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Title: Arto Rajala, Dr.


1
High-tech Marketing
  • Arto Rajala, Dr.
  • Helsinki School of Economics
  • Department of Marketing

2
Outline
  • Definitions
  • Characteristics of High Technology
  • Commercializing High-Tech Products
  • Identifying and Crossing the Chasm
  • On the Mainstream Market
  • Managing Marketing Offerings in High-Tech
  • Conclusions
  • Appendix High Technology in Finland

3
Definitions
  • Marketing High Technology

4
Defining Marketing
  • Marketing is a business (management) discipline
    or orientation
  • ...performance of business activities that
    direct goods and services from produces to
    consumer or user (AMA)
  • Understanding actual and potential customer
    needs, by
  • developing/modifying products, facilitating
    customer access to its offerings, attracting and
    influencing the market, creating differential
    advantages (brand)
  • Establishing and maintaining customer
    relationships
  • Managing 4Ps (Product, Price, Place, Promotion)
  • Segmenting ? Targeting ? Positioning

5
Through Market Segmentation, Companies Divide
Large, Heterogeneous Markets into Smaller
Segments that Can be Reached More Efficiently And
Effectively With Products and Services That Match
Their Unique Needs.
6
Segmentation Process
Market Segmentation 1. Identify bases for
segmenting the market 2. Develop segment profiles
Market Targeting 3. Develop measure of
segment attractiveness 4. Select target segments
Market positioning 5. Develop positioning for
target segments 6. Develop a marketing mix
for each segment
See more in e.g. Kotler Armstrong (2003),
Principles of Marketing. 10th edition, Prentice
Hall.
7
Requirements for Effective Segmentation
8
Characteristics of High Technology
  • Novelty advanced compared to the-state-of-the-ar
    t
  • Knowledge intensity based on radical innovation
  • Leading-edge technology
  • The-state-of-the-art in the field and not
    widespread acceptance by those working in the
    field
  • Technology-base is new
  • Cross-industry characteristics
  • Ability to create/modify new applications
  • Dependence on RD and highly educated people
  • RD investments gt 4 of turnover (OECD)
  • usually between 10 - 20
  • Long RD phase short market existence

9
Characteristics of High Technology
  • Developers vs. users view on technology
  • Technology adapters CUSTOMERS
  • Technology providers SUPPLIERS
  • Customer perceived value
  • Added value to customer
  • Knowledge intensity
  • Different technology settings
  • Technology life cycle
  • From product to process technologies

10
A Definition of High-Tech from Marketing
Point of View
  • High-tech is that of the leading-edge
    technology involving a high level of knowledge
    intensity, which enhances the value of the
    product or process to the customer in the sense
    that it provides better quality, lower costs, or
    it makes the use of the object easier compared to
    the old technology

11
High Technology
  • What Makes High-Tech so Difficult for Marketers?

12
Innovations CORE of high techonology
  • Innovation a totally new, or a remarkable
    enhanced, product, service or production
    system/process
  • Product innovations
  • New, or enhanced innovative products or services
  • Process innovations
  • New information and material flows within and
    between units and organizations as well as
    innovative principles of working, working
    methods, roles and the tools used in the business
    process
  • Organizational (managerial) innovations
  • Refers to innovations about administrative,
    social and organizational elements (e.g. new
    organizational structure, management reward
    systems, business models)
  • Process and organizational innovations differ
    from product innovations in terms of the
    implementation of ideas.
  • Process and organizational innovations have an
    internal focus, i.e., they are most often
    implemented within the company
  • Product innovations are embedded into products
    and launched into external markets by different
    individuals and departments

13
Continuum of Innovations
  • Incremental Innovation
  • Extension of existing product or process
  • Product characteristics well defined
  • Competitive advantage on low-cost production
  • Often developed in response to specific market
    need
  • Demand-side market
  • Customer pull
  • Radical Innovation
  • Now technology creates new market
  • RD invention in the lab
  • Superior functional performance over old
    technology
  • Specific market opportunity or need of only
    secondary concern
  • Supply-side market
  • Technology push

