Transcript Adoption and Diffusion of Innovation

Marketing of High-Technology
Products and Innovations
Understanding High-Tech Customers
Critical Issues in Understanding
High-Tech Customers
Factors that
determine who
desirable
customers are.
Factors that
affect purchase
decision
High Tech
Customer
Factors that affect
timing of purchase
decision
Chapter Outline
• Determine Desirable Customers: Choose a Target
Market
– Market Segmentation Process
– Target Market and Positioning
• Purchase Decisions: Depend on Adopter Category
– Factors Affecting Technology Adoption
– Categories of Adopters
– The Chasm
• Timing of Purchase: Depend on Adopter Category
and Customer Strategies to Avoid Obsolescence
– Migration/Upgrade Decisions
Step 1 in Market Segmentation
• Divide market into groups based on different needs
across groups and common characteristics within
groups
–
–
–
–
Demographics
Geographics
Psychographics (Values and lifestyles)
Behavioral Variables
• Useage Volume
• Benefits Sought
• Useage Occasion
Step 2 in Market Segmentation
• Profile (describe) customers in each segment
by specifying a typical customer in the segment.
Examples of Tech Customer
Segments: “Technographics”
THE PESSIMISTS…
… AND THE OP TIMISTS
MORE AFFLUENT
LESS AFFLUENT
LESS AFFLUENT
HANDSHAKERS:
SIDELINED CITIZENS:
MORE AFFLUENT
TRADITIONALISTS:
MEDIA
JUNKIES:
TECHNOSTRIVERS:
DIGITAL
HOPEFULS:
GADGETGRABBERS:
FAST
FORWARDS:
BUSINESS
NEW AGE
NURTURERS:
FAMILY
MOUSE
POTATOES:
.
ENTERTAINMENT
Examples of Tech Customer
Segments: “Technographics”
THE PESSIMISTS…
… AND THE OP TIMISTS
MORE AFFLUENT
LESS AFFLUENT
LESS AFFLUENT
HANDSHAKERS:
SIDELINED CITIZENS:
MORE AFFLUENT
TRADITIONALISTS:
MEDIA
JUNKIES:
SIDELINED CITIZENS:
Not interested in technology
TECHNOSTRIVERS:
DIGITAL
HOPEFULS:
GADGETGRABBERS:
FAST
FORWARDS:
BUSINESS
NEW AGE
NURTURERS:
FAMILY
MOUSE
POTATOES:
.
ENTERTAINMENT
Examples of Tech Customer
Segments: “Technographics”
THE PESSIMISTS…
… AND THE OP TIMISTS
MORE AFFLUENT
LESS AFFLUENT
SIDELINED CITIZENS:
HANDSHAKERS:
TRADITIONALISTS:
MEDIA
JUNKIES:
HAND-SHAKERS:
MORE AFFLUENT
Older consumers – typically
LESS AFFLUENT
managers – who don't touch their
FAST
computers
at
work.
They
leave that
TECHNOFORWARDS:
to younger assistants.
STRIVERS:
TRADITIONALISTS:NEW AGE
Willing
to use technology
but slow
DIGITAL
NURTURERS:
to upgrade. Not convinced
HOPEFULS:
upgrades and other add-ons are
worth paying for.
MOUSE
GADGETPOTATOES:
.
GRABBERS:
MEDIA JUNKIES:
Seek entertainment and can't find
much of it online. Prefer TV and
older media.
BUSINESS
FAMILY
ENTERTAINMENT
Examples of Tech Customer
Segments: “Technographics”
THE PESSIMISTS…
TECHNO-STRIVERS:
AFFLUENT
Use technology from MORE
cell phones
LESS AFFLUENT
and pagers to online services
HANDprimarily to gain career edge.
SIDELINED CITIZENS:
SHAKERS:
DIGITAL HOPEFULS:
Families with a limitedTRADITIONbudget but
ALISTS:
still interested in new technology.
Good candidates for the under$1000 PC
MEDIA
JUNKIES:
GADGET-GRABBERS:
They also favor online
entertainment but have less cash to
spend on it.
… AND THE OP TIMISTS
MORE AFFLUENT
LESS AFFLUENT
TECHNOSTRIVERS:
DIGITAL
HOPEFULS:
GADGETGRABBERS:
FAST
FORWARDS:
BUSINESS
NEW AGE
NURTURERS:
FAMILY
MOUSE
POTATOES:
.
ENTERTAINMENT
Examples of Tech Customer
Segments: “Technographics”
THE PESSIMISTS…
SIDELINED CITIZENS:
LESS AFFLUENT
… AND THE OP TIMISTS
FAST FORWARDS:
MORE
AFFLUENT
MORE AFFLUENT
These
customers are the biggest
spenders, and they'reLESS
earlyAFFLUENT
HAND-of new technology for
FAST
adopters
TECHNOSHAKERS:
FORWARDS:
individual use.
