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Marketing of Technology Intensive Products Dr. Matti J. Haverila.

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Presentation on theme: "Marketing of Technology Intensive Products Dr. Matti J. Haverila."— Presentation transcript:

1 Marketing of Technology Intensive Products Dr. Matti J. Haverila

2 ©Matti Haverila, Infacs Oy Table Contents Issues for High Tech Companies (1-5) Hurdle of Internationalization What seems to be the Problem Types of New Products Strategy Process (1-5) Positioning Positioning Example Differentiation Key Points in Strategy Process (1) Business Idea Key Points in Strategy Process (2-7) John Warnock, Adobe NPDP Stage-Gate NPD (1-7) Approaches to NPD NPD Strategies Marketing- Technology Balance Marketing-Mix - Product (1) Learning Cycle Marketing-Mix - Product (2) Degree of Product Modification Research Process Research Results (1-4) Successful vs. Unsuccessful (1-4) Conclusion (1-5) Recommendations Finland vs. California (1-2)

3 ©Matti Haverila, Infacs Oy Issues for High Tech Companies (1)* Finance related factorsWeight of the problem The difficulty to get financial support84 High cost of financing79 Acquisition of financing72 Total of finance related factors235 R&D related factors The credibility of the company amongst the customers94 The capability to follow the development of technology65 Lack of R&D competence45 The technological ageing of products10 Total of R&D related factors214 * See Autio et al: Uudet teknologiayritykset...

4 ©Matti Haverila, Infacs Oy Issues for High Tech Companies (2) Competition related factorsWeight of the problem The competition by replaceable products64 Domestic competitors47 International competitors25 Total of competition related factors136 Labour related factors The acquisition of employees100 The high cost of employees59 Total of labour related factors159

5 ©Matti Haverila, Infacs Oy Issues for High Tech Companies (3) Management related factorsWeight of the problem Lack of accounting competence109 The difficulty to get management team14 The difficulty to get board14 Total of management related factors137 Production related factors The acquisition of machinery and equipment66 The long production time of the product63 Total of production related factors129 Other factors The bureaucracy of the government and local authority106 The acquisition of factory space43 The attitude of the university29 The attitude of the family25 Total of other factors203

6 ©Matti Haverila, Infacs Oy Issues for High Tech Companies (4) Market or marketing related factorsWeight of the problem Minor identity of the company143 Lack of marketing competence124 Getting of customers and creating customer relationships98 The high price of the product or service88 Difficulty to get to the distribution channels59 Acquisition of international contacts52 Total of market or marketing related factors564

7 ©Matti Haverila, Infacs Oy Issues for High Tech Companies (5) Issue AreaWeight of the problem Market or marketing related factors564 Finance related factors235 R&D related factors214 Other factors203 Labour related factors159 Management related factors137 Competition related factors136 Total of production related factors129

8 ©Matti Haverila, Infacs Oy Hurdle of Internationalization SalesSales North-American technology companies Finnish technology companies Hurdle of Internationalization Technology Companies

9 ©Matti Haverila, Infacs Oy What seems to be the problem? Richard M. Cyert, the president of Carnegie-Mellon University: America's most formidable high-tech problem is not innovation - the problem is marketing new ideas. Sam Walton There is only one boss - the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

10 ©Matti Haverila, Infacs Oy The Types of New Products Newness to the Company Newness to the Market Low High Low Improvements /Revisions to Existing Products (26%) Cost Reductions (11%) Repositionings (7%) Additions to Existing Product Lines (26%) New Product Lines (20%) New to the World Products (10%) GoTo

11 ©Matti Haverila, Infacs Oy New Product Development Process (NPDP) Exploration Idea Generation Concept development Business Analysis Screening Protype development Market testing Plant Scale-Up Product Launch Post Launch Check-Up Business Strategy Commercialized Products