14
Technology Life-Cycle
Source Anderson Tushman (1990)
15
Nature of High Tech Markets
  • Why are high-tech markets different ?
  • Market uncertainty
  • Ambiguity about the type and extent of customer
    needs that can be satisfied by the technology
  • Technological uncertainty
  • Not knowing whether the technology - or the
    company providing it - can deliver on its promise
    to meet needs, once they have been articulated
  • Competitive volatility
  • Changes in the competitive landscape

16
Sources of Uncertainties
Source Mohr (2001)
17
Challenges for Marketing
  • New designs must win market share
  • Role of distribution channel
  • Customer perceptions
  • Competition
  • From higher performance to lower costs and
    differentiation through minor design variations
    and strategic positioning tactics
  • incremental changes take place
  • Segmenting ? Targeting ? Positioning

18
Commercialising High-Tech Products (1/2)
  • Identifying and Crossing the Chasm

19
Key Issues
  • Why so many excellent products fail?
  • 90-95 of new product ideas newer reach market
  • 30-50 of introduced products seem to fail on
    the market
  • Are there differences between high-tech and
    low-tech product concerning the commercialisation
    process?
  • Critical issue Time-to-Market
  • Using the Market Development Model

20
Technology Adoption Life-Cycle
Pragmatists create the dynamics of high-tech
market development.
Source Moore (1998)
21
Innovators Technology Enthusiasts
  • Primary Motivation
  • Learn about new technologies for their own sake
  • Key Characteristics
  • Strong aptitude for technical information
  • Like to alpha test new products
  • Can ignore the missing elements
  • Do whatever they can to help
  • Challenges
  • Want unrestricted access to top technical people
  • Want no-profit pricing (preferably free)

22
Early Adopters Visionaries
  • Primary Motivation
  • Gain dramatic competitive advantage via
    revolutionary breakthrough
  • Key Characteristics
  • Great imaginations for strategic applications
  • Attracted by high-risk, high-reward propositions
  • Will commit to supply the missing elements
  • Perceive order-of-magnitude gains so not
    price-sensitive
  • Challenges
  • Want rapid time-to-market
  • Demand high degree of customization and support

23
Early Majority Pragmatists
  • Primary Motivation
  • Gain productivity improvements via evolutionary
    change
  • Key Characteristics
  • Astute managers of mission-critical applications
  • Understand real-world issues and tradeoffs
  • Focus on proven applications
  • Like to go with the market leader
  • Challenges
  • Insist on good references from trusted colleagues
  • Want to see the solution in production at the
    reference site

24
Late Majority Conservatives
  • Primary Motivation
  • Just stay even with the competition.
  • Key Characteristics
  • Better with people than technology
  • Risk averse
  • Price-sensitive
  • Highly reliant on a single, trusted advisor
  • Challenges
  • Need completely pre-assembled solutions
  • Would benefit from value-added services but do
    not want to pay for them

25
Laggards Skeptics
  • Primary Motivation
  • Maintain status quo.
  • Key Characteristics
  • Good at debunking marketing hype
  • Disbelieve productivity-improvement arguments
  • Believe in the law of unintended consequences
  • Seek to block purchases of new technology
  • Challenges
  • Not a customer
  • Can be formidable opposition to early adoption

26
The Logic of Commercialising High-Tech Products
  • Seeding new products to Techis
  • Techis help and educate Visionaries
  • Visionaries serve good references for the
    Pragmatists
  • Becoming the market leader by serving Pragmatists
    and setting standards
  • Leverage success - generate sufficient volume
    experience -- reliable products which are also
    cheap enough to Conservatives
  • Leaving Sceptics to their on devices

27
Discovering the Chasm
  • High-tech products are warmly welcome in an early
    market but then they usually fall into a chasm
    (sales will falter and often plummet)
  • Visionaries dont see enough of a head start
  • Pragmatists see no reason to start yet

Source Moore (1998)
28
Crossing the Chasm
  • High-tech paradox
  • 80 of many solutions but none of 100
  • Pragmatists won't buy 80 solutions !!!
  • High-tech myopia
  • Committing to the most common enhancement
    requests
  • Never finishing any one customer's wish-list

