Marketing Concepts in Commercialization of High Technology

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Marketing Concepts in Commercialization of High
Technology

• Session 9
• Marketing/Internet
• Wrap-Up

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NICE JOB!
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Review
Please sit with your STC380 teammates
Cold Call 5 key learnings from last time
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Developing a W-O-M Campaign

• Objective develop or change attitudes/opinions
• Decide on the message to spread
• Best in delivering messages with intangible
  qualities (commitment, credibility, appeal and
  support).
• Decide who should receive the message (target a
  specific audience)

• Decide who should deliver it

• Develop relationships with key people in the
  industry infrastructure

McKenna, 1985
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How Credibility is Developed
Presence and Credibility

• Inference
• people infer that the startup must be a credible
  competitor if
• Reference
• when making complex decisions, people depend on
  references of others they trust
• Evidence
• success breeds success

McKenna, 1985
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Stern, El-Ansary Coughlan, p. 109
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Channel Design Process
-1 With the new product in mind

• Identify homogeneous customer segments
• Identify/prioritize their channel function needs
• Examine own vs. competitive channel capabilities
• Develop set of channel options that would fit
  customers needs
• Evaluate cost/benefit of each option
• Aggregate information from Step 5 and adapt to
  address multiple products and multiple markets

Rangan, 1994, HBS
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2. Prioritize Customer Channel Functions Needed

• Product information
• Product customization
• Product quality assurance
• Lot size
• Assortment
• Availability
• After sales service
• Logistics

Rangan, 1994, HBS
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Examine Own vs. Competitive Channel Capabilities
as Related to Customer Requirements
Customer Segments Function Priorities
Large Customer Segment

• Product information
• Product warranty
• Applic. Engineering
• Assortment
• Credit terms

Rangan, 1994, HBS
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Small Customer Segment
Customer Segments Function Priorities

• Assortment
• Credit terms
• Product warranty
• Product information
• Applic. Engineering

Rangan, 1994, HBS
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Large Customer Segment, cont.
Function Priorities

• Product information
• Product warranty
• Applic. Engineering
• Assortment
• Credit terms

Conclusion If the seller wants to launch a new
product towards large companies, they would
probably not be as successful because their
existing channels dont meet the needs of the
large companies.
Rangan, 1994, HBS
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4. Generate Alternatives
5. Analyze Cost/Benefit for Each
Rangan, 1994, HBS
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Strategic Alliances
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Discussion Coming

• In-Class Students
• What strategic alliances would make sense for
  your project?
• What would be your objectives for each of the
  alliances?

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Alliance Continuum
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Alliance Continuum
Loose collaboration
Major equity position
Partnerships, joint ventures, licensing
Minority investments
50/50 equity
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Types of Strategic Alliances

• Sales Marketing
• Sales Force
• Distribution
• Promotional
• Logistics
• Service
• Research and Development
• Market Entry/Foreign Access

Gersony Peters (1997) p. 66
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Boston Edison Electric Co. and General Motors

• BE agrees to promote electric vehicle chargers
  developed and manufactured by GM
• Electrical utilities eager to promote use of
  electric cars-- to increase night-time power
  consumption
• GM eager to establish its recharging technology
  as the standard

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FORD/MAZDA

• Collaboration on 10 car models
• Mazda MX6, 323, Protege, Ford Probe, Explorer,
  Escort
• Ford helps Mazda with promotions finance
• Mazda gives Ford manufacturing product
  development expertise

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Marketing alliances
Pros/Benefits
Cons

• Faster market entry
• Lower costs in
• Development
• Sales
• Marketing
• Support
• Faster learning
• Improved relationships
• Enhanced reputation

• Direct investment and financial risk
• Loss of control
• Diversion of focus
• Time lost to relationship management
• Tarnished reputation if unsuccessful.

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Why Use (Marketing) Alliances?

• Lack of expertise in a needed business area
• Technology
• Global operations
• Distribution systems
• Government regulations
• Market understanding
• For Start-Ups Credibility!
• Speed
• Resource and risk management
• Rarely practical to go it alone
• RD and new product development expensive
• Penetrating new markets expensive

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Keys to a Good Alliance

• Complementary needs assets (strategic fit)
• Joint benefits
• Each partner contributes something distinctive
• Basic research
• Skills/competencies
• Manufacturing capacity
• Access to market/distribution

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Keys to a Good Alliance

• Clear set of objectives before entering. What
  exactly do we want to achieve with an alliance?
• Market entry
• R D
• Marketing opportunities
• promotion/logistics/pricing/service

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Keys to a Good Alliance

• Similarities in management perspective
• Long term perspective
• Specific established performance requirements
• At least some mutual equity
• Collegiality, to a degree
• Flexibility, ability to adjust with time

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WHY STRATEGIC ALLIANCES FAIL

• Partners are often organized differently,
  creating problems
• Marketing design decisions
• Achieving cooperation trust
• Partners who work well in one country may not do
  so in another-- or more globally

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Discussion

• In-Class Students
• What strategic alliances would make sense for
  your project?
• What would be your objectives for each of the
  alliances?