12 ©Matti Haverila, Infacs Oy Stage-Gate NPD (1) Idea Gate 1 Stage 1 Gate 2 Stage 2 Gate 3 Stage 3 Gate 4 Stage 4 Gate 5 Stage 5 PLR Initial Screen Second Screen Decision on Business case Postdevelopment Review Prelaunch Business Analysis Post Launch Review Preliminary Investigation Detailed Investigation (build business case) Development Testing & Validation Production & Launch

13 ©Matti Haverila, Infacs Oy Stage-Gate NPD (2) Idea Gate 1 Initial Screen The company identifies potential wants and needs of each customer segment, examines the external market and competitive trends. It offers tangible needs, wants, complaints and problems that customers have about a certain activity, function or product performance. In the idea generation stage company generates new ideas, that fit the identified categories, through a variety of problem-solving and creative techniques. A good new product idea can make or break a project: ideas are the feedstock of the new product process. The decision to commit resources to the project. Evaluation of must meet and should meet criteria, which deal with strategic alignment, project feasibility, magnitude of opportunity and market attractiveness, differential advantage, synergy with the companys resources, and fit with company policies.

14 ©Matti Haverila, Infacs Oy Stage-Gate NPD (3) Stage 1 Gate 2 Second Screen Preliminary Investigation Turning an idea into a concept means giving the idea form, substance and shape. The concept must describe the real, functional or perceived benefits of the new product concept. In gate 2 the project is re-evaluated in the light of the new information obtained in stage 2.

15 ©Matti Haverila, Infacs Oy Stage-Gate NPD (4) Stage 2 Gate 3 Decision on Business case Detailed Investigation (build business case) Business analysis requires examining the dynamics of the category and the competition, cost positions, consumer buying patterns and fit with internal strengths in order to develop financial projections. Stage 2 is a detailed investigation stage, which clearly defines the product and verifies the attractiveness of the project prior to expenses. Gate 3 is the final gate before the development stage, the last point at which the project can be killed before entering heavy spending. In gate 3 the project is re-evaluated based on f.ex. NPV and IRR together with sensitivity analysis, such as portfolio impact assessment through portfolio maps. The elements of the definition include target market definition, delineation of the product concept, specification of a product positioning strategy, and spelling out essential and desired product features, attributes, requirements and specifications.

16 ©Matti Haverila, Infacs Oy Stage-Gate NPD (5) Stage 3 Gate 4 Postdevelopment Review Development The objective is to design one or more prototypes, that are in final form for customer testing. Company figures accurately the cost of materials and manufacturing. Stage 3 witnesses the implementation of the development plan and the physical development of the product. The emphasis is on technical work, but marketing and manufacturing activities proceed in parallel. These activities are iterative, with each development result taken to the customer for assessment and feedback. The post implementation review is a check on the progress and continued attractiveness or the product and project. The gate revisits the economic aspects via revised financial analysis based on new and more accurate information. The validation plans for next stage are approved for immediate implementation.

17 ©Matti Haverila, Infacs Oy Stage-Gate NPD (6) Stage 4 Gate 5 Prelaunch Business Analysis Testing & Validation The objective of the market testing is to determine whether the new product is a winner and what changes need to be made prior to launch. The main advantage is to provide real-life direction on how to improve the positioning, packaging, pricing, advertising, and self placement. In the stage 4 company runs tests and validates the entire viability of the project, the product, the production process, customer acceptance, and the economics of the project. In-house product tests, user or field trials of the product, trial or limited pilot production, pre-test market, test market or trial sell, and revised financial analysis.

18 ©Matti Haverila, Infacs Oy Stage-Gate NPD (7) Stage 5 PLR Post Launch Review Production & Launch Timing, coordinated and carefully planned execution and communication are the cornerstones of a successful launch. Identification of the target customer, product positioning, and competitive advantage must be factored into the development of the roll out plan. The stage involves implementation of the marketing launch plan and the production plan. The marketing plan outlines companys objectives, strategies and programs, and guides the products entry to the market. Marketing planning is an outgoing activity, that occurs formally and informally throughout of the new product process.

