Transcript Marketing of High-Technology Products and Innovations Jakki J. Mohr

Marketing of High-Technology
Products and Innovations
Jakki J. Mohr
Chapter 1:
Introduction to High-Technology
Technology is ubiquitous
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Examples of traditional “high-tech” industries:
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Computers and information technology
Biotechnology
Telecommunications
Internet
Examples of some industries where
technological innovation is creating radical
changes:
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Waste management
Agriculture
Automotive
Oil and Gas
Consumer Products
© Jakki Mohr, 2001
The “New Economy”
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Substitution of knowledge and
information for physical assets
Massive investments in information
technology
Enhanced productivity
Falling prices for technology
 Faster growth and lower inflation at
the same time
© Jakki Mohr, 2001
Drawbacks to Technology
Impact on Economy
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Volatile
Relies on constant stream of innovation
Dot-com crashes
Stock market effects
Global effects
© Jakki Mohr, 2001
Definitions of “High-Tech”
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Government perspective
“Common underlying characteristics”
perspective
© Jakki Mohr, 2001
Definitions of Technology:
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the practical application of knowledge especially in
a particular area (e.g., engineering)
a manner of accomplishing a task especially using
technical processes, methods, or knowledge (e.g.,
new technologies for information storage)
scientific technology involving the production or
use of advanced or sophisticated devices (as in
computers or electronics)
© Jakki Mohr, 2001
Definitions of Technology:
Government Perspective
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Classify industries based on objective,
measurable indicators:
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the number of technical employees
$ spent on R&D
# of patents filed in industry
Used by the Bureau of Labor Statistics,
Organization for Economic Cooperation and
Development, and the National Science
Foundation
© Jakki Mohr, 2001
Level 1 Industries:
Technology-Intensive
SIC
code
131
211
281
282
283
284
285
286
287
289
291
299
335
355
Industry
Total.........................................................................................................
1
Level 1 industries ................................................................................
Crude petroleum and natural gas operations...........................................
Cigarettes ................................................................................................
Industrial inorganic chemicals..................................................................
Plastics materials and synthetics .............................................................
Drugs .......................................................................................................
Soap, cleaners, and toilet goods..............................................................
Paints and allied products........................................................................
Industrial organic chemicals.....................................................................
Agricultural chemicals ..............................................................................
Miscellaneous chemical products ............................................................
Petroleum refining....................................................................................
Miscellaneous petroleum and coal products ............................................
Nonferrous rolling and drawing ................................................................
Special industry machinery ......................................................................
© Jakki Mohr, 2001
Percent research
and development
employment
100.00
86.5
1.9
.4
1.3
1.8
2.3
1.6
.6
1.5
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1.0
1.2
.1
1.8
1.6
Level 1 Industries (Cont)
Technology-Intensive
SIC
code
357
362
366
367
371
372
376
381
382
384
386
737
871
873
874
899
Industry
Computer and office equipment...............................................................
Electrical industrial apparatus..................................................................
Communications equipment ....................................................................
Electronic components and accessories..................................................
Motor vehicles and equipment.................................................................
Aircraft and parts .....................................................................................
Guided missiles, space vehicles, parts ....................................................
Search and navigation equipment ...........................................................
Measuring and controlling devices...........................................................
Medical instruments and supplies............................................................
Photographic equipment and supplies.....................................................
Computer and data-processing services .................................................
Engineering and architectural services ....................................................
Research and testing services.................................................................
Management and public relations ............................................................
2
Services, n.e.c. ......................................................................................
© Jakki Mohr, 2001
Percent research
and development
employment
4.5
1.8
2.7
6.1
8.5
7.1
1.9
3.0
3.3
2.4
1.0
7.3
7.7
5.3
5.8
.4
Level II Industries:
Technology Moderate
SIC
code
229
261
267
348
351
356
359
365
369
379
Industry
Level II industries ..................................................................................
Miscellaneous textile goods .....................................................................
Pulp mills .................................................................................................
Miscellaneous converted paper products ................................................
2
Ordnance and accessories, n.e.c. ..........................................................
Engines and turbines ...............................................................................
General industrial machinery ...................................................................
2
Industrial machines, n.e.c. .....................................................................
Household audio and video equipment....................................................
Miscellaneous electrical equipment and supplies ....................................
Miscellaneous transportation equipment .................................................
