET-GRABBERS They also favor online
entertainment but have less cash to spend on it.
10
Examples of Tech Customer Segments
Technographics
FAST FORWARDS These customers are the biggest
spenders, and they're early adopters of new
technology for individual use.
NEW AGE NURTURERS Also big spenders, but focused
on technology for home users such as family PC.
MOUSE POTATOES They like the online world for
entertainment and are willing to spend for the
latest technotainment.
11
Step 2 in Market Segmentation
  • Profile (describe) customers in each segment
  • EX

Couple A Age 44 and 46 Job Secretary/Maintenanc
e Supervisor Children 2 (11 and 12 years
old) PC 1 (3 years old) Other - no internet
connections - considering upgrades for
speedier games
Couple B Age 46 and 53 Job Manager/CPA Children
3 (7-15 years old) PC 3 Other - 2 pagers
- go on-line for work
12
Steps in Market Segmentation
  • Evaluate and select a target market
  • SWOT analysis for the firm and competitors
  • How many competitors/which competitors to be
    analyzed?
  • Size of segment in terms of sales volume
  • Growth rate of the segment
  • Competition within the segment
  • Ability of firm to effectively meet the needs of
    the segment

13
Beachhead
  • Must identify the best beachhead
  • A single target market from which to pursue the
    mainstream market (starting from the adjacent
    segments)
  • Focus on early market or mainstream?
  • Cannot afford to pursue many segments at once

14
Step 4 of Segmentation Process
  • Position the product within the segment
  • Positioning the act of designing the companys
    offering and image to occupy a distinctive place
    in the mind of the target market.
  • Consider customer perceptions (perceived benefit
    (value)/cost)
  • Position relative to perceived competition (a
    distinctive place)
  • Position on important, compelling
    attributes/benefits
  • Would the cost of creating such a product be much
    higher?
  • Would customers buy this product by paying a lot?
  • What is the solution in the trade-off of high
    quality vs. cost?
  • Strengthening/Grab unoccupied position/De-position
    and re-position/Exclusive Club

15
Factors Affecting Purchase Decision
  • Customer FUD uncertain about the benefits and
    cost
  • Relative Advantage
  • Perceived benefit vs. cost
  • Compatibility
  • The extent to which adopting and using the
    innovation is based on existing ways of doing
    things
  • Complexity
  • The easier, the better/ interface (ex on-line
    button, stat sw)
  • Ability to communicate product benefits (HDTV,
    CPU)
  • Observability
  • How easily the benefits be observed by current
    customers/other customers

16
Factors Affecting Purchase Decision
  • An example of Web TV importance of communicating
    all unique benefits of a new product
  • Web TV a web surfing device (a small box) for
    TVs
  • In 1996, internet was exploding/TV is everywhere
  • Traditional marketing heavy advertising dealer
    training
  • Problem target customers didnt understand the
    device
  • Solution in 1997, an education initiative was
    launched customers were explained the benefits
    of Internet and WebTV
  • Result Sales increase 7 times

17
Final Thoughts on Adoption
  • These factors are crucial hurdles to overcome in
    effective marketing.
  • Marketers must provide compelling reasons for
    adoption, and overcome customers fear,
    uncertainty, and doubt.
  • Traditional marketing methods (which assumes
    customers understand the usefulness of the
    products and know how to evaluate them) are often
    insufficient.
  • Often, must focus more on educating potential
    users about benefits and how to use new product

18
Categories of Adopters Different Characteristics
Chasm
Early Market
Mainstream
  • Technology-Lover
  • Test Product
  • Alternative Solution
  • Change Agent
  • Gate Keeper
  • Competitive Advantage
  • Revolutionary Product
  • High Risk/ High Reward
  • Risk Seeking
  • High Price
  • Intensive SS
  • Productivity Enhancement
  • Evolutionary
  • Reliable Service
  • Move Together
  • Industry Standard
  • Implement Quickly
  • Risk Averse
  • Price Sensitive
  • Bullet-proof Solution
  • Adopt for Matching Competitors
  • Dont Believe in Technology
  • Remain Status Quo
  • Adopt When All Other Alternatives Are Worse
    Cost Justification Are Absolutely Solid

34
16
2.5
13.5
34
Time
19
Innovators Technology Enthusiasts
  • Appreciate technology for its own sake (wont
    care too much on benefit/cost)
  • Motivated by idea of being a change agent in the
    reference group
  • Will tolerate initial glitches
  • Will develop make-shift (alternative) solutions
  • Willing to alpha/beta test and work with
    technical personnel
  • Provide early revenue for marketersbut not a
    large group
  • Importance They are the gatekeeper to the next
    group of adopters