19 ©Matti Haverila, Infacs Oy Approaches to NPD Process Consumer drivenCompetition drivenTechnology driven Concept development and consumer screening Business Analysis Product development Consumer/Lab testing Test marketing Business Analysis Prototype development Production testing Advanced development Product development Concept identification and screening Concept development and consumer screening Idea generation Market Analysis Technology needs and application ideas Market Launching

20 ©Matti Haverila, Infacs Oy NPD Strategies Focused, but weak technology High-budget, Shotgun Low budget, conservation Marketing and technology integrated Technology driven Success Rate % of company sales from new products

21 ©Matti Haverila, Infacs Oy Marketing - Technology Balance Relative Effort Allocation Cutting Edge State of The Art Advan- ced Main- stream MatureDecline State of Technology Engineering efforts Marketing efforts

22 ©Matti Haverila, Infacs Oy Marketing Mix - Product (1) Develop product Develop product Sales-customer feedback Launch Improved Product Launch Improved Product Launch Improved Product Launch Improved Product Sales- customer feedback Sales- customer feedback Sales- customer feedback Slow Learning Cycle Rapid Learning Cycle

23 ©Matti Haverila, Infacs Oy Learning Cycle Slow Learning Cycle Rapid Learning Cycle

24 ©Matti Haverila, Infacs Oy Marketing Mix - Product (2) 40 20 30 10 Introductory Growth MatureDecline Product not ModifiedProduct Modified Market share achieved

25 ©Matti Haverila, Infacs Oy Degree of product modification 0246 81012 14 1618 20 Zone of minimal product adaptation Zone of minimal Product adaptation (minor type) Zone of minimal Product adaptation (major type) Costs Incremental gains

26 ©Matti Haverila, Infacs Oy Research Project The % of R&D of the sales Mean = 9,62 Mode = 15 Median = 8,0 The % of marketing of the sales Mean = 10,02 Mode = 10 Median = 8,7 The % of export share of the sales Mean = 62,4 Mode = 90 Median = 70 The number of product launches per year (total 536) Mean = 6,6 Mode = 3 Median = 3,0

27 ©Matti Haverila, Infacs Oy Research results (1) Marketing method Rank 1. Personal selling1 2. Marketing concept2 3. New product development strategy3 4. Differentiation4 5. Product/service specialisation5 6. Pricing6 7. Sales promotion7 8. Market segmentation8 9. Marketing organisation9 10. Distribution10 11. Positioning11 12. Marketing planning12 13. Market share13 14. Publicity14 15. Market research15 16. Advertising16 17. Marketing information systems/ Marketing intelligence17 18. Marketing consultants18

28 ©Matti Haverila, Infacs Oy Research results (2) Marketing methodDescription of importance 1. Personal sellingVery important 2. Marketing conceptVery important 3. New product development strategyVery important 4. DifferentiationVery important 5. Product/service specialisationRather important 6. PricingModerately important 7. Sales promotionModerately important 8. Market segmentationModerately important 9. Marketing organisationModerately important 10. DistributionModerately important 11. PositioningModerately important 12. Marketing planningModerately important 13. Market shareModerately important 14. PublicityRather unimportant 15. Market researchRather unimportant 16. AdvertisingVery unimportant 17. Marketing information systems/ Marketing intelligenceVery unimportant 18. Marketing consultantsVery unimportant

29 ©Matti Haverila, Infacs Oy Research results (3) Marketing methodDescription of importance 1. Personal sellingVery important 2. Marketing conceptVery important 3. New product development strategyVery important 4. DifferentiationVery important 5. Product/service specialisationRather important 6. PricingModerately important 7. Sales promotionModerately important 8. Market segmentationModerately important 9. Marketing organisationModerately important 10. DistributionModerately important 11. PositioningModerately important 12. Marketing planningModerately important 13. Market shareModerately important 14. PublicityRather unimportant 15. Market researchRather unimportant 16. AdvertisingVery unimportant 17. Marketing information systems/ Marketing intelligenceVery unimportant 18. Marketing consultantsVery unimportant

