Presentation on theme: "Marketing of Technology Intensive Products"— Presentation transcript:
1 Marketing of Technology Intensive Products Dr. Matti J. Haverila
2 Table Contents Issues for High Tech Companies (1-5) Hurdle of InternationalizationWhat seems to be the ProblemTypes of New ProductsStrategy Process (1-5)PositioningPositioning ExampleDifferentiationKey Points in Strategy Process (1)Business IdeaKey Points in Strategy Process (2-7)John Warnock, AdobeNPDPStage-Gate NPD (1-7)Approaches to NPDNPD StrategiesMarketing- Technology BalanceMarketing-Mix - Product (1)Learning CycleMarketing-Mix - Product (2)Degree of Product ModificationResearch ProcessResearch Results (1-4)Successful vs. Unsuccessful (1-4)Conclusion (1-5)RecommendationsFinland vs. California (1-2)
3 Issues for High Tech Companies (1)* Finance related factors Weight of the problemThe difficulty to get financial support 84High cost of financingAcquisition of financingTotal of finance related factorsR&D related factorsThe credibility of the company amongst the customers 94The capability to follow the development of technology 65Lack of R&D competenceThe technological ageing of products 10Total of R&D related factors* See Autio et al: Uudet teknologiayritykset...
4 Issues for High Tech Companies (2) Competition related factors Weight of the problemThe competition by replaceable products 64Domestic competitorsInternational competitorsTotal of competition related factorsLabour related factorsThe acquisition of employeesThe high cost of employeesTotal of labour related factors
5 Issues for High Tech Companies (3) Management related factors Weight of the problemLack of accounting competenceThe difficulty to get management team 14The difficulty to get boardTotal of management related factorsProduction related factorsThe acquisition of machinery and equipment 66The long production time of the product 63Total of production related factorsOther factorsThe bureaucracy of the government and local authority 106The acquisition of factory space 43The attitude of the universityThe attitude of the familyTotal of other factors
6 Issues for High Tech Companies (4) Market or marketing related factors Weight of the problemMinor identity of the companyLack of marketing competenceGetting of customers and creating customer relationships 98The high price of the product or service 88Difficulty to get to the distribution channels 59Acquisition of international contacts 52Total of market or marketing related factors 564
7 Issues for High Tech Companies (5) Issue Area Weight of the problemMarket or marketing related factors 564Finance related factors 235R&D related factorsOther factorsLabour related factors 159Management related factors 137Competition related factors 136Total of production related factors 129
8 Hurdle of Internationalization North-AmericantechnologycompaniesS alesFinnishtechnologycompaniesHurdle of InternationalizationTechnology Companies
9 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 WaltonThere 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 The Types of New Products Product Lines(20%)New to theWorld Products(10%)HighImprovements/Revisions toExisting Products(26%)Additionsto ExistingProduct Lines(26%)Newnessto theCompanyCost Reductions(11%)Repositionings(7%)LowLowHighNewness to the MarketGoTo
11 New Product Development Process (NPDP) Business StrategyExplorationIdea GenerationConcept developmentBusiness AnalysisScreeningProtype developmentMarket testingPlant Scale-UpCommercialized ProductsProduct LaunchPost Launch Check-Up
13 Stage-Gate NPD (2) Idea Gate 1 Initial ScreenThe 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 company’sresources, and fit with company policies.IdeaGate 1The 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.
14 Stage-Gate NPD (3) Stage 1 Gate 2 Second ScreenStage 1Gate 2PreliminaryInvestigationTurning 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 Stage-Gate NPD (4) Gate 3 Stage 2 Decision onBusiness caseStage 2Gate 3The 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.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.
16 Stage-Gate NPD (5) Stage 3 Gate 4 PostdevelopmentReviewThe 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.Stage 3Gate 4DevelopmentThe 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.
17 Stage-Gate NPD (6) Stage 4 Gate 5 Prelaunch BusinessAnalysisIn-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.Stage 4Gate 5Testing &ValidationThe 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.