BUSINESS
STRIVERS:
NEW AGE NURTURERS:
TRADITIONAlso
big spenders, but DIGITAL
focused on
ALISTS:
technology for home HOPEFULS:
users such as
NEW AGE
NURTURERS:
FAMILY
family PC.
MEDIA
GADGETJUNKIES:
MOUSE
POTATOES:
GRABBERS:
They like the online world
for
entertainment and are willing to
spend for the latest
technotainment.
MOUSE
POTATOES:
.
ENTERTAINMENT
Step 2 in Market Segmentation
• Profile (describe) customers in each segment
• EX:
Couple A:
Couple B:
Age: 44 and 46
Age: 46 and 53
Job: Secretary/Maintenance Supervisor
Job: Manager/CPA
Children: 2 (11 and 12 years old)
Children: 3 (7-15 years old)
PC: 1 (3 years old)
PC: 3
Other: - no internet connections
Other: - 2 pagers
- considering upgrades for
speedier games
- go on-line for work
Steps in Market Segmentation
• Evaluate and select a target market:
– SWOT analysis for the firm and competitors
• How many competitors/which competitors to be analyzed?
–
–
–
–
Size of segment in terms of sales volume
Growth rate of the segment
Competition within the segment
Ability of firm to effectively meet the needs of the
segment
Beachhead
• Must identify the best “beachhead”
– A single target market from which to pursue the
mainstream market (starting from the adjacent
segments)
• Focus on early market or mainstream?
– Cannot afford to pursue many segments at once
Step 4 of Segmentation Process
• Position the product within the segment
– Positioning: the act of designing the company’s offering
and image to occupy a distinctive place in the mind of the
target market.
• Consider customer perceptions (perceived benefit (value)/cost)
• Position relative to perceived competition (a distinctive place)
• Position on important, compelling attributes/benefits
– Would the cost of creating such a product be much higher?
– Would customers buy this product by paying a lot?
– What is the solution in the trade-off of high quality vs. cost?
• Strengthening/Grab unoccupied position/Deposition and re-position/Exclusive Club
Factors Affecting Purchase Decision
• Customer FUD: uncertain about the benefits and cost
• Relative Advantage
– Perceived benefit vs. cost
• Compatibility
– The extent to which adopting and using the innovation is
based on existing ways of doing things
• Complexity
– The easier, the better/ interface (ex: on-line button, stat sw)
• Ability to communicate product benefits (HDTV, CPU)
• Observability
– How easily the benefits be observed by current
customers/other customers
Factors Affecting Purchase Decision
• An example of Web TV: importance of
communicating all unique benefits of a new product
–
–
–
–
–
Web TV: a web surfing device (a small box) for TVs
In 1996, internet was exploding/TV is everywhere
Traditional marketing: heavy advertising & dealer training
Problem: target customers didn’t understand the device
Solution: in 1997, an education initiative was launched;
customers were explained the benefits of Internet and
WebTV
– Result: Sales increase 7 times
Final Thoughts on Adoption
• These factors are crucial hurdles to overcome in effective
marketing.
• Marketers must provide compelling reasons for adoption,
and overcome customers’ fear, uncertainty, and doubt.
• Traditional marketing methods (which assumes customers
understand the usefulness of the products and know how to
evaluate them) are often insufficient.
– Often, must focus more on educating potential users about
benefits and how to use new product
Categories of Adopters: Different Characteristics
Early Market
Chasm
Mainstream
•Technology •Competitive
-Lover
Advantage
•Productivity
Enhancement
•Test
Product
•Evolutionary
•Revolutionary
Product
•Alternative •High Risk/
Solution
High Reward
•Gate
Keeper
•Move Together
•Adopt for
Matching
•Industry Standard
Competitors
•Implement
Quickly
•Remain Status
Quo
•Adopt When All
Other Alternatives
Are Worse & Cost
Justification Are
Absolutely Solid
•Intensive S&S
Early
Majority
Late
Majority
34%
13.5%
34%
{
Early
Adopters
{
2.5%
•High Price
•Bullet-proof
•Reliable Service Solution
{
{
Innovators
•Risk Seeking
•Price Sensitive
•Don’t Believe in
Technology
Technology
Enthusiasts
Visionaries
Prag matists
Conservatives
Laggards
16%
{
•Change
Agent
•Risk Averse
Skeptics
Time
Innovators:
Technology Enthusiasts
• Appreciate technology for its own sake (won’t care too
much on benefit/cost)
• Motivated by idea of being a change agent in the reference
group
• Will tolerate initial glitches
• Will develop make-shift (alternative) solutions
• Willing to alpha/beta test and work with technical
personnel
• Provide early revenue for marketers—but not a large
group
• Importance: They are the gatekeeper to the next group of
Early Adopters: “Visionaries”
• Focus on gaining competitive advantage
• Want to revolutionize competitive rules in their
industry
• Attracted by high-risk/high-reward projects
• Not necessarily very price sensitive
• Demand customized solutions and intensive tech
support
– Will supply missing elements of total solution
• Product Form Competition: Between categories of
solutions (ex: DVD vs. VCD)
• Early adopters communicate horizontally (across
industry boundaries)
Early Majority: “Pragmatists”
• Comfortable with only evolutionary changes in
business practices, in order to gain productivity
enhancements
• Averse to disruptions in their operations
• Want proven applications, reliable service
• Buy only with a reference from trusted colleague in
same industry
Pragmatists (Cont.)