30 ©Matti Haverila, Infacs Oy Research results (4) Marketing methodDescription of importance 1. Personal sellingVery important 2. Marketing conceptVery important 3. New product development strategyVery important 4. DifferentiationVery important 5. Product/service specialisationRather important 6. PricingModerately important 7. Sales promotionModerately important 8. Market segmentationModerately important 9. Marketing organisationModerately important 10. DistributionModerately important 11. PositioningModerately important 12. Marketing planningModerately important 13. Market shareModerately important 14. PublicityRather unimportant 15. Market researchRather unimportant 16. AdvertisingVery unimportant 17. Marketing information systems/ Marketing intelligenceVery unimportant 18. Marketing consultantsVery unimportant

31 ©Matti Haverila, Infacs Oy Successful vs. Unsuccesful (1) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling11 2. NPD strategy25 3. Marketing concept34 4. Differentiation42 5. Product/service specialisation56 6. Pricing67 7. Market segmentation79 8. Sales promotion83 9. Marketing organisation97 10. Distribution1011 11. Positioning1111 12. Marketing planning1213 13. Market share139 14. Market research1415 15. Publicity1516 16. Advertising1616 17. MIS/ Marketing intelligence1714 18. Marketing consultants1816

32 ©Matti Haverila, Infacs Oy Successful vs. Unsuccesful (2) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling11 2. NPD strategy25 3. Marketing concept34 4. Differentiation42 5. Product/service specialisation56 6. Pricing67 7. Market segmentation79 8. Sales promotion83 9. Marketing organisation97 10. Distribution1011 11. Positioning1111 12. Marketing planning1213 13. Market share139 14. Market research1415 15. Publicity1516 16. Advertising1616 17. MIS/ Marketing intelligence1714 18. Marketing consultants1816

33 ©Matti Haverila, Infacs Oy Successful vs. Unsuccesful (3) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling11 2. NPD strategy25 3. Marketing concept34 4. Differentiation42 5. Product/service specialisation56 6. Pricing67 7. Market segmentation79 8. Sales promotion83 9. Marketing organisation97 10. Distribution1011 11. Positioning1111 12. Marketing planning1213 13. Market share139 14. Market research1415 15. Publicity1516 16. Advertising1616 17. MIS/ Marketing intelligence1714 18. Marketing consultants1816

34 ©Matti Haverila, Infacs Oy Successful vs. Unsuccesful (4) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling11 2. NPD strategy25 3. Marketing concept34 4. Differentiation42 5. Product/service specialisation56 6. Pricing67 7. Market segmentation79 8. Sales promotion83 9. Marketing organisation97 10. Distribution1011 11. Positioning1111 12. Marketing planning1213 13. Market share139 14. Market research1415 15. Publicity1516 16. Advertising1616 17. MIS/ Marketing intelligence1714 18. Marketing consultants1816

35 ©Matti Haverila, Infacs Oy Conclusions (1) The success rate when launching high technology products into the export markets was in this study 80,41 %. Amongst Finnish high technology companies product and sales related factors appear to have greater importance than marketing related factors, when launching new products into the foreign markets. Among marketing mix (4 Ps), product factors have the highest utilisation, while the non-personal elements of promotion have the lowest usage ratings. –Personal selling is the most important promotional element. –Pricing and place factors are only moderately important elements in the marketing mix decision. The careful balance between the various marketing methods is important in the successful launch of new high technology product into the export market.