Source Moore (1998)
29
Successful Crossing
  • Understanding the difference between visionaries
    and pragmatists
  • The former is willing to bet on the come
  • The latter want to see the solutions in
    production (i.e. see the whole product before
    they by it)
  • Clear focus on a single beachhead
  • Use a niche strategy ? a full solution for one
    niche
  • Putting all eggs in one basket (e.g. Nokia in
    1990s)
  • Global focus with local applicapility
  • Think global act local Gaining the acceptance
    within a mainstream market
  • Gaining the acceptance within a mainstream market

30
Commercialising High-Tech Products (2/2)
  • On the Mainstream Market

31
Market Development Model
Main Street
Tornado
Total Assimilation
Early Market
Chasm
Bowling Alley
Mainstream Market
Source Moore (1998)
32
Beyond the Chasm Assessing Mass Market
  • The Bowling Alley
  • a period of niche-based adoption in advance of
    the general marketplace, driven by compelling
    customer needs and the willingness of vendors to
    craft niche-specific whole products
  • The Tornado
  • a period of mass-market adoption, when the
    general marketplace switches over to the new
    infrastructure paradigm
  • Main Street
  • a period of aftermarket development, when the
    base infrastructure has been deployed and the
    goal now is to flesh out its potential
  • End of Life
  • wholly new paradigms (technology) come to market

33
Technology vs. Category Life Cycles
Technology Adoption Life Cycle (First time
adopters)
Source Moore (1998)
34
Four Marketing Frameworks
1 on 1 Marketing
Mass Marketing
Deal Driven
Niche Marketing
Source Moore (1998)
35
Product Mix Offerings
Source Moore (1998)
36
Service Mix Offerings
Source Moore (1998)
37
Managing Marketing Offerings in High-Tech Firms
  • Are the 4 Ps still relevant?

38
What is a product?
Core product
Installation
Actual product
Packaging
Augmented product
Brand name
Features
After sales services
Delivery and credit
Potential product
Styling
Quality
Warranty
39
Evolution of the Whole Product
Source Moore (1998)
Different whole product priorities at different
stages of the life cycle.
40
What is a Marketing Offering?
  • Problems of (business) customers are often
    complex and can rarely be solved by a physical
    product alone
  • Call for marketers problem solving abilities and
    advice
  • Ability to make promises ? value proposition
  • e.g. each spent on the purchase of ERP
    (Enterprise Resource Planning) software ? further
    5 are spent on service and consulting in the
    choice and implementation of the system
  • Offerings often related to quality ? misused term
  • Five elements of a Marketing Offering ...
  • Product, Services, Logistics, Advice, and
    Adaptation
  • Offerings also depend on the customers demand
    ability !!!

41
Elements of an Offering
Source Ford et al. (2002)
42
Products
  • A physical part of the offering what customers
    see and feel after the purchase
  • Products are often wrongly considered by many
    customers and suppliers to be the most important
    element, but...
  • ... usually the product element is relatively
    unimportant
  • Does not itself have intrinsic value ...
  • There is no market for quarter inch drills, but
    there is an enormous market for quarter inch
    holes.

43
Services
  • Are often the major part of the offerings,
    because ...
  • products have little value without the associated
    services (e.g. paper machine automation
    software)
  • customers purchase a service instead of a product
    (e.g. leasing vs. buying cars)
  • companies are depended on external technologies
    (e.g. outsourcing design activities in automotive
    and fashion industries contract manufacturing in
    electronic and telecommunication sectors
    maintenance in aircraft industry)

44
Logistics
  • Are not just the ways in which the other elements
    of the offering are delivered, but...
  • often the most vital element of an offering for
    competitive success ? DIFFERENTIATION (JIT,
    zero-inventory, MRO maintenance, repair
    operations in-plant
  • Important also to advertising agencies,
    accountants, trainers, and consultants
  • Relationships with competitors to advice and
    service clients in other countries

45
Advice
  • Concerns all the activities which are aimed at
    increasing the customers understanding
  • ? reducing the perceived uncertainty of the
    customers
  • Suppliers skills in communication its offering
    and influencing its customers
  • Two-way process in business relationships
  • Reducing suppliers uncertainties how the
    customer will use the offering

46
Adaptation
  • Occurs when a supplier makes a change to any
    element of its offering that it would not
    normally do for other customers
  • Important to demonstrate commitment to a
    relationship
  • Results in considerable costs disruption to a
    companys operations
  • Translating customer problems into offerings that
    can provide solutions for different customers
    with the maximum commonality ? Need for close
    internal coordination