1 See text for definition of Level I and Level II industries.
2 n.e.c. = not elsewhere classified
© Jakki Mohr, 2001
Percent research
and development
employment
13.4
.5
.2
2.4
.8
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2.4
3.2
.9
1.7
.5
Shortcomings to the
classification approach:
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Some industries are R&D intensive (i.e., hightech), but new products are not revolutionary
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May exclude industries who are technologydriven
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Ex: Cigarettes
Ex: Textiles production
Some industries with standardized output
produced in mass quantities
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Ex: Some computing equipment
© Jakki Mohr, 2001
Definitions of Technology:
Common, Underlying Characteristics
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Market Uncertainty
Technological Uncertainty
Competitive Volatility
Other Characteristics
© Jakki Mohr, 2001
Market Uncertainty:
ambiguity
about the type and extent of customer needs
that can be satisfied by a particular technology
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Consumer fear, uncertainty and doubt (FUD)
Customer needs change rapidly and
unpredictably
Customer anxiety over the lack of standards
and dominant design
Uncertainty over the pace of adoption
Uncertainty over/inability to forecast market
size
© Jakki Mohr, 2001
Technology Uncertainty:
not knowing whether the technology or the
company can deliver on its promise
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Uncertainty over whether the new innovation
will function as promised
Uncertainty over timetable for new product
development
Ambiguity over whether the supplier will be
able to fix customer problems with the
technology
Concerns over unanticipated/unintended
consequences
Concerns over obsolescence
© Jakki Mohr, 2001
Competitive Volatility:
changes in competitors, offerings, strategies
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Uncertainty over who will be future
competitors
Uncertainty over “the rules of the game” (i.e.,
competitive strategies and tactics)
Uncertainty over “product form” competition
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competition between product classes vs. between
different brands of the same product
Implication: Creative destruction
© Jakki Mohr, 2001
Characterizing the High-Tech
Environment
Market
Uncertainty
Technological
Uncertainty
Marketing of
High-Technology
Products &
Innovations
Competitive
Volatility
© Jakki Mohr, 2001
Other Characteristics Common
to High-Tech Markets:
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“Unit-one” costs: when the cost of producing
the first unit is very high relative to the costs of
reproduction
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Ex: development vs. reproduction of software
Demand-side increasing returns: When the
value of the product increases as more people adopt
it
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Also called network externalities and bandwagon
effects
Ex: portals on the Internet
Implications: may give away products for free
© Jakki Mohr, 2001
Other Characteristics Common
to High-Tech Markets: (Cont.)
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Tradeability problems arise because it is difficult to
value the know-how which forms the basis of the
underlying technology
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Ex: How much to charge for licensing the rights to a wasteeating microbe?
Knowledge spillover: Another type of externality
that arises from the fact that technological
developments in one domain spur new developments
and innovations in other areas.
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Ex: Human Genome Project
© Jakki Mohr, 2001
Supply Chain for Auto Industry
Suppliers
Car Manufacturers
Car Dealers
Customers
personal
consumption
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-raw materials
-components
-production equipment
-services
-business use
(fleets, etc.)
© Jakki Mohr, 2001
A Supply Chain Perspective on
Technology
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Often, technological innovations occur at
upstream (i.e., supplier) levels in the supply
chain
Such innovations may radically affect the
manufacturing process or the inner workings
of a product, but
End-user behavior may not be significantly
affected
Examples: cars, food, computing, hair styling,
Internet
© Jakki Mohr, 2001
Continuum of Innovations
Incremental
Radical
Extension of existing product or
process
New technology creates new
market
Product characteristics welldefined
R&D invention in the lab
Competitive advantage on low
cost production
Superior functional performance
over "old" technology
Often developed in response to
specific market need
Specific market opportunity or
need of only secondary concern
"Demand-side" market
"Supply-side" market
© Jakki Mohr, 2001
Supplier vs. Customer Perceptions
of Nature of Innovation
Mismatch:
Delusion
Breakthrough
Incremental
Mismatch:
Shadow
© Jakki Mohr, 2001
Contingency Theory
Marketing Strategy
New Product Success
Type of Innovation
-Breakthrough
-Incremental
Type of marketing strategy is contingent
upon the nature of the innovation.
© Jakki Mohr, 2001
Examples of Implications of
Contingency Theory:
Breakthrough
R&D/Marketing
Interaction
R&D leads;
“technology
Type of Marketing
Research
Lead users;
empathic design
Role of
Advertising
Primary demand;
customer
education
Pricing
push”
Incremental
Marketing
leads;
“customer pull”
Surveys; focus
groups
Selective
demand; build
image
May be premium More
competitive
© Jakki Mohr, 2001
Framework for High-Tech
Marketing Decisions
Marketing – 4Ps and the Internet (Ch. 7-11)
}
High-Tech Firm
Customers
Internal Considerations (Ch. 2, 3, 4)
Core Competencies/Core Rigidities
Funding Considerations
Market Orientation
Relationship Marketing
R&D/Marketing Interactions
Planning Process (Ch. 12)
Understanding Customers (Ch. 5,6)
High-tech Research
Forecasting
Customer Decision-Making
Adoption Diffusion of Innovations
Target Marketing
Societal, Ethical, and Regulatory Concerns (Ch.12)
© Jakki Mohr, 2001