Marketing Concepts in Commercialization of High Technology

1
Marketing Concepts in Commercialization of High
Technology

• Session 5
• O/I Analysis
• Marketing Strategy

2
Review
Please sit with your STC380 teammates
Cold Call 5 key learnings from last time
3
Agenda

• Review
• Exercise O/I Analysis
• Lecture Segmentation
• Exercise Segmentation
• Lecture Differentiation/Positioning
• Exercises Differentiation/Positioning

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Session 5 Objectives

• Apply information from the current situation
  analysis to develop an opportunities and issues
  analysis.
• Describe market segmenting and targeting
• Describe the relationship between differentiation
  and positioning
• Describe how the product life cycle concept can
  assist in the development of the marketing mix

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I. Executive Summary
II. Marketing Situation Analysis
III. Opportunity and Issue Analysis
Customers
Competition/Industry
Company
Collaborators
Context (macroenvironment)
IV. Objectives
V. Marketing Strategy
VI. Action Programs
VII. Research Next Steps
VIII. Financials
Year 1 of a 3-year strategic plan
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Opportunities/Issues Analysis
Check Marketing Plan Template

• Analyze current situation (5 Cs)
• Context (macroenvironment), Competition/Industry,
  Customer, Collaborators, Company
• Identify opportunities/threats (external)
• Identify organizational strengths and weaknesses
  that are related to those opportunities and
  threats (internal)
• Prioritize the OTSWs that you see in order to
  focus on developing strategy for the most
  important 3-5 issues.

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Team Exercise

• Think about the technology/product that survived
  your Quick Look assessment.
• Recall what you know about the 5 Cs for it.
• Work individually for 10 minutes
• Work in your teams for 15 minutes
• Use the handout to jot down opportunities and
  threats from 4 of the Cs (Customer, Competition,
  Context (Macroenvironment), Collaborators.)
• Then go back and jot down the strengths/
  weaknesses of your company/product/technology as
  related to each of those opportunities/threats.
• Report out

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The Marketing Plan
I. Executive Summary
II. Marketing Situation Analysis
III. Opportunity and Issue Analysis
IV. Objectives

• Financial Objectives (Profitability)
• Marketing Objectives (Sales units/dollars share
  awareness)

V. Marketing Strategy
VI. Action Programs
VII. Research Next Steps
VIII. Financials
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BREAK
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The Marketing Plan
I. Executive Summary
II. Current Marketing Situation
III. Opportunity and Issue Analysis
IV. Objectives
V. Marketing Strategy
VI. Action Programs
VII. Research Next Steps
VIII. Financials
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Why is Segmentation Important?

• Research
• adoption of new products/services/ideas is faster
  if the marketing strategy is compatible with the
  segment targeted.
• Important to remember as you think about the
  Marketing Mix Strategies
• Product Design
• Pricing
• Promotion
• Place/Distribution

(Gatignon Robertson, 1985)
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Segmentation

• Cornerstone of marketing strategy
• Market Segment A specific group of customers
  with unique needs, purchase behaviors, and
  identifying characteristics.
• Why Important?
• Most businesses have
• Unique capabilities
• Limited resources
• The Real Value of Market Segmentation
• Focus resources on opportunities that match
  capabilities.
• Decide who NOT to serve.

Decide who NOT to serve
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Exercise ComingProject Teams

• Work in your teams and, using the approach
  described in Crossing the Chasm, Ch. 4 (pp.
  89-98), create a scenario for ONE potential
  target customer for your project.
• Use Segmentation Exercise Worksheet.
• Using the rating system described in Crossing the
  Chasm, pp. 89-106, rate the segment scenario from
  1 to 5.
• Report out.

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Segmentation
Segment A group of (potential) customers who
have similar problems/ needs, characteristics,
and/or behaviors
Needs/Benefits (common problems to be
solved) Demographics (age, income, education,
etc.) Demographics B2B (company size, SIC code,
etc.) Psychographics (attitudes, values,
lifestyles) Behaviors user status - potential
users, ex-users, etc. usage rates - heavy,
medium, light
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Characteristics of Segments Bases vs. Descriptors

• Basescharacteristics that tell us why segments
  differ (e.g., needs, wants, benefits, solutions
  to problems).
• Descriptorscharacteristics that help us find and
  reach segments (demographics/firmographics,
  psychographics, behavior, decision-making, media
  patterns).
• (Business markets) (Consumer markets)
• Industry Age/Income Size Education Locati
  on Profession Organizational Life styles
  structure Media habits

Adapted from Marketing Engineering, p. 63
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Common Segmentation Approaches

• Benefits/Needs
• Behavior
• Demographic

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1. Benefit Segmentation(Needs-Based
Segmentation)

• Reliability (e.g., minimal down-time)
• Service
• Economy
• Speed
• etc.