47
Matching Offerings to Problems
  • Offering lt Problem
  • Only a part of the problem is solved by the
    offering
  • Technological, resource or cost problems
    (supplier)
  • Poor diagnostics of the problem (customer or
    supplier)
  • Offering Problem
  • Solution exactly solves the problem
  • Optimal quality contractual
  • Offering gt Problem
  • Offering does more than solve the original
    problem ? Customer delight
  • Demonstrating commitment building a
    relationship
  • Offering ltgt Problem
  • Solution exceeds the problem in some aspects but
    fails to meet requirements in others (e.g.
    over-standardization, poor communication)

48
Product Platform
  • Product platform is a collection of common
    elements, particularly the underlying technology
    elements, implemented across a range of products.
  • It is primarily a definition for planning,
    decision making, and strategic thinking.
  • Especially important in high-tech firms in which
    multiple products are related by common
    technology.
  • Platform defines the cost structure,
    capabilities, and differentiation of the
    resulting products.
  • Separating product platform strategy from product
    line and individual product strategy, a company
    can concentrate on its most important strategic
    issues.

49
Product Platform
Product 3
Segment III
Product 1b
Product 4
Segment II
Product 1
Product 1a
Unique product elements
Product 2
Segment I
Element C
Common platform elements
Element B
Element A
Source McGrath (2000, 55)
50
Main Characteristics
  • Product platform is NOT a product!
  • ... but the lowest common determinator of
    relevant technology in a set of products or
    product line
  • Product failures in high-tech firms often caused
    by incomplete product platform strategy
  • Nature of product platforms varies across
    industries
  • e.g. in PC it consists of the microprocessor
    combined with its operating system, packaging,
    power supply, memory, disk drives, monitors, and
    interfaces
  • e.g. it can be a chemical compound combined with
    with the manufacturing process

51
Conclusions
  • What have we learned?

52
Current Wisdom on High-Tech Marketing
  • Interaction between marketing and RD
  • Coping with the high levels of technological and
    market uncertainty
  • Marketing capabilities business competencies
  • Product development processes
  • Rapid changes in technology and market settings
  • Shortening the breakthrough-time
  • Market offering and product platform approaches
  • Increasing importance of services
  • Emphasise technical support and after sales
    service
  • Differentiating from competitors
  • Building strong relationships with suppliers,
    channels and customers
  • Analysing value systems ? Networks, strategic
    alliances, partnerships
  • Rely on qualitative rather than quantitative
    approaches for market research
  • What the customers really value?

53
What does this mean?
  • The High-Tech label is not once and for all,
    so todays hot new technologies becomes
    tomorrows basic technology
  • Surprisingly, high-tech marketing is not so
    different from that of low-tech as often claimed
  • but there is a special need for more marketing
    focus in high-tech context because ...
  • Customers view is easily overlooked
  • To avoid developing a product which are
    engineer's dilemma but marketers nightmare
  • Knowing competitors well enough
  • Global view of high-tech business
  • Cross-industry effects and convergence of
    different technologies
  • Focusing more and more on services

54
References
  • High Technology in Finland 2001 (also 1999, 1997,
    1995, 1993, 1991), Finnish Academies of
    Technology.
  • McGrath, Michel E. (2001), Product Strategy for
    High-Technology Companies Accelerateing Your
    Business to Web Speed. N.Y McGrew Hill.
  • Mohr, J. J. (2001), Marketing of High-Technology
    Products and Innovations. Upper Saddle River,
    N.J Prentice Hall.
  • Moore, G. (1995), Crossing the Chasm Marketing
    and Selling High-Tech Products to Mainstream
    Customers. New York HarperCollins Publishers.
  • Moore, G. (1998), Inside the Tornado Marketing
    Strategies from Silicon Valleys Cutting Edge.
  • Moore, J. F. (1997), The Death of Competition
    Leadership Strategy in the Age of Business
    Ecosystems. N.Y. HarperCollins Publisher.
  • Paija, L. (2001), Finnish ICT Cluster in the
    Digital Economy, Helsinki Taloustieto Oy.
  • Simon, H. (1996), Hidden Champions Lessons for
    500 of the Worlds Best Unknown Companies.
    Boston, Mass Harvard Business School Press.
  • Tapscott, D. (1999), Creating Value in the
    Network Economy. A Harvard Business Review Book.
  • Tidd, Joe, John Bessant and Keith Pavitt (1997),
    Managing Innovation Integrating Technological,
    Market and Organizational Change. Chichester, UK
    John Wiley Sons