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Session 9 Objectives

• Describe similarities and differences between
  conventional and internet marketing.
• (Reading and Debate)
• Review course concepts.

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BREAK
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Todays Seating Chart
Debate Team 2 D, E, F 3 speakers 1
collector 12 researchers
Debate Team 1 A, B, C, H 3 speakers 1
collector 12 researchers
Choose team roles
There is NOTHING strategically new about the
Internet
versus
The Internet REVOLUTIONIZES marketing strategy
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DEBATE

• Be it resolved that, in relation to marketing
  strategy
• There is NOTHING strategically new about the
  Internet
• - OR -
• The Internet has REVOLUTIONIZED marketing
  strategy

For Debate Purposes There is NO middle ground
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Process

• Flip coin winner debates Proposition 1
• 15 minutes prepare arguments
• Team 1, speaker 1 5 minutes to spell out
  argument
• Team 2 , speaker 1 5 minutes to spell out their
  argument
• 10 minutes prepare arguments (note no
  rebuttal yet)
• Team 1, speaker 2 5 minutes to complete
  argument
• Team 2, speaker 2 5 minutes to complete
  argument
• 10 minutes prepare rebuttals
• Team 1, spkr 3 5 min. - restate Team 2 argument
  rebut
• Team 2, spkr 3 5 min. - restate Team 1 argument
  rebut

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Judging Score-sheet

• Contentions clearly spelled out
• Provided evidence
• Provided examples
• Correctly summarized other teams POV
• Rebutted each point individually
• Overall quality of arguments

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Heckling

• Often the speaker will contradict him/herself or
  make an absurd assumption.
• A heckle at this time will point out the error
  and add to the debate.
• Heckling is acceptable if it is short, to the
  point, and preferably witty.
• If excess heckling becomes disturbing, the CHAIR
  may intervene.

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Debate Debrief
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Course Objectives

• Explain the place and roles of marketing in the
  process of commercializing new technologies and
  high tech products/services
• Apply the principles of persuasion to influence
  stakeholders and customers at all stages of the
  commercialization process
• Design, and be able to defend, a marketing plan
  for the launch of a high tech product or service
  that could be supported by stakeholders and
  customers.

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THE ENDof the beginning
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BREAK
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Course Instructor Survey
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IntroducingVish Krishnan
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References

• Bayne, K.M. (2000). The Internet Marketing Plan
  (2nd Ed). New York John Wiley Sons.
• Kotler, P. (1999). Kotler on Marketing. New
  York The Free Press
• Silverstein, B. (2000). Business-to-Business
  Internet Marketing. 2nd Edition. Gulf Breeze,
  FL Maximum Press.

• Web sites of interest Strategic Alliances
• www.strategic-alliances.org - The Association of
  Strategic Alliance Professionals, ASAP, is
  committed to providing the professional and
  educational support for executives and managers
  of strategic alliances
• Web sites of interest Internet Marketing and
  e-commerce
• http//cism.bus.utexas.edu - Center for
  Research in Electronic Commerce Developed and
  track Internet Indicators

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Additional Information of Interest
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Internet The Newest Channel PLUS
Customers
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Direct Marketing

• Selling products/services to directly to
  customers, without intermediaries.

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Characteristics

• One-to-One
• Interactive
• Responsive

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Direct Marketing

• Traditional direct-marketing channels
• Catalogs
• Direct mail
• Telemarketing
• New direct-marketing channel
• The Internet

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Based on Lists

• Mailing lists
• Catalogs
• Direct mail
• E-mail lists
• Telephone lists
• Telemarketing

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Most Valuable Tool

• Customer Databases
• purchase history
• demographics
• company
• occupation
• job title
• etc.

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Nature of Products in B-2-B Direct Marketing

• Possibly usable only by audience with special
  expertise
• Focused on a specialized solution
• More expensive than average products
• Evaluated by more than one person in evaluating
  and purchasing

Silverstein, 2000 p. 14
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Key Audience Strategies

• Micro segmentation
• Cross-functional Direct Marketing
• Relationship Direct Marketing

Silverstein, 2000 p. 28
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Successful B-2-B Direct Marketing

• Position products differently based on specific
  audiences.
• Promote benefits and advantages before promoting
  features

Silverstein, 2000
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Effect of the Internet on . . .

