marketing of technology intensive products dr. matti j. haverila

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Marketing of Technology Intensive Products

Dr. Matti J. Haverila

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©Matti Haverila, Infacs Oy

Table Contents• 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)

• 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)

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Issues for High Tech Companies (1)*

Finance related factors Weight of the problem

The difficulty to get financial support 84

High cost of financing 79

Acquisition of financing 72

Total of finance related factors 235

R&D related factorsThe credibility of the company amongst the customers 94The capability to follow the development of technology 65Lack of R&D competence 45The technological ageing of products 10Total of R&D related factors 214

* See Autio et al: Uudet teknologiayritykset...

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Issues for High Tech Companies (2)

Competition related factors Weight of the problem

The competition by replaceable products 64

Domestic competitors 47

International competitors 25

Total of competition related factors 136

Labour related factorsThe acquisition of employees 100The high cost of employees 59Total of labour related factors 159

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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 factors 137

Production related factorsThe acquisition of machinery and equipment 66The long production time of the product 63Total of production related factors 129

Other factorsThe bureaucracy of the government and local authority 106The acquisition of factory space 43The attitude of the university 29The attitude of the family 25Total of other factors 203

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Market or marketing related factors Weight 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 factors 564

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Issue Area Weight 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 136Total of production related factors 129

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Hurdle of Internationalization

Sales

North-Americantechnologycompanies

Finnish technologycompanies

Hurdle of Internationalization

Technology Companies

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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.

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The Types of New Products

Newness to the Company

Newness to the Market

Low High

High

Low

Improvements /Revisions to

Existing Products(26%)

Cost Reductions(11%)

Repositionings(7%)

Additions to Existing

Product Lines(26%)

New Product Lines

(20%)

New to theWorld Products

(10%)

GoTo

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New Product Development Process (NPDP)

Exploration

Idea Generation

Concept development

Business Analysis

Screening

Protype development

Market testing

Plant Scale-Up

Product Launch

Post Launch Check-Up

Business Strategy

Commercialized Products

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Stage-Gate NPD (1)

Idea Gate 1 Stage 1 Gate 2 Stage 2

Gate 3 Stage 3 Gate 4 Stage 4

Gate 5 Stage 5 PLR

Initial Screen Second Screen

Decision on Business case

PostdevelopmentReview

Prelaunch BusinessAnalysis

Post LaunchReview

Preliminary Investigation

Detailed Investigation(build business case)

Development Testing &Validation

Production & Launch

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Stage-Gate NPD (2)

Idea Gate 1

Initial Screen

• 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.

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.

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Stage-Gate NPD (3)

Stage 1 Gate 2

Second Screen

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.

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Stage-Gate NPD (4)

Stage 2 Gate 3

Decision on Business case

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.

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.

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Stage-Gate NPD (5)

Stage 3 Gate 4

PostdevelopmentReview

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.

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.

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Stage-Gate NPD (6)

Stage 4 Gate 5

Prelaunch BusinessAnalysis

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.

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.

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Stage-Gate NPD (7)

Stage 5 PLR

Post LaunchReview

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.

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Approaches to NPD ProcessConsumer driven Competition driven Technology driven

Concept developmentand consumer screening

Business Analysis

Product development

Consumer/Lab testing

Test marketing

Business Analysis

Prototype development

Production testing

Advanced development

Product development

Concept identificationand screening

Concept developmentand consumer screening

Idea generation Market AnalysisTechnology needs and

application ideas

Market Launching Market Launching Market Launching

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NPD Strategies

Focused, butweak technology

High-budget,Shotgun

Low budget,conservation

Marketing and technology integrated

Technology driven

SuccessRate

% of company sales from new products

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Marketing - Technology Balance

RelativeEffortAllocation

CuttingEdge

State ofThe Art

Advan-ced

Main-stream

Mature Decline

State of Technology

Engineering efforts

Marketing efforts

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Marketing Mix - Product (1)

Developproduct

Developproduct

Sales-customer feedback

LaunchImprovedProduct







Slow Learning Cycle

Rapid Learning Cycle

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Learning Cycle

Slow Learning Cycle

Rapid Learning Cycle

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Marketing Mix - Product (2)40

20

30

10

Introductory Growth Mature Decline

Product not Modified Product Modified

Market share achieved

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Degree of product modification

0 2 4 6 8 10 12 14 16 18 20Zone of minimalproductadaptation

Zone of minimalProduct adaptation(minor type)

Zone of minimalProduct adaptation(major type)

CostsIncremental gains

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Research Project

• The % of R&D of the sales Mean = 9,62 Mode = 15 Median = 8,0

• The % of marketing of the salesMean = 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

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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

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Research results (2)Marketing method Description of importance1. 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

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Successful vs. Unsuccesful (1)Successful cases Unsuccessful cases

Marketing method Rank Rank1. Personal selling 1 1

2. NPD strategy 2 53. Marketing concept 3 4

4. Differentiation 4 25. Product/service specialisation 5 6

6. Pricing 6 7

7. Market segmentation 7 98. Sales promotion 8 39. Marketing organisation 9 710. Distribution 10 11

11. Positioning 11 11

12. Marketing planning 12 13

13. Market share 13 914. Market research 14 15

15. Publicity 15 16

16. Advertising 16 16

17. MIS/ Marketing intelligence 17 1418. Marketing consultants 18 16

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6. Pricing 6 7





15. Publicity 15 16



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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.

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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.

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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.

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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.

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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.

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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.

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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 specialization2.60 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

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Finland vs. California (2)CA Finland Diff.

Significance

MARKETING ORGANIZATION AND PLANNING

1. NPD strategy 3.48 4.08 -0.60 0.05862. Differentiation 4.85 3.74 1.11 0.00003. Market segmentation 3.09 3.38 -0.29 *4. Marketing organization 3.70 2.90 0.80 0.00015. 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 0.03859. MIS 3.17 2.07 1.10 0.003210. Marketing consultants 1.84 1.74 0.10 *

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At Your Service!

marketing of technology intensive products dr. matti j. haverila

Documents

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