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H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N.

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Presentation on theme: "H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N."— Presentation transcript:

1 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N Marketing High Technology Arto Rajala

2 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 2 Marketing High Technology/Rajala Content  1. Introduction  2. Strategic Marketing  3. Characteristics of High Technology  4. Marketing Issues High Tech Context  5. Commercialization of High Tech Products  6. Conclusion

3 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 3 Marketing High Technology/Rajala 1. Introduction  High Technology in Finland... More than 2.000 companies and close to 50.000 employees 11.5 % of industry volume (1996) 16 % of total export (1997) [cf. 4% in 1988] FIM 35 billion Export surplus over FIM 10 billion Volume growth 50 % per year Large externalities - New industries/businesses ! Electronics and Telecommunications are the main sectors R&D investments in Finland over 3% NGP (1999)

4 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 4 Marketing High Technology/Rajala Definitions  Marketing as a business (management) discipline or orientation  “… the performance of business activities that direct goods and services from producer to consumer or user” (AMA) Understanding actual and potential customers’ needs by… developing/modifying products, facilitating customers access to its offerings, attracting and influencing the market, creating differential advantages (branding) Establishing and maintaining customer relationships Managing 4 Ps (Product, Price, Place, Promotion)

5 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 5 Marketing High Technology/Rajala Definitions  Technology Machinery, equipment, tools, etc. (tangible) Techniques - specific ways of proceeding or completing instrumental acts and specific arrangements of persons, materials and tasks (intangible) The science of knowledge to practical purpose (to obtain something useful) Knowledge and skills - not only to develop but how to use … making benefit from technology

6 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 6 Marketing High Technology/Rajala 2. Strategic Marketing  Business Strategy What are the drivers for competitive advantage? What resources and skills are needed? What capabilities to create or acquire?  Targeting Marketing Activities  Positioning Strategies  Creating and Managing Relationship Networks

7 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 7 Marketing High Technology/Rajala Segmentation  Who are the primary customers for each product/service? Evaluating market potential Selecting delivery channel How to set price? (Positioning)  Segmentation criteria Demographic factors Attitudes - preferences - benefit segmentation Heavy-users vs. light-users

8 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 8 Marketing High Technology/Rajala Targeting  Marketing strategy for each segment Environmental challenges? Using innovation diffusion model Aggressive or defensive strategy?  Strategic planning = organizational learning What have been done earlier? What are the results? Generating market information (lead-users) Making scenarios

9 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 9 Marketing High Technology/Rajala Positioning  Marketing mix (4P) - combination of strategies Product strategy Logistic strategy (Place) Pricing Strategy Communications strategy (Promotion) How to position product/service according to attributes or features preferred by the customers ?  Customer and supplier strategies  Partnering and network strategies

10 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 10 Marketing High Technology/Rajala Relationship Strategies  Rapidly changing business environment  Resource gaps Complexity of technology Financial risks Access in to the market  Classification of relationships Customer, supplier, dealer, strategic alliance, joint venture Internal relationships (cross-functional teams)

11 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 11 Marketing High Technology/Rajala  Successful relationship management - Atmosphere Commitment Trust Mutuality  Relationships are long-term investments ! Technology development (innovations) Technology transfer (commercialization of innovations) Generating tacit knowledge Creating distinctive capabilities Norms

12 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 12 Marketing High Technology/Rajala 3. Characteristics of High Technology  How to define high tech? Novelty - advanced compared to the-state-of-the-art Knowledge-intensity - usually based on radical innovations Dependence on R&D and highly educated employees R&D investments more than 4 % of turnover (OECD) Usually between 10 - 20 % Intensive development cooperation between universities and research institutes (National and EU technology programs) Long R&D phase - short market existence

13 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 13 Marketing High Technology/Rajala Market Uncertainty What needs might be met by new technology? How will needs change in future? Will market adopt industry standard? How large is the potential market? How fast will the innovation spread? Technology Uncertainty Will the new product function as promised? Will the delivery timetable be met? Will the vendor give high-quality service? Will new technology make ours obsolete? Will there be side effects of the new product? High-Tech Marketing Source: Moriarty & Kosnik (1989)

