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Marketing of Technology Intensive Products

Marketing of Technology Intensive Products. Dr. Matti J. Haverila. Table Contents. 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)

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Marketing of Technology Intensive Products

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

  2. Table Contents • 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) • 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)

  3. Issues for High Tech Companies (1)* Finance related factorsWeight of the problem The difficulty to get financial support 84 High cost of financing 79 Acquisition of financing 72 Total of finance related factors235 R&D related factors The credibility of the company amongst the customers 94 The capability to follow the development of technology 65 Lack of R&D competence 45 The technological ageing of products 10 Total of R&D related factors214 * See Autio et al: Uudet teknologiayritykset...

  4. Issues for High Tech Companies (2) Competition related factorsWeight of the problem The competition by replaceable products 64 Domestic competitors 47 International competitors 25 Total of competition related factors136 Labour related factors The acquisition of employees 100 The high cost of employees 59 Total of labour related factors159

  5. Issues for High Tech Companies (3) Management related factors Weight of the problem Lack of accounting competence 109 The difficulty to get management team 14 The difficulty to get board 14 Total of management related factors137 Production related factors The acquisition of machinery and equipment 66 The long production time of the product 63 Total of production related factors129 Other factors The bureaucracy of the government and local authority 106 The acquisition of factory space 43 The attitude of the university 29 The attitude of the family 25 Total of other factors203

  6. Issues for High Tech Companies (4) Market or marketing related factorsWeight of the problem Minor identity of the company 143 Lack of marketing competence 124 Getting of customers and creating customer relationships 98 The high price of the product or service 88 Difficulty to get to the distribution channels 59 Acquisition of international contacts 52 Total of market or marketing related factors564

  7. Issues for High Tech Companies (5) Issue AreaWeight of the problem Market or marketing related factors 564 Finance related factors 235 R&D related factors 214 Other factors 203 Labour related factors 159 Management related factors 137 Competition related factors 136 Total of production related factors 129

  8. North-American technology companies Hurdle of Internationalization Sa l e s Finnish technology companies Hurdle of Internationalization Technology 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 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. The Types of New Products New Product Lines (20%) New to the World Products (10%) High Improvements /Revisions to Existing Products (26%) Additions to Existing Product Lines (26%) Newness to the Company Cost Reductions (11%) Repositionings (7%) Low Low High Newness to the Market GoTo

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

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

  13. Stage-Gate NPD (2) Initial Screen 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 company’s resources, and fit with company policies. Idea Gate 1 • 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.

  14. Stage-Gate NPD (3) Second Screen Stage 1 Gate 2 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. Stage-Gate NPD (4) Decision on Business case Gate 3 Stage 2 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. 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) Postdevelopment Review 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. Gate 4 Stage 3 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.

  17. Stage-Gate NPD (6) Prelaunch Business Analysis 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. Gate 5 Stage 4 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.

  18. Stage-Gate NPD (7) Post Launch Review Stage 5 PLR 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 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.

  19. Approaches to NPD Process Consumer driven Competition driven Technology driven Market Analysis Technology needs and application ideas Idea generation Concept development and consumer screening Concept identification and screening Concept development and consumer screening Business Analysis Product development Business Analysis Product development Prototype development Consumer/Lab testing Production testing Test marketing Advanced development Market Launching Market Launching Market Launching

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

  21. Marketing - Technology Balance Relative Effort Allocation Marketing efforts Engineering efforts Cutting Edge State of The Art Advan- ced Main- stream Mature Decline State of Technology

  22. Marketing Mix - Product (1) Slow Learning Cycle Sales-customer feedback Develop product Launch Improved Product Rapid Learning Cycle Sales- customer feedback Sales- customer feedback Sales- customer feedback Launch Improved Product Launch Improved Product Develop product Launch Improved Product

  23. Learning Cycle Rapid Learning Cycle Slow Learning Cycle

  24. Marketing Mix - Product (2) 40 Market share achieved 30 20 10 Growth Introductory Mature Decline Product not Modified Product Modified

  25. Degree of product modification Incremental gains Costs 0 2 4 6 20 8 10 12 16 18 14 Zone of minimal Product adaptation (minor type) Zone of minimal product adaptation Zone of minimal Product adaptation (major type)

  26. 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. Research results (1) Marketing method Rank 1. Personal selling 1 2. Marketing concept 2 3. New product development strategy 3 4. Differentiation 4 5. Product/service specialisation 5 6. Pricing 6 7. Sales promotion 7 8. Market segmentation 8 9. Marketing organisation 9 10. Distribution 10 11. Positioning 11 12. Marketing planning 12 13. Market share 13 14. Publicity 14 15. Market research 15 16. Advertising 16 17. Marketing information systems/ Marketing intelligence 17 18. Marketing consultants 18

  28. Research results (2) Marketing methodDescription ofimportance 1. Personal selling Very important 2. Marketing concept Very important 3. New product development strategy Very important 4. Differentiation Very important 5. Product/service specialisation Rather important 6. Pricing Moderately important 7. Sales promotion Moderately important 8. Market segmentation Moderately important 9. Marketing organisation Moderately important 10. Distribution Moderately important 11. Positioning Moderately important 12. Marketing planning Moderately important 13. Market share Moderately important 14. Publicity Rather unimportant 15. Market research Rather unimportant 16. Advertising Very unimportant 17. Marketing information systems/ Marketing intelligence Very unimportant 18. Marketing consultants Very unimportant