• Pioneering advantage
• Competitive environment
• Pricing
• Customer relationship management

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Effect of Internet on Pioneering Advantage

• Offline Environment
• Supply side
• Raw material advantages
• Experience effects
• Channel preemption
• Demand side
• Advantages of familiarity
• Choice of perceptual position
• Creates standard

• Online Environment
• Cognitive lock-in
• Building a customer base (Network effects)
• Increasing returns

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Increasing Returns

• Characteristics of Increasing Returns
  businesses
• Market instability (market tilts to favor a
  product that gets ahead)
• Unpredictability
• Ability to lock in a market
• Possible predominance of an inferior product
• Fat profits for the winner
• Underlying characteristics of an increasing
  returns market
• Up-front costs
• Network effects
• Customer groove-in (same as lock-in)

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Effect of Internet onCompetitive Environment

• Due to increasing returns
• Search for the NEXT BIG THING
• Flatter hierarchies to be more nimble
• Due to expected consumer behavior changes
• Frictionless market
• Perfect competition
• Lower transaction costs
• Decrease in search and switching costs

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Comparison Shopping SearchResearch Study

• Limited search across sites
• Average sites searched 1.1 book sites, 1.2 CD
  sites
• Convenience oriented / time-sensitive shoppers
• Cognitive search costs
• Retailer Loyalty derived from
• Trust
• Cognitive Lock-In
• Clicks and Mortar

Who has the advantage?
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(No Transcript)
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Comparison Shopping Shopbots

• Price-sensitive shoppers?
• 51 choose an offer that is not the lowest price
• Branded retailers are able to charge a price
  premium

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Effect of Internet onPricingOn-Line Prices

• Price levels and price dispersion?
• 9-16 lower online than in conventional channels
• Wide price dispersion online (25 for CDs, 33
  for books)
• Price changes
• smallest observed price change on Internet is
  0.01 compared to 0.35 offline

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Evidence on price sensitivity

• Experimental study of wine online and offline
  (Lynch Ariely 2000)
• Providing higher quality, easier to access
  information. reduced price sensitivity
• Making cross-store comparison easy increased
  price sensitivity for wines common to both stores
  
• Field study of shopping behavior at Peapod
  (Degratu et al 2000)
• Attributes for which more information is
  accessible online are more salient
• Sensory search attributes for which less
  information is available online are less salient
• Brand names are more important online, at least
  for products for which little attribute
  information is available online
• The combined effect of price and promotion is
  weaker online

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Factors that influence price sensitivity

• Customer segment
• Strength of brand
• Availability of quality/helpful information
• Ease of cross-store comparison
• Uniqueness of product

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Customer relationship management

• More information
• Behavioral modeling
• Privacy concerns
• Segmentation and targeting
• Product offering
• Price
• Promotion

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Marketing and the InternetPutting it in
Perspective

• New - Channel
• New - Media
• New - Research Tool
• New Relationship Management Tool

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Wrap-UpThe Internet Marketing Plan
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The Internet Marketing Plan
Does it look familiar?
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Principles of Marketing

• BASIC principles are identical whether you are
• Corporate or entrepreneur
• Influencing early stage stakeholders or
  influencing customers
• Business-to-Business or Business-to-Consumer
• Using indirect channels (distributors, retailers)
  or direct channels (direct sales force, direct
  mail, internet)
• Repeat The basic principles are identical

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Principles of Marketing

• Identify/Understand opportunities and threats
• Understand your own ability to address them
• Develop concrete objectives
• Develop marketing strategy
• Execute well

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Identify/Understand Opportunities and Threats

• in terms of
• customers problems
• customers characteristics
• industry status and trends
• competitive status and trends
• collaborative agreements/strategic alliances
• macro environmental trends

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Understand Your Own Strengths and Weaknesses

• Strengths of your organization that allow you to
  take advantage of the opportunities
• Strengths of your technology/product/service
  that allow you to take advantage of the
  opportunities
• Weaknesses of your organization that could make
  you vulnerable to the threats
• Weaknesses of your technology/product/service
  that could make you vulnerable to the threats

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Develop Concrete Objectives

• Good objectives
• Based on estimates of market potential
• Realistic
• Measurable/quantitative
• Time-boxed (for a marketing plan it is usually
  one year)
• Marketing Objectives
• Unit sales, Dollar sales
• Awareness among target
• Order response rate
• Financial Objectives
• Gross Margin, Contribution, Profit

To the degree possible
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Develop Marketing Strategy

• Investigate market segments for their
  needs/potential
• Choose a few high potential segments to target
• Design with differentiation in mind
• Spell out the position that you want the
  technology/ product/service to hold in the
  customers mind
• Design the marketing mix to communicate the
  positioning
• Develop integrated marketing action programs

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Review
Course
See separate presentation BlackboardDocuments
Session 9
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Discussion

• What are the two most important marketing
  strategies?
• Three things I learned/didnt realize about
  marketing principles in commercialization.