Transcript Marketing of High-Technology Products and Innovations
Marketing of High-Technology Products and Innovations
Jakki J. Mohr
Chapter 1: Introduction to High-Technology
Technology is ubiquitous
Examples of traditional “high-tech” industries: Computers and information technology Biotechnology Telecommunications Internet Examples of some industries where technological innovation is creating radical changes: Waste management Agriculture Automotive Oil and Gas Consumer Products © Jakki Mohr, 2001
The “New Economy”
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
Volatile Relies on constant stream of innovation Dot-com crashes Stock market effects Global effects © Jakki Mohr, 2001
Definitions of “High-Tech”
Government perspective “Common underlying characteristics” perspective © Jakki Mohr, 2001
Definitions of Technology:
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
Classify industries based on objective, measurable indicators: 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
131 211 281 282 283 284 285 286 287 289 291 299 335 355
SIC code
Level 1 Industries: Technology-Intensive
Industry
Total.........................................................................................................
Level 1 industries 1 ................................................................................
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 ......................................................................
Percent research and development employment
100.00
86.5
1.9 .4 1.3 1.8 2.3 1.6 .6 1.5 .5 1.0 1.2 .1 1.8 1.6 © Jakki Mohr, 2001
362 366 367 371 372 376 381 382 384 386
Level 1 Industries (Cont) Technology-Intensive
SIC Percent research Industry and development code employment
357 Computer and office equipment............................................................... 4.5 737 871 873 874 899 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 ............................................................ Services, n.e.c.
2
...................................................................................... 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 © Jakki Mohr, 2001
Level II Industries: Technology Moderate
SIC code Industry
229 261 267 348 351 356 359 365 369
Level II industries ..................................................................................
Miscellaneous textile goods ..................................................................... Pulp mills ................................................................................................. Miscellaneous converted paper products ................................................ Ordnance and accessories, n.e.c.
2
.......................................................... Engines and turbines ............................................................................... General industrial machinery ................................................................... Industrial machines, n.e.c.
2
..................................................................... Household audio and video equipment.................................................... Miscellaneous electrical equipment and supplies .................................... 379 Miscellaneous transportation equipment ................................................. 1 See text for definition of Level I and Level II industries. 2 n.e.c. = not elsewhere classified
Percent research and development employment 13.4
.5 .2 2.4 .8 .9 2.4 3.2 .9 1.7 .5 © Jakki Mohr, 2001
Shortcomings to the classification approach:
Some industries are R&D intensive (i.e., high tech), but new products are not revolutionary Ex: Cigarettes May exclude industries who are technology driven Ex: Textiles production Some industries with standardized output produced in mass quantities Ex: Some computing equipment © Jakki Mohr, 2001
Definitions of Technology: Common, Underlying Characteristics
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 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 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 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 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
Marketing of High-Technology Products & Innovations
Technological Uncertainty Competitive Volatility © Jakki Mohr, 2001
Other Characteristics Common to High-Tech Markets:
“Unit-one” costs: reproduction when the cost of producing the first unit is very high relative to the costs of Ex: development vs. reproduction of software Demand-side increasing returns it : When the value of the product increases as more people adopt 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.)
Tradeability problems underlying technology arise because it is difficult to value the know-how which forms the basis of the Ex: How much to charge for licensing the rights to a waste eating 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 © Jakki Mohr, 2001
Supply Chain for Auto Industry
Suppliers Car Manufacturers Car Dealers Customers -raw materials -components -production equipment -services personal consumption -business use (fleets, etc.) © Jakki Mohr, 2001
A Supply Chain Perspective on Technology
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 Product characteristics well- defined Competitive advantage on low cost production Often developed in response to specific market need "Demand-side" market 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 © Jakki Mohr, 2001
Supplier vs. Customer Perceptions of Nature of Innovation
Breakthrough Mismatch: Delusion Incremental Mismatch: Shadow © Jakki Mohr, 2001
Contingency Theory
Marketing Strategy Type of Innovation
-Breakthrough -Incremental
New Product Success
Type of marketing strategy is contingent upon the nature of the innovation.
© Jakki Mohr, 2001
Examples of Implications of Contingency Theory:
Breakthrough Incremental
R&D/Marketing Interaction Type of Marketing Research Role of Advertising Pricing R&D leads; “ technology push” Lead users; empathic design Marketing leads; “customer pull” Surveys; focus groups Primary demand; customer education Selective demand; build image May be premium More © Jakki Mohr, 2001 competitive
Framework for High-Tech Marketing Decisions
Marketing – 4Ps and the Internet (Ch. 7-11) High-Tech Firm
Internal Considerations (Ch. 2, 3, 4) Core Competencies/Core Rigidities Funding Considerations Market Orientation Relationship Marketing R&D/Marketing Interactions Planning Process (Ch. 12)
Customers
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