Technology Marketing and the Entrepreneurial Firm Dr' Alan L' Carsrud The FIU Center for Global Entr

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Technology Marketing and the Entrepreneurial
FirmDr. Alan L. CarsrudThe FIU Center for
Global Entrepreneurship InnovationThe FIU
Colleges of Business Administration and
Engineering and Applied Sciences Based on the
materials of Professor Bob Foster of UCLA
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Basic Marketing Questions

• What products do we sell?
• To whom do we sell?
• Who sells our products?
• How do we promote sales?
• What price do we charge?
• What about customer service?

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Different Viewpointsof a Product

• Technologists View
• Product centered
• Focuses on device
• Minimizes packaging
• Minimizes corporate imaging

• Customers View
• Looks at bigger picture
• Evaluates the whole product
• Interested in the extras
• Interested in image of company

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The Whole Product Concept
Corporate Imaging
Product Packaging
Device
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Whats a Device?

• The basic, core product
• What the customer actually uses
• The invention, software, hardware
• What the engineers design, develop, build
• Examples
• Software Code
• Hardware Physical product

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Product Packaging
Packaging
Device
Device
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What isProduct Packaging?

• What are things, processes, images, services,
  and extra features that high tech firms need to
  wrap around their product?

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Four Major Elements of Packaging

• During the sales process
• As part of the product device
• The physical package
• In post-sales support

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Elements of Product Packaging

• Sales Process
• Pre-Sale Support
• Pricing
• Financing
• Warranty
• Trade-In Policy
• Sales approach
• Advertising

• Product Related
• Ease of Initial Conversion
• Product Family
• Platform
• Industry Standards
• Migration Strategy
• Product Upgrade Policy

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• Post-Sale Support
• Delivery
• Installation
• Training
• Telephone On-line Support
• Maintenance/Parts
• User Groups

• Physical Package
• Product exterior graphics design
• Color materials
• Shipping carton
• Documentation

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To Provide Effective Product Packaging

• Understand your customers needs
• Spend time observing your customers
• Talk to them about their requirements
• Design whole products from the start
• Dont try to design the perfect product
• Probe and learn
• Get feedback
• Avoid feature creep

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• Outsource if you cant provide all elements of
  the whole product
• Create joint venture or make acquisition

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Most Customers Want To

• Buy a complete, whole product
• Solve a problem with a total solution
• Buy it from one vendor
• Buy it all at once
• Not be a beta test site
• Buy from a solid, reputable supplier

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Aspects of Corporate Imaging

• Company product name and logo
• First and beta test customers
• VC firms, investors, bankers
• Members of board of directors
• Endorsements from industry gurus
• Favorable press reviews
• Positive word of mouth

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Device
Plus
Product Packaging
Plus
Corporate Imaging
Equals
A Whole Product and/or Service
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Summary of the Whole Product or Service

• View product or service from customers viewpoint
• Focus on customers needs
• Provide a complete solution
• Engineering designs the core device
• Marketing completes the whole product or service

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How Can You Differentiate a High Technology
Product or Service?

• How can the device/product/service be changed to
  make it different from its competition?

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Basic Principles ofProduct or Service
Differentiation

• Feature must be quickly and easily recognizable
  by customer
• Must be important to and valued by customer
• Must be clearly different from competition
• Must be significantly better

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6 Ways to Differentiate a Product

• 1. Providing Unique Features
• 2. Improving User Productivity
• 3. Protecting Investment
• 4. Lowering Cost of Failure
• 5. Increasing Price-Performance
• 6. Flexibility and Scalability

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1. Differentiate by Providing Unique Features

• Must be truly unique, not me-too
• Breakthrough inventions are best
• Hardest and most expensive way
• Takes RD effort
• Protect with patents if you can

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2. Differentiate by Improving User Productivity

• Do it faster and cheaper
• Shorten time to learn
• Make fewer errors
• Automatic error correction
• Automate several operational steps
• Make it easier to use

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3. Differentiate by Protecting the Customers
Investment

• Minimize switching cost to migrate
• Avoid re-writing application software
• Extend useful life of current product

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4. Differentiate by Lowering the Cost of
Product Failure

• Avoid downtime lost productivity
• Avoid cost of recovery

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5. Differentiate byHigher Price-Performance

• Provide more value
• Increase performance
• Lower price
• Better yet, do both at same time
• Want quantified, understood benchmark

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6. Differentiate by Flexibility Scalability

• Design build flexibility into product
• Provide wider range of capabilities
• Easily expand from small to large

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Product Differentiation Summary

• Many ways to differentiate products
• Try to use 2 or 3 ways on a product
• Must be
• Easily understood by customer
• Valued by customer
• A lot better.25-30

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Market Segmentation

• What is a market segment?
• Why is it important?

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What is a Market Segment?

• Set of potential customers
• Who have similar needs
• Who reference each other when buying
• Are alike in the way they
• Perceive value
• View products
• Purchase products

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Why Define a Market Segment?