  29. Research results (3) Marketing methodDescription ofimportance 1. Personal selling Very important 2. Marketing concept Very important 3. New product development strategy Very important 4. Differentiation Very important 5. Product/service specialisation Rather important 6. Pricing Moderately important 7. Sales promotion Moderately important 8. Market segmentation Moderately important 9. Marketing organisation Moderately important 10. Distribution Moderately important 11. Positioning Moderately important 12. Marketing planning Moderately important 13. Market share Moderately important 14. Publicity Rather unimportant 15. Market research Rather unimportant 16. Advertising Very unimportant 17. Marketing information systems/ Marketing intelligence Very unimportant 18. Marketing consultants Very unimportant

  30. Research results (4) Marketing methodDescription ofimportance 1. Personal selling Very important 2. Marketing concept Very important 3. New product development strategy Very important 4. Differentiation Very important 5. Product/service specialisation Rather important 6. Pricing Moderately important 7. Sales promotion Moderately important 8. Market segmentation Moderately important 9. Marketing organisation Moderately important 10. Distribution Moderately important 11. Positioning Moderately important 12. Marketing planning Moderately important 13. Market share Moderately important 14. Publicity Rather unimportant 15. Market research Rather unimportant 16. Advertising Very unimportant 17. Marketing information systems/ Marketing intelligence Very unimportant 18. Marketing consultants Very unimportant

  31. Successful vs. Unsuccesful (1) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling 1 1 2. NPD strategy 25 3. Marketing concept 3 4 4. Differentiation 42 5. Product/service specialisation 5 6 6. Pricing 6 7 7. Market segmentation 79 8. Sales promotion 83 9. Marketing organisation 97 10. Distribution 10 11 11. Positioning 11 11 12. Marketing planning 12 13 13. Market share 139 14. Market research 14 15 15. Publicity 15 16 16. Advertising 16 16 17. MIS/ Marketing intelligence 1714 18. Marketing consultants 18 16

  32. Successful vs. Unsuccesful (2) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling 1 1 2. NPD strategy 25 3. Marketing concept 3 4 4. Differentiation 42 5. Product/service specialisation 5 6 6. Pricing 6 7 7. Market segmentation 79 8. Sales promotion 83 9. Marketing organisation 97 10. Distribution 10 11 11. Positioning 11 11 12. Marketing planning 12 13 13. Market share 139 14. Market research 14 15 15. Publicity 15 16 16. Advertising 16 16 17. MIS/ Marketing intelligence 1714 18. Marketing consultants 18 16

  33. Successful vs. Unsuccesful (3) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling 1 1 2. NPD strategy 25 3. Marketing concept 3 4 4. Differentiation 42 5. Product/service specialisation 5 6 6. Pricing 6 7 7. Market segmentation 79 8. Sales promotion 83 9. Marketing organisation 97 10. Distribution 10 11 11. Positioning 11 11 12. Marketing planning 12 13 13. Market share 139 14. Market research 14 15 15. Publicity 15 16 16. Advertising 16 16 17. MIS/ Marketing intelligence 1714 18. Marketing consultants 18 16

  34. Successful vs. Unsuccesful (4) Successful casesUnsuccessful cases Marketing methodRankRank 1. Personal selling 1 1 2. NPD strategy 25 3. Marketing concept 3 4 4. Differentiation 42 5. Product/service specialisation 5 6 6. Pricing 6 7 7. Market segmentation 79 8. Sales promotion 83 9. Marketing organisation 97 10. Distribution 10 11 11. Positioning 11 11 12. Marketing planning 12 13 13. Market share 139 14. Market research 14 15 15. Publicity 15 16 16. Advertising 16 16 17. MIS/ Marketing intelligence 1714 18. Marketing consultants 18 16

  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. 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. Finland vs. California (1) CA Finland Diff. Significance MARKETING CONCEPT 1. Marketing concept 3.32 3.95 -0.63 0.02 MARKETING MIX VARIABLES 1. Personal selling 4.22 4.13 0.09 * 2. Product/service specialization 2.60 3.70 -1.10 0.0002 3. Pricing 3.07 3.49 -0.42 * 4. Sales promotion 4.00 3.26 0.74 * 5. Distribution 3.23 3.10 0.13 * 6. Publicity 4.00 2.48 1.52 0.0001 7. Advertising 3.50 2.33 1.17 0.0005

  42. Finland vs. California (2) CA Finland Diff. Significance MARKETING ORGANIZATION AND PLANNING 1. NPD strategy 3.48 4.08 -0.60 0.0586 2. Differentiation 4.85 3.74 1.11 0.0000 3. Market segmentation 3.09 3.38 -0.29 * 4. Marketing organization 3.70 2.90 0.80 0.0001 5. Positioning 3.37 2.92 0.45 * 6. Marketing planning 2.91 2.84 0.07 * 7. Market share 2.13 2.51 -0.38 * 8. Market research 3.05 2.26 0.79 0.0385 9. MIS 3.17 2.07 1.10 0.0032 10. Marketing consultants 1.84 1.74 0.10 *

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