20
Early Adopters Visionaries
  • Focus on gaining competitive advantage
  • Want to revolutionize competitive rules in their
    industry
  • Attracted by high-risk/high-reward projects
  • Not necessarily very price sensitive
  • Demand customized solutions and intensive tech
    support
  • Will supply missing elements of total solution
  • Product Form Competition Between categories of
    solutions (ex DVD vs. VCD)
  • Early adopters communicate horizontally (across
    industry boundaries)

21
Early Majority Pragmatists
  • Comfortable with only evolutionary changes in
    business practices, in order to gain productivity
    enhancements
  • Averse to disruptions in their operations
  • Want proven applications, reliable service
  • Buy only with a reference from trusted colleague
    in same industry

22
Pragmatists (Cont.)
  • This groups is the bulwark of the mainstream
    market
  • They want to move together (herd mentality)
  • They want to pick the same technology solution
    (avoid risk)
  • Once they make a decision, they want to implement
    it quickly.
  • Requires industry standards

23
Late Majority Conservatives
  • Risk averse, technology shy
  • Very price sensitive
  • Require completely pre-assembled, bullet-proof
    solutions
  • Motivated only by need to keep up with
    competitors in their industry
  • Rely on single, trusted advisor

24
Laggards Skeptics
  • Want to maintain status quo (current condition)
  • Technology is a hindrance to operations
  • Buy only if all other alternatives worse and cost
    justification is absolutely solid

25
Target Innovators or the Early Majority?
  • Target the majority when
  • Word of mouth effects are low
  • Consumer products industries (vs. b-to-b)
  • Low ratio of innovators to majority users (a lot
    more in majority category)
  • Profit margins decline slowly with time (still
    profitable in majority category)
  • Long time period for market acceptance (longer to
    cross chasm)

26
What is the Chasm?
  • Gap between early market and mainstream market
  • Visionaries vs. Pragmatists
  • Visionary market is saturated, but mainstream not
    yet ready to buy.
  • Marketing that was successful with visionaries
    simply is not effective with pragmatists
  • Intensive services vs. reliable products
  • Advanced technology vs. complete product package
  • Customized features vs. simplifying usage

27
Goal Minimize time in the Chasm
  • Look to the new strategies necessary to reach the
    mainstream market
  • Pick a single target market with specific
    application
  • RD must
  • build interfaces to legacy systems
  • work with partners
  • ride the line between service and engineering

28
Crossing the Chasm Summary
  • The whole product is the critical success factor
  • Until a high-tech firm has established itself in
    the mainstream market, it has not proven itself.
  • To manage the mainstream market effectively, firm
    must work with partners in a disciplined fashion
    (that prioritizes partners so as to provide a
    whole product, including hardware, software,
    connection, and training,..)

29
Factors Affecting Rate of Adoption Customer
Strategies to Avoid Obsolescence
  • Basic Issue Tension between adopting newest
    generations of technology and obsoleting
    investments in prior generations.
  • Marketing implication Firms must manage a
    migration path for customers to the new
    generation.

30
What Affects Customers Migration Decision?
  • Expectations about pace of improvements relative
    to price
  • A migration path is a series of upgrades to
    help transition the customer to new generations.
  • Expectation about magnitude of improvements
    relative to price

The greater the anticipated product
improvements and/or expected price declines, the
greater the customers propensity to delay
purchase.
31
Implication
  • High-tech firms must provide upgrades that allow
    firms to take advantage of new technology without
    scrapping investments in the prior generation.

32
Managing a Migration Path
33
Managing A Migration Path
  • When customers expect a rapid pace in technology
    advancement
  • They will be willing to wait for price declines
  • Migration assistance (i.e., trade-ins, etc.)
    mitigates against customer stalling and
    leapfrogging.

34
Managing A Migration Path
  • When customers expect significant magnitude of
    improvement
  • They realize smooth upgrading is unlikely
  • Waiting for price declines may result in
    purchasing an obsolete product
  • Therefore, migration path is less crucial, as it
    is meaningless, to a certain extent

35
Managing A Migration Path
  • When customers have uncertainty about
    expectations
  • Migration path makes sense
  • Sell old and new simultaneously

36
Cross-Selling
  • The strategy of pushing new products to current
    customers based on their past purchases.
    Cross-selling is designed to widen the customer's
    reliance on the company and decrease the
    likelihood of the customer switching to a
    competitor.
  • Cross-selling (selling additional products to
    existing customers) deepens the relationship and
    improves customer retention, both of which are
    important for market ownership. Cross-selling
    prevents competitors from taking customers, and
    is much cheaper than advertising and searching
    for new customers.
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