• Easier to understand customer needs
• Focus whole product to a narrower set of
  customer needs
• Easier to become a leader in a smaller market
  (Big fish in small pond)
• More effective use of marketing dollars
• Generally more profitable

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PIMS Profit Impact of Marketing Strategies

• Originally a General Electric study
• Now the Strategic Planning Institute
• Studied 2600 business units since 1972
• Evaluated 28 factors related to ROI
• Determined the factor that most affected ROI was
  market share

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• Firms with market shares over 40 have an avg ROI
  2 1/2 times more than firms with market shares
  under 10
• Increasing market share an additional 10 results
  in an additional 5 point increase in ROI

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Profitability Increaseswith Market Share

• Market share of up to 10 13.2 ROI
• 10 - 20, ROI 18.0
• 20 - 30, 23.6
• 30 - 40, 24.4
• Over 40 market share, ROI 32.3

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Conclusion

• Dont enter a new market unless you can capture
  25 -30 market share in a few years

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Strategy

• Define market segment small enough to allow you
  to capture 25 to 30 share
• Be a Big fish in small pond
• Ideal Be the only supplier in a very narrowly
  defined market.
• But Is the market large enough for future growth?

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Moores SegmentationTechnology Adoption Curve

• Normal population distribution of buyers
• Segmented into buying groups
• Uses standard deviation boundaries
• Based on psychographics, propensity to buy
  technology based products
• Its a metaphor, a model

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Consumer Markets Product Adoption
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Rate of adoption
13.5
16
2.5
Late majority
Early majority
Early adopters
Innovators
Laggards
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InnovatorsThe Techies

• Technology enthusiasts they love it
• First to buy, even at high prices
• Willing to invest in learning, very tolerant
• Gatekeeper role, but minimal buying power
• Will bug the heck out of you
• Problem Not many of them to buy

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Marketing to Techies

• Product must be technically interesting
• Product must work functionally, not perfect
• Draft manuals ok
• Have them beta test
• Want to talk with techie developers
• Deliver papers and demo at conferences
• Publish in technical journals

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Early AdoptersThe Visionaries

• Want a new technology to impact their business in
  a strategic manner
• Want discontinuous breakthrough impact
• Goal improve business, not use technology
• Project oriented builders, not maintainers
• Anxious, champions, visible, risk takers
• Make bet their career decisions

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Marketing To Early Adopter Visionaries

• Direct sell the dream, but clearly define scope
  product deliverables
• Relate to their business objectives
• Have them reference other visionaries who have
  bought your best salesmen
• Price is secondary they want it right, complete,
  quickly on time

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Early MajorityThe Pragmatists

• Want incremental improvement
• Evolutionary not revolutionary products
• Want standards, proven products, solid firm
• Cant sell them new, risky technology
• Hard to sell dreams, only reality sells
• Live with their decisions long time

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Marketing To Early Majority Pragmatists

• Proven product, based on standards, many
  satisfied customers, market leadership
• Want competition lower prices, alternatives
• Industry specific seminars and conferences
• Develop long term relationships
• Like one-stop shopping but slow to buy

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Late MajorityThe Conservatives

• Back side of the curve 1/3 population
• Significant opportunity for sales profits
• Technology adverse dont like change
• Want only mature whole products, fully packaged
  and supported....at a low price
• Most technology products they buy are sold
  through retail distribution channels

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LaggardsThe Skeptics

• Last 1/6 of population 17
• Dont buy technology unless they have to
• Just now buying microwave ovens VCRs
• Not worth talking about
• Not worth me making this slide!
• Enough said....

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Market Opportunities Challenges

• 8 population cant set a digital clock
• 25 never used a computer
• 25 never programmed a VCR
• 50 of US college graduates have never heard of
  High Definition TV or Interactive TV

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Tech-thusiasts Innovators Early Adopters

• Together equal 15 of US population
• Have to sell technology to them first
• 38-40 million people, urban locations
• Younger, more affluent, better educated
• 38 yrs old, 57,000/yr, two yrs college
• Read more, watch less TV

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Moores First Minor ChasmInnovators to Early
Adopters

• Have to convert technical product into a major
  strategic benefit
• Must enable a strategic leap forward
• Must have a single compelling application and
  reason to buy
• Early adopters can be sold futures, vaporware,
  dreams

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Moores Major ChasmEarly Adopter to Early
Majority

• A major leap many firms never complete
• Requires a significant change in marketing and
  sales strategy
• Conservatives want it packaged perfectly
• Dont let visionaries reference to conservatives
  a lost cause, different goals
• Must provide a compelling reason to buy

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Visionaries and Pragmatists Dont Relate to Each
Other

• Visionaries
• Dont relate to industry colleagues
• More interested in technology than industry
• Minimize importance of infrastructure
• Are change agents catalysts shake things up
• Not concerned about the long term they dont
  plan on being there a long time they move on

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• Pragmatists
• Plan to stay at company in industry
• Want long term relationships
• Are security conscious, risk averse
• Want solid industry references before buying
• Wont buy futures, visions, or dreams
• Take longer to sell must go through more steps
  in the sales cycle

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Therefore You Cant Use the Same Marketing
Tactics

• Product positioning must stress proven product
  stable, solid, main stream, industry standard
• References from other pragmatists --best
• Industry press, conventions, papers are key
• Direct sales presentations must change, often
  requires a different salesperson
• Brochures, value proposition must change