18 Stage-Gate NPD (7) Stage 5 PLR Post LaunchReviewStage 5PLRProduction &LaunchTiming, 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 company’s objectives, strategies and programs, and guides the product’s entry to the market.Marketing planning is an outgoing activity, that occurs formally and informally throughout of the new product process.
20 NPD Strategies Success Rate % of company sales from new products Marketing and technology integratedLow budget,conservation% of company salesfrom new productsHigh-budget,ShotgunTechnology drivenFocused, butweak technology
25 Degree of product modification Incremental gainsCosts2468101214161820Zone of minimalproductadaptationZone of minimalProduct adaptation(minor type)Zone of minimalProduct adaptation(major type)
26 Research Project The % of R&D of the sales Mean = 9, Mode = Median = 8,0The % of marketing of the salesMean = 10, Mode = Median = 8,7The % of export share of the salesMean = 62, Mode = Median = 70The number of product launches per year (total 536)Mean = 6, Mode = Median = 3,0
27 Research results (1) Marketing method Rank 1. Personal selling 1 2. Marketing concept3. New product development strategy 34. Differentiation5. Product/service specialisation 56. Pricing7. Sales promotion8. Market segmentation 89. Marketing organisation 910. Distribution11. Positioning12. Marketing planning13. Market share14. Publicity15. Market research16. Advertising17. Marketing information systems/ Marketing intelligence 1718. Marketing consultants
28 Research results (2) Marketing method Description of importance 1. Personal selling Very important2. Marketing concept Very important3. New product development strategy Very important4. Differentiation Very important5. Product/service specialisation Rather important6. Pricing Moderately important7. Sales promotion Moderately important8. Market segmentation Moderately important9. Marketing organisation Moderately important10. Distribution Moderately important11. Positioning Moderately important12. Marketing planning Moderately important13. Market share Moderately important14. Publicity Rather unimportant15. Market research Rather unimportant16. Advertising Very unimportant17. Marketing information systems/ Marketing intelligence Very unimportant18. Marketing consultants Very unimportant
29 Research results (3) Marketing method Description of importance 1. Personal selling Very important2. Marketing concept Very important3. New product development strategy Very important4. Differentiation Very important5. Product/service specialisation Rather important6. Pricing Moderately important7. Sales promotion Moderately important8. Market segmentation Moderately important9. Marketing organisation Moderately important10. Distribution Moderately important11. Positioning Moderately important12. Marketing planning Moderately important13. Market share Moderately important14. Publicity Rather unimportant15. Market research Rather unimportant16. Advertising Very unimportant17. Marketing information systems/ Marketing intelligence Very unimportant18. Marketing consultants Very unimportant
30 Research results (4) Marketing method Description of importance 1. Personal selling Very important2. Marketing concept Very important3. New product development strategy Very important4. Differentiation Very important5. Product/service specialisation Rather important6. Pricing Moderately important7. Sales promotion Moderately important8. Market segmentation Moderately important9. Marketing organisation Moderately important10. Distribution Moderately important11. Positioning Moderately important12. Marketing planning Moderately important13. Market share Moderately important14. Publicity Rather unimportant15. Market research Rather unimportant16. Advertising Very unimportant17. Marketing information systems/ Marketing intelligence Very unimportant18. Marketing consultants Very unimportant
35 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 P’s), 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 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 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 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 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 RecommendationsStudy 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 Finland vs. California (1) CA Finland Diff. SignificanceMARKETING CONCEPT1. Marketing conceptMARKETING MIX VARIABLES1. Personal selling *2. Product/service specialization3. Pricing *4. Sales promotion *5. Distribution *6. Publicity7. Advertising
42 Finland vs. California (2) CA Finland Diff. SignificanceMARKETING ORGANIZATION AND PLANNING1. NPD strategy2. Differentiation3. Market segmentation *4. Marketing organization5. Positioning *6. Marketing planning *7. Market share *8. Market research9. MIS10. Marketing consultants *