Transcript Marketing Strategy in High

Marketing Strategy in High-Tech
Markets II
What is a high-tech product?
►

►
Hardly any product consist of one technology only =>
difficult to define high-tech products on technology
they incorporate.
What does a Marketer suggest?
High-tech is in the eye of the customer and supplier.
–
High-tech to the extend that customer and supplier evaluate a
product based on incorporated technology.
The Where of Technology
► Process
technology
► Product technology
Meldrum’s Definition of High-tech
Products:
►
have been developed in a highly technical
►
incorporate a new or advanced technology which
►
are associated with a high degree of
technologically-based uncertainty on the part of
►
environment
acts as a focus for their evaluation
both the supplier and the customer
are not currently accepted as natural solutions for
the problems they have been designed to address;
►
do not yet have an associated external
infrastructure.

Is the iPad a high-tech product?
Is Laser Eye surgery a high-tech product?

Common, Underlying Characteristics of
High-Tech Markets
► Market
Uncertainty
► Technological
Uncertainty
► Competitive Volatility
Market
Uncertainty
Technological
Uncertainty
Marketing of
High-Technology
Products &
Innovations
Competitive
Volatility
Market Uncertainty:
► Consumer
fear, uncertainty and doubt (FUD)
► Anxiety over the lack of standards and dominant
design
► Customer needs (sometimes rather tastes) change
rapidly and unpredictably (recorded books, ebooks?)
► Uncertainty over the pace of adoption
► Uncertainty over/inability to forecast market size
New Orders
Customer Adoption a la Moore*
Who influences whom?
Who references whom?
Who buys for what reason?
What is the whole product?
What is the minimum product?
Which partner helps bridge the gap?
What is the minimum customer base?
What are optimal price points?
Moore’s Chasm
Visionaries
Pragmatists
Skeptics
Conservatives
Time
Innovators/
Early Adopters
Early Majority
* Moore (1991), Crossing the Chasm
Late Majority
Laggards
Technology Uncertainty:
► Will
the new innovation function as
promised? (and what happens if not?)
 Will the supplier be able to fix customer
problems with the technology?
► What
is the timetable for new product
development?
► What are unanticipated/unintended
consequences?
► (When) Will our technology be obsolete?
Competitive Uncertainty:
► Who
will be future competitors?
► What will be “the rules of the game” (i.e.,
competitive strategies and tactics)?
► What will “product form” competition be like?
 competition between product classes vs. between
different brands of the same product
Other Characteristics Common to
High-Tech Markets:
► “Unit-one”
costs: when the cost of producing
the first unit is very high relative to the costs of
reproduction
 Ex: development vs. reproduction of software
► Demand-side increasing returns: When the
value of the product increases as more people adopt
it
 Also called network externalities and bandwagon
effects
 Ex: telephone, fax, IM, eBay
 Implications: may give away products for free (IM)
Other Characteristics Common to
High-Tech Markets: (Cont.)
► Tradeability problems arise because it is difficult to
value the know-how which forms the basis of the
underlying technology
 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.
 Ex: Human Genome Project
Continuum of Innovations
Incremental
•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
Radical
•New technology creates new
market
•R&D invention in the lab
•Superior functional performance
over "old" technology
•Specific market opportunity or
need of only secondary concern
•"Supply-side" market
Supplier vs. Customer Perceptions
of Nature of Innovation
Mismatch:
Delusion
Breakthrough
Incremental
Mismatch:
Shadow
Contingency Theory
Marketing Strategy
New Product Success
Type of Innovation
-Breakthrough
-Incremental
Type of marketing strategy is contingent
upon the nature of the innovation.
Examples of Implications of
Contingency Theory:
Breakthrough
Incremental
“customer pull”
R&D/Marketing Interaction
“technology
Type of Marketing
Research
Lead users;
developers
Surveys; focus groups
Role of Advertising
Primary demand;
customer
education
Selective demand; build
image
May be premium
More competitive
Pricing
push”
Let’s explore further…
► In
groups…
Benkenstein and Bloch (1994)
► Why
are High-Tech markets particularly
dynamic?
No established rules of the game
No significant size economies
low entry barriers.
Research Shows:
► Continuous shortening of product life
cycles, which if true leads to a serious
dilemma:
=> High first part costs in innovation
phase is associated with shorter
pay-back cycles!
Authors claim:
Technology is the fundamental success factor!
Concentrated vs. Differentiated
► Pros
and Cons?
► Strategic Implications?
 (Segmentation, timing, participation)
STP
High innovation costs plus shortening PLC
means strategically:
1) Enter as many market segments as possible
at the same time to shorten pay-back time.
2) Develop a broad geographical strategy as low
entry barriers allow competitors to exploit
uncovered territory.
STP
Three Entry Options:
►
►
►
Pioneers
Early Followers
Late followers
What are some pros and cons of each?
STP
Strategic Considerations:
1)
2)
3)
Differentiation versus Standardization?
Price-Quantity (cost utility) versus
preference oriented (buyer utility)?
Customer-orientation versus
competitor-orientation?
A Preliminary Summary: What
can high-tech firms do?
Ultra-dominance (become de facto standard)
► Mega-market-coverage (product/solution for
every contingency)
► Deep specialization/Focus
► Alliances, partnerships, joint ventures, licensing
► Accelerate processes (IT steroid injections)
► Shift to services (configure, integrate, consult…)
► Develop breakthrough innovations
► Effective marketing !!!
►