14 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 14 Marketing High Technology/Rajala Technology Life-Cycle  Incremental Changes Evolutionary in nature - e.g. microprocessor generations (Intel 286, 386, 486) or mobile phone models (Nokia 3110, 5110, 6110)  Radical Changes - Technology Discontinuities (HIGH TECH) Revolutionary in nature - e.g. NMT vs. GSM, TV vs. HDT Radical innovation is followed by an era of ferment where different technologies compete to be the standard of the focal industry  Markets (not so much technology) impacts what is the new DOMINANT DESIGN (cf. Betamax vs. VHS)

15 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 15 Marketing High Technology/Rajala Technology Development Source: Anderson & Thusman (1990) RevolutionEvolutionRevolution

16 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 16 Marketing High Technology/Rajala 4. Marketing Issues in High-Tech Context  Does new technology embedded in products/services really generate new demand or does it only replace existing demand? What are the real products from marketing point of view? Utilizing new technology, but it does not necessarily need new marketing efforts … so it is difficult to make a distinction between high-tech ja non- high-tech products only by considering used technology  When analyzing high tech markets, it is important to understand suppliers’ and customers’ different perspectives !

17 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 17 Marketing High Technology/Rajala  But…does an excellent product sell itself? Once high tech - not always high tech! Level of analysis (product, company, industry, markets) Analyzing the ‘Marketing Basics’ carefully  What are the bottlenecks of a high tech product? Marketing (world-wide sales and delivery channels) Financing (How to finance globalization?) R&D (shortage of employees)

18 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 18 Marketing High Technology/Rajala  High tech marketing does not differ so much from traditional marketing as usually believed, but... customers are more easily forgotten, knowing competitors is extremely important, need for global view on business ‘Think global - act local’, and considering technology and industry convergence  Avoiding ‘Engineers dream but marketers nightmare’ -products However,...

19 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 19 Marketing High Technology/Rajala Challenges…  How to sell a high tech product? Not only high technology … but also high design, high quality, and high systems know-how  Investing on marking capabilities and resources Product excellenceCustomer and service capabilities Sale excellence Delivery and logistic capabilities Partnering excellence Network capabilities

20 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 20 Marketing High Technology/Rajala Towards Market-Driving Approach  Market Driving  Sales driven - Market driven -Customer driven - Market Driving  Unique business processes & Discontinuous leap in value creation Revolutionary marketing, Channel configuration, Networks Destroying industry segmentation, New price points  Vision instead of traditional market research Forward seeing, seeing differently  Customer education and overwhelming customer expectations  e.g. IKEA, Southwest Airlines, Swatch, Bennetton, FedEx Source: Kumar et al. (2000)

21 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 21 Marketing High Technology/Rajala How Value Is Created in High-Tech Markets ? Infrastructure Context Content Customers Exchange Brand Infrastructure Context Content Customers Exchange Brand MarketplaceMarketspace Source: Sviokla & Rayprot (1994)

22 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 22 Marketing High Technology/Rajala The High-Tech Value Chain Discontinuous innovations must create new value chains to survive. Continuous innovations leverage existing value chains. Discontinuous innovations must create new value chains to survive. Continuous innovations leverage existing value chains. Product ProvidersService ProvidersCustomers $$ Technology Products Systems Technical Buyers End Users Economic Buyers Sales Channels SALESALE Source: Moore (1998)

23 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 23 Marketing High Technology/Rajala 5. Commercialization High Technology  Why do so many products fail? 90-95% of new product ideas never get in to market 30-50% of new products do fail in market  Successful product have some common features… Market orientation - knowing customers needs and wants Resource enhancements in sales and distribution Synergies with technology and production Global view on product development Understanding innovators’ and early adopters’ different views

24 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 24 Marketing High Technology/Rajala Time to market  When bring a high tech product in to market ? Readiness (e.g. 80% or 100%) Competitors reactions (launches)  ‘First in the market’ - not always the best strategy Monopoly - segmentation - entry barriers Symmetric/asymmetric market/technology know-how  Adoption of new technology Innovation diffusion in high tech sectors

25 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 25 Marketing High Technology/Rajala Technology Adoption Life Cycle Pragmatists create the dynamics of high-tech market development. InnovatorsEarly Adopters Early MajorityLate MajorityLaggards Techies: Try it! Pragmatists: Stick with the herd! Conservatives: Hold on! Skeptics: No way! Visionaries: Get ahead of the herd! Source: Moore (1998)