55
Thank You !
  • Arto.Rajala_at_hkkk.fi

56
APPENDIX
  • High Technology in Finland

57
Some statistics http//tilastokeskus.fi/tk/yr/ttt
_huippu.html http//www.research.fi/
  • Turnover of high-tech companies 16 billion
    (1999)
  • Share of high-tech in manufacturing output 27
    USA 32
  • Average growth of production/year 31 between
    1995-1999
  • Employed 42,000 people (1999) 30,500 (-95, 8
    /year
  • Number of RD stuff 73,000 (2003) 47,000 (-91)
  • 1,257 doctoral dissertations (2003) 524 (-91)
  • 20.6 of total export (2002) 9.7 billion euro
    6.0 in 1991
  • 16.0 of total import (2002) 5.7 billion euro
    12.1 in 1991
  • RD investments (2003) 3.43 of GNP (4.9 billion
    euro of which private sector accounted for 70 )
  • 2,575 patent applications (2002) 6,762 (1995)
  • Government budget (2004) for RD 1,538 M
    (Universities 27 , Tekes 26 ) i.e. 1.0 of
    GNP and 4.5 of the budget

58
RD expenditure by sector
59
RD personell by sector
60
RD funding in the state budget in 2004
61
Finnish patent applications
62
GDP share of RD expenditure ()
63
Major High-Tech Sectors in Finland
  • Electronics
  • Telecommunication
  • Data and Office Equipment
  • Software
  • Biotechnology
  • Environmental technology
  • High technology is a problem from industry
    classification point of view - no explicit
    statistic available!

ICT- Information Telecommunication Cluster
Big expectations
64
High technology exports and imports Finland's
main trade partners in 2002
Source www.research.fi
Exports   Million  Imports   Million
 United Kingdom 1,397.6 14.4  United States 1,203.7 21.1
 Germany 707.9 7.3  Germany 661.1 11.6
 France 623.7 6.4  Japan 545.1 9.6
 United States 607.7 6.3  United Kingdom 466.3 8.2
 Russia 590.7 6.1  China 449.5 7.9
 United Arab Emirates 487.8 5.0  Sweden 265.2 4.7
 Italy 427.1 4.4  Estonia 208.3 3.7
 Sweden 337.9 3.5  Ireland 195.6 3.4
 China 316.5 3.3  Netherlands 163.9 2.9
 Switzerland 269.3 2.8  Malaysia 150.2 2.6
 Netherlands 269.0 2.8  Taiwan 137.3 2.4
 Saudi Arabia 237.1 2.4  South Korea 125.1 2.2
 Japan 231.0 2.4  France 124.2 2.2
 Ireland 198.5 2.0  Denmark 115.0 2.0
 Thailand 183.6 1.9  Switzerland 85.2 1.5
 Hong Kong 181.3 1.9  Singapore 81.4 1.4
 Greece 179.1 1.8  Italy 74.6 1.3
 Poland 174.1 1.8  Hungary 74.5 1.3
 Spain 171.9 1.8  Czech Republic 62.3 1.1
 Denmark 143.9 1.5  Belgium 58.0 1.0
 Total 7,735.9 79.6  Total 5,246.5 92.1
 Other countries        1,977.3 20.4  Other countries        449.5 7.9
 Total exports 9,713.2 100.0  Total imports 5,696.0 100.0
65
(No Transcript)
66
Source Statistics Finland
67
Factors behind the Finnish success
  • Strong technology-base (Forest
    Metal/Engineering Industries)
  • High level of RD investments (public vs.
    private)
  • Focusing on core capabilities - outsourcing
    others (Nokia)
  • Technological co-operation between companies,
    research co-operation between companies and
    universities - Networking (Technology Villages)
  • Educated labour force (75 of 25-35 years old
    have a university or vocational training)
  • Rapid globalisation - born global companies
  • Access to venture capital funding
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