• This groups is the bulwark of the mainstream
market:
– They want to move together (herd mentality)
– They want to pick the same technology solution
(avoid risk)
– Once they make a decision, they want to implement it
quickly.
• Requires industry standards
Late Majority: “Conservatives”
• Risk averse, technology shy
• Very price sensitive
• Require completely pre-assembled, bullet-proof
solutions
• Motivated only by need to keep up with
competitors in their industry
• Rely on single, trusted advisor
Laggards: “Skeptics”
• Want to maintain status quo (current condition)
• Technology is a hindrance to operations
• Buy only if all other alternatives worse and cost
justification is absolutely solid
Target Innovators or
the Early Majority?
• Target the majority when:
– Word of mouth effects are low
– Consumer products industries (vs. b-to-b)
– Low ratio of innovators to majority users (a lot more in
majority category)
– Profit margins decline slowly with time (still profitable in
majority category)
– Long time period for market acceptance (longer to cross
chasm)
What is the “Chasm?”
• Gap between early market and mainstream
market—
– Visionaries vs. Pragmatists
• Visionary market is saturated, but mainstream
not yet ready to buy.
• Marketing that was successful with visionaries
simply is not effective with pragmatists
– Intensive services vs. reliable products
– Advanced technology vs. complete product package
– Customized features vs. simplifying usage
Goal: Minimize time
in the Chasm
• Look to the new strategies necessary to reach
the mainstream market
• Pick a single target market with specific
application
• R&D must:
– build interfaces to legacy systems
– work with partners
– ride the line between service and engineering
Crossing the Chasm Summary
• The whole product is the critical success factor
• Until a high-tech firm has established itself in the
mainstream market, it has not proven itself.
• To manage the mainstream market effectively,
firm must work with partners in a disciplined
fashion (that prioritizes partners so as to provide
a “whole” product, including hardware, software,
connection, and training,..)
Factors Affecting Rate of Adoption:
Customer Strategies to Avoid Obsolescence
• Basic Issue: Tension between adopting
newest generations of technology and
obsoleting investments in prior generations.
• Marketing implication: Firms must manage
a migration path for customers to the new
generation.
What Affects Customer’s
Migration Decision?
• Expectations about pace of improvements relative to price
– A “migration path” is a series of upgrades to help
transition the customer to new generations.
• Expectation about magnitude of improvements relative to
price
** The greater the anticipated product
improvements and/or expected price declines, the
greater the customer’s propensity to delay purchase.
**
Implication:
• High-tech firms must provide upgrades that
allow firms to take advantage of new technology
without scrapping investments in the prior
generation.
Managing a Migration Path
Withdraw older
generation immediately
No migration
assistance
Offer migration
assistance
Sell old & new generations
Sell simultaneously
for brief periods
Indefinitely
CUSTOMER OPTIONS:
Constrained
Enlarged
Managing A Migration Path
• When customers expect a rapid pace in
technology advancement:
– They will be willing to wait for price declines
– Migration assistance (i.e., trade-ins, etc.) mitigates
against customer stalling and leapfrogging.
Managing A Migration Path
• When customers expect significant magnitude of
improvement
– They realize smooth upgrading is unlikely
– Waiting for price declines may result in purchasing
an obsolete product
– Therefore, migration path is less crucial, as it is
meaningless, to a certain extent
Managing A Migration Path
• When customers have uncertainty about
expectations:
– Migration path makes sense
– Sell old and new simultaneously
Cross-Selling
• The strategy of pushing new products to current
customers based on their past purchases. Crossselling is designed to widen the customer's reliance
on the company and decrease the likelihood of the
customer switching to a competitor.
• Cross-selling (selling additional products to existing
customers) deepens the relationship and improves
customer retention, both of which are important for
market ownership. Cross-selling prevents
competitors from taking customers, and is much
cheaper than advertising and searching for new
customers.