36 ©Matti Haverila, Infacs Oy Conclusions (2) Publicity, promotion, marketing organisation, market share and positioning are marketing methods, which are more commonly used in larger companies. Advertising, publicity, sales promotion and market share are marketing methods that are more commonly used in companies in which most (>40%) of the sales of the company is sold outside Finland. Personal selling and positioning are marketing methods which are more commonly used in companies where the president of the firm has a technical and marketing background, or just marketing background than in companies where the president has only technical background. Differentiation is a marketing method which is more commonly used in companies where the senior marketing officer of the firm has a technical and marketing background, or just marketing background than in companies where the senior marketing officer has only technical background.

37 ©Matti Haverila, Infacs Oy Conclusions (3) Publicity, promotion, marketing organisation, market share and positioning are marketing methods, which are more commonly used in larger companies. Product/service specialisation, distribution, and positioning are marketing methods that are more commonly used in companies with more experience on product launches into the export markets. There were no significant differences either in absolute or relative marketing expenditure between large and small companies, nor were there significant differences in marketing expenditure amongst companies with different amount of experience on product launches into the export markets. Marketing concept is a marketing method which is more commonly used in successful product launches.

38 ©Matti Haverila, Infacs Oy Conclusions (4) There were significant differences in relative marketing expenditure among companies with different percentage of the sales of the company sold outside Finland. In companies where the export's share of turnover was less or equal to 40 %, the mean of the marketing expenditure was 7,6%, and in companies where export's share of turnover more than 40 %, the mean of the marketing expenditure was 11,2 %. The three factors (the absolute sales volume of the company, the absolute amount of export volume and the absolute amount of marketing expenditure) differentiate effectively the successful and unsuccessful product launches. There were no differences in the outcome of product launches between the industries nor were there any differences in the outcome of product launches between the companies with different amount of experience in product launches into the export market.

39 ©Matti Haverila, Infacs Oy Conclusions (5) There were no differences in the outcome of product launches depending upon the background of the president of the company nor were there any differences in the outcome of product launches depending upon the background of the highest ranking marketing officer of the company. Product/service specialisation, distribution, advertising, publicity, promotion, market share, positioning, marketing planning and market research are marketing methods more commonly used by companies with higher relative marketing expenditure.

40 ©Matti Haverila, Infacs Oy Recommendations Study carefully the marketing strategy when launching high tech products. The launch of a new high tech product into foreign markets is different than the launch of a traditional consumer product. Remember that the new product is finished only when the launch process is completed, i.e. the final customer has received the product and is satisfied with it. Be aware of the final customers' real needs. Make sure you are able to offer the benefits he is seeking. Try not to compensate for the shortages of the product offering with overly optimistic promotional efforts. Be prepared to increase your relative marketing expenditure with a substantial amount while the share of export of your sales increases. Implement the marketing concept into your organisation. Involve everybody including the R&D and production personnel. Try to achieve critical mass in your export sales and marketing expenditure. Find any, and all means to overcome this obstacle.

41 ©Matti Haverila, Infacs Oy Finland vs. California (1) CA Finland Diff.Significance MARKETING CONCEPT 1. Marketing concept3.323.95-0.630.02 MARKETING MIX VARIABLES 1. Personal selling4.224.130.09* 2. Product/service specialization2.603.70-1.100.0002 3. Pricing3.073.49-0.42* 4. Sales promotion4.003.260.74* 5. Distribution3.233.100.13* 6. Publicity4.002.481.520.0001 7. Advertising3.502.331.170.0005

42 ©Matti Haverila, Infacs Oy Finland vs. California (2) CA Finland Diff.Significance MARKETING ORGANIZATION AND PLANNING 1. NPD strategy3.484.08-0.600.0586 2. Differentiation4.853.741.110.0000 3. Market segmentation3.093.38-0.29* 4. Marketing organization3.702.900.800.0001 5. Positioning3.372.920.45* 6. Marketing planning2.912.840.07* 7. Market share2.132.51-0.38* 8. Market research3.052.260.790.0385 9. MIS3.172.071.100.0032 10. Marketing consultants1.841.740.10*

43 ©Matti Haverila, Infacs Oy At Your Service!


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