26 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 26 Marketing High Technology/Rajala TECHNOLOGY ENTHUSIASTS Fundamentally committed to new-tech They love to get their hands on the latest and greatest innovation All organisations support techies From marketing point of view… they usually do not have the money they are gatekeepers to the rest of life cycle innovations get hearing with their endorsement new products are ‘given’ to them to gain their supportVISIONARIES Are the true revolutionaries in business Being first to exploit the new capability - competitive advantage Extraordinary influence on high-tech marketing can and will bring real money to the table help publicise the new innovation, but… Each require special modifications that no one else would use… overtax R&D resources need to find customers for ‘standard solutions’

27 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 27 Marketing High Technology/Rajala PRAGMATISTS Make the bulk of all technology infrastructure phases do not love technology of its own sake believe on evolution not revolution Interested in enhancing their systems’ efficiency by using new technology strong reference base needed -- trust adopt the new innovation when time is ready Prefer to buy from market leader everyone else in the market makes the product work with the leader’s market leader attracts many third- party companies into its after-marketCONCERVATIVES Pessimistic about their ability to gain any value from technology investments buy high-tech only when they must price-sensitive, sceptical, and very demanding Represent a large opportunity for high-tech products need to be handled with care simplify and commodities systems - just work, no more ‘they are happy to by several dozen of the world’s most advanced microprocessors, as long as they are deeply embedded inside a BMW’

28 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 28 Marketing High Technology/Rajala Discovering the Chasm  Visionaries don’t see enough of a head start Too late to be the first one Too easy for “fast-followers” to catch up  Pragmatists see no reason to start yet Too early for anything to be “in production” No herd of references has yet formed Early Market Mainstream Market Chasm

29 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 29 Marketing High Technology/Rajala Crossing the Chasm  Product vendor’s problem 80% of many solutions—100% of none Pragmatists won't buy 80% solutions  Most common vendor mistake: Committing to the most common enhancement requests Never finishing any one customer's wish-list  Solution Focus on a single beachhead Accelerate formation of that segment's whole product Pick a list and finish it!

30 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 30 Marketing High Technology/Rajala Market Development Model Chasm Tornado Total Assimilation Bowling Alley Main Street Early Market Source: Moore (1998)

31 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 31 Marketing High Technology/Rajala Early Market   Visionary business level executives going ahead of the herd Driven by competitive advantage Will help pay for new paradigm Demand “whatever it takes” commitment Rely on their own judgment   Deal-driven marketing prevails Breakthrough technology gets center stage Senior service partner leads behind the scenes Think project not product

32 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 32 Marketing High Technology/Rajala Crossing the Chasm  Pragmatist department managers adopting before the herd Head-pin segment adopts only if in severe pain Responsible for a broken mission-critical business process Requires complete solution to the problem Will try anything that looks like it should work Will track customer references within own niche carefully  Niche marketing prevails Direct sales opens up the niche Indirect sales takes over the niche once under way Healthy price margins, restricted competition are normal Think whole product not product

33 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 33 Marketing High Technology/Rajala Bowling Alley   Other niche segment managers adopting before the herd Major improvement in a specific business process Must have complete whole products Rely on customer references   Niche marketing continues to prevail Leverage customer references from one segment to next Leverage solution partners from one segment to the next Invest in extending the whole product not the product

34 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 34 Marketing High Technology/Rajala Tornado  Pragmatist infrastructure managers adopting with the herd Transition to the new infrastructure Must have standards Rely on market share  Mass marketing prevails Streamlined one-size-fits-all whole product Low-touch, high-volume distribution Margin-based competitions Think product

35 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 35 Marketing High Technology/Rajala Main Street  Installed base driving the after-market Want better values, no disruption Two paths: commodity vs. differentiation Installed vendor has major competitive advantage Customer relies on trial, not references  Mass customization prevails Standard core for price-sensitive sales Customizable surface for differentiated offers High-touch, high-volume distribution direct to end users Think end-user experience not product

36 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 36 Marketing High Technology/Rajala 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

37 H E L S I N G I N K A U P P A K O R K E A K O U L U H E L S I N K I S C H O O L O F E C O N O M I C S A N D B U S I N E S S A D M I N I S T R A T I O N 37 Marketing High Technology/Rajala 6. Conclusions  Market Driving Approach Implementing new value chains Real time marketing  Commercialization in Focus Understanding the dynamics of high-tech markets Global view on business and R&D Integrating design, service, and system integrator elements  Creating and Maintaining Coordination Capabilities Marketing information systems Circulating employees (marketing - R&D) Marketing organization - Marketing capabilities


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