Marketing of technology intensive products
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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

Marketing of Technology Intensive Products

Dr. Matti J. Haverila


Table contents

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)


Issues for high tech companies 1

Issues for High Tech Companies (1)*

Finance related factorsWeight of the problem

The difficulty to get financial support84

High cost of financing79

Acquisition of financing72

Total of finance related factors235

R&D related factors

The credibility of the company amongst the customers94

The capability to follow the development of technology65

Lack of R&D competence45

The technological ageing of products10

Total of R&D related factors214

* See Autio et al: Uudet teknologiayritykset...


Issues for high tech companies 2

Issues for High Tech Companies (2)

Competition related factorsWeight of the problem

The competition by replaceable products64

Domestic competitors47

International competitors25

Total of competition related factors136

Labour related factors

The acquisition of employees100

The high cost of employees59

Total of labour related factors159


Issues for high tech companies 3

Issues for High Tech Companies (3)

Management related factorsWeight of the problem

Lack of accounting competence109

The difficulty to get management team14

The difficulty to get board14

Total of management related factors137

Production related factors

The acquisition of machinery and equipment66

The long production time of the product63

Total of production related factors129

Other factors

The bureaucracy of the government and local authority106

The acquisition of factory space43

The attitude of the university29

The attitude of the family25

Total of other factors203


Issues for high tech companies 4

Issues for High Tech Companies (4)

Market or marketing related factorsWeight of the problem

Minor identity of the company143

Lack of marketing competence124

Getting of customers and creating customer relationships98

The high price of the product or service88

Difficulty to get to the distribution channels59

Acquisition of international contacts52

Total of market or marketing related factors564


Issues for high tech companies 5

Issues for High Tech Companies (5)

Issue AreaWeight of the problem

Market or marketing related factors564

Finance related factors235

R&D related factors214

Other factors203

Labour related factors159

Management related factors137

Competition related factors136

Total of production related factors129


Hurdle of internationalization

North-American

technology

companies

Hurdle of Internationalization

Sa

l

e

s

Finnish

technology

companies

Hurdle of Internationalization

Technology Companies


What seems to be the problem

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.


The types of new products

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


New product development process npdp

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


Stage gate npd 1

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


Stage gate npd 2

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.


Stage gate npd 3

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.


Stage gate npd 4

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.


Stage gate npd 5

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.


Stage gate npd 6

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.


Stage gate npd 7

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.


Approaches to npd process

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


Npd strategies

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


Marketing technology balance

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


Marketing mix product 1

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


Learning cycle

Learning Cycle

Rapid Learning Cycle

Slow Learning Cycle


Marketing mix product 2

Marketing Mix - Product (2)

40

Market share

achieved

30

20

10

Growth

Introductory

Mature

Decline

Product not Modified

Product Modified


Degree of product modification

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)


Research project

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


Research results 1

Research results (1)

Marketing methodRank

1. Personal selling1

2. Marketing concept2

3. New product development strategy3

4. Differentiation4

5. Product/service specialisation5

6. Pricing6

7. Sales promotion7

8. Market segmentation8

9. Marketing organisation9

10. Distribution10

11. Positioning11

12. Marketing planning12

13. Market share13

14. Publicity14

15. Market research15

16. Advertising16

17. Marketing information systems/ Marketing intelligence17

18. Marketing consultants18


Research results 2

Research results (2)

Marketing methodDescription ofimportance

1. Personal sellingVery important

2. Marketing conceptVery important

3. New product development strategyVery important

4. DifferentiationVery important

5. Product/service specialisationRather important

6. PricingModerately important

7. Sales promotionModerately important

8. Market segmentationModerately important

9. Marketing organisationModerately important

10. DistributionModerately important

11. PositioningModerately important

12. Marketing planningModerately important

13. Market shareModerately important

14. PublicityRather unimportant

15. Market researchRather unimportant

16. AdvertisingVery unimportant

17. Marketing information systems/ Marketing intelligenceVery unimportant

18. Marketing consultantsVery unimportant


Research results 3

Research results (3)

Marketing methodDescription ofimportance

1. Personal sellingVery important

2. Marketing conceptVery important

3. New product development strategyVery important

4. DifferentiationVery important

5. Product/service specialisationRather important

6. PricingModerately important

7. Sales promotionModerately important

8. Market segmentationModerately important

9. Marketing organisationModerately important

10. DistributionModerately important

11. PositioningModerately important

12. Marketing planningModerately important

13. Market shareModerately important

14. PublicityRather unimportant

15. Market researchRather unimportant

16. AdvertisingVery unimportant

17. Marketing information systems/ Marketing intelligenceVery unimportant

18. Marketing consultantsVery unimportant


Research results 4

Research results (4)

Marketing methodDescription ofimportance

1. Personal sellingVery important

2. Marketing conceptVery important

3. New product development strategyVery important

4. DifferentiationVery important

5. Product/service specialisationRather important

6. PricingModerately important

7. Sales promotionModerately important

8. Market segmentationModerately important

9. Marketing organisationModerately important

10. DistributionModerately important

11. PositioningModerately important

12. Marketing planningModerately important

13. Market shareModerately important

14. PublicityRather unimportant

15. Market researchRather unimportant

16. AdvertisingVery unimportant

17. Marketing information systems/ Marketing intelligenceVery unimportant

18. Marketing consultantsVery unimportant


Successful vs unsuccesful 1

Successful vs. Unsuccesful (1)

Successful casesUnsuccessful cases

Marketing methodRankRank

1. Personal selling11

2. NPD strategy25

3. Marketing concept34

4. Differentiation42

5. Product/service specialisation56

6. Pricing67

7. Market segmentation79

8. Sales promotion83

9. Marketing organisation97

10. Distribution1011

11. Positioning1111

12. Marketing planning1213

13. Market share139

14. Market research1415

15. Publicity1516

16. Advertising1616

17. MIS/ Marketing intelligence1714

18. Marketing consultants1816


Successful vs unsuccesful 2

Successful vs. Unsuccesful (2)

Successful casesUnsuccessful cases

Marketing methodRankRank

1. Personal selling11

2. NPD strategy25

3. Marketing concept34

4. Differentiation42

5. Product/service specialisation56

6. Pricing67

7. Market segmentation79

8. Sales promotion83

9. Marketing organisation97

10. Distribution1011

11. Positioning1111

12. Marketing planning1213

13. Market share139

14. Market research1415

15. Publicity1516

16. Advertising1616

17. MIS/ Marketing intelligence1714

18. Marketing consultants1816


Successful vs unsuccesful 3

Successful vs. Unsuccesful (3)

Successful casesUnsuccessful cases

Marketing methodRankRank

1. Personal selling11

2. NPD strategy25

3. Marketing concept34

4. Differentiation42

5. Product/service specialisation56

6. Pricing67

7. Market segmentation79

8. Sales promotion83

9. Marketing organisation97

10. Distribution1011

11. Positioning1111

12. Marketing planning1213

13. Market share139

14. Market research1415

15. Publicity1516

16. Advertising1616

17. MIS/ Marketing intelligence1714

18. Marketing consultants1816


Successful vs unsuccesful 4

Successful vs. Unsuccesful (4)

Successful casesUnsuccessful cases

Marketing methodRankRank

1. Personal selling11

2. NPD strategy25

3. Marketing concept34

4. Differentiation42

5. Product/service specialisation56

6. Pricing67

7. Market segmentation79

8. Sales promotion83

9. Marketing organisation97

10. Distribution1011

11. Positioning1111

12. Marketing planning1213

13. Market share139

14. Market research1415

15. Publicity1516

16. Advertising1616

17. MIS/ Marketing intelligence1714

18. Marketing consultants1816


Conclusions 1

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.


Conclusions 2

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.


Conclusions 3

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.


Conclusions 4

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.


Conclusions 5

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.


Recommendations

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.


Finland vs california 1

Finland vs. California (1)

CA Finland Diff.Significance

MARKETING CONCEPT

1. Marketing concept3.323.95-0.630.02

MARKETING MIX VARIABLES

1. Personal selling4.224.130.09*

2. Product/service specialization2.603.70-1.100.0002

3. Pricing3.073.49-0.42*

4. Sales promotion4.003.260.74*

5. Distribution3.233.100.13*

6. Publicity4.002.481.520.0001

7. Advertising3.502.331.170.0005


Finland vs california 2

Finland vs. California (2)

CA Finland Diff.Significance

MARKETING ORGANIZATION AND PLANNING

1. NPD strategy3.484.08-0.600.0586

2. Differentiation4.853.741.110.0000

3. Market segmentation3.093.38-0.29*

4. Marketing organization3.702.900.800.0001

5. Positioning3.372.920.45*

6. Marketing planning2.912.840.07*

7. Market share2.132.51-0.38*

8. Market research3.052.260.790.0385

9. MIS3.172.071.100.0032

10. Marketing consultants1.841.740.10*


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