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2. Behavioral SegmentationPossible Criteria

• Degree of brand/supplier loyalty (none, medium,
  strong)
• Usage rate, e.g., based on per capita consumption
  (light user, medium user, heavy user)
• User status (Nonuser, ex-user, potential user,
  first-time user, regular user)
• Buyer readiness stage (unaware, aware, informed,
  interested, desirous, intending to buy)
• For B2B
• Current Customers, Potential Customers

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McKinsey StudyWeb Surfing/Buying Behavior

• Conventional wisdom
• the longer someone has been using the Internet,
• the more comfortable they become and,
• consequently, the more time they spend surfing
  various Web sites,
• transacting business and buying things.
• Tracked 50,000 panelists, 3 months, 1999

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Findings

• 30 of those tracked didnt get on line during
  the time period.
• 20 didnt get on line at least one of the
  months.
• Therefore, 50 on line at least once/month.
• 30 of sessions less than 5 minutes
• Six Segments

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Findings, cont.Six Segments

• Surfers,
• Simplifiers These people have been on-line the
  longest of anybody, yet they're not very heavy
  users in terms of time spent on-line. But they
  are heavy shoppers, accounting for 50 percent of
  retail purchases on-line. They understand the
  Internet. They get on. They do what they need to
  do and get off. If they want to buy a book, they
  go to Amazon, buy the book and get off. They are
  looking for end-to-end convenience. They're
  saying 'Don't give me all these bells and
  whistles at the site, because I'm not going to
  use them and they're going to get in my way.'"
• Connectors,
• Routiners,
• Bargainers
• Sportsters.

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3. Demographic/Psychographic

• Demographic
• Age
• Income
• Education
• Ethnicity
• Psychographic

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Segmentation Research

• Get data on customers preferences (e.g.,
  semantic scales).
• Group customers into a defined number of
  different segments (e.g., cluster analysis).
• Profile segments using descriptors
• Choose the segments that will best serve the
  firms strategy, given its capabilities and the
  likely reactions of competitors.

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Carpet FibersSegmentation
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Carpet FibersTargeting
Segment(s) to serve
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Strength(Importance)
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Water Resistance (Importance)
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Carpet FibersSegmentation
Perceptions/Ratings for one respondent Customer
Values
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Strength (Importance)
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Distance between segments C and D
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A,B,C,D Location of segment
centers. Typical members A schools B light
commercial C indoor/outdoorcarpeting
D health clubs
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Water Resistance (Importance)
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Steps in Segmentation and Targeting

• Identify needs-based segments in the market
• Develop profiles of the resulting needs-based
  segments
• Evaluate attractiveness of each segment
• Select one segment to target (first).

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Step 1Segment Based on Needs

• Segment first based on the needs or benefits
  sought by potential customers.
• Reliability
• Quality
• Service
• Economy
• Increased productivity
• Safety low risk

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Marketing Plan Template
Segment Segment Segment 1 2
3
Benefits Sought/Key Needs
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• Segments based on customer needs/benefits desired

A study of female investors needs produced three
needs-based segments
The benefits the customer hopes to derive from
her investment decision
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• Segments based on customer needs/benefits desired

Segment Needs

A Economy and Acceptable Performance
B Ease of Use and High Performance
C Convenience and Acceptable Performance




The benefits an industrial customer hopes to
derive from purchasing a computer system
Segment Profile
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Interesting . . . But . . .How do you find them?

• Need descriptors of some sort.

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Step 2Describe (develop profiles of) the members
of each Segment

• Industrial Interviews (limited number of
  customers)
• Consumer Market studies

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• Segment Identification
• -- What do the customers in each needs
  segment have in common?

Roger Best, 2000, Market-Based Mgmt
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Descriptive Factors for Segmenting Business
Markets

• Firmographics (Demographics for firms)
• Industry
• Company size
• Location
• Austin companies
• Texas companies
• Southwest U.S. Companies
• U.S. Companies
• North and South America
• Europe
• Global

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Descriptive Factors for Segmenting Business
Markets, cont.

• Firmographics (Demographics for firms)
• Industry, company size, location
• Operating variables
• customer capabilities (need many/few services),
  user/nonuser
• Purchasing approaches
• centralized/decentralized, purchase policies
• Situational factors
• urgency, size of order
• Personal characteristics
• attitudes toward risk, loyalty, price sensitivity

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Marketing Plan Template
Segment Segment Segment 1 2
3
Benefits Sought/Key Needs Description/Firmographi
cs Customers in Segment Segment Growth
Rate Decision-makers Decision-making
process Market Attractiveness Competitive
Intensity Profitability ??? ???
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2. Segment Identification
Segment Segment Need
A Economy and Acceptable Performance
B Ease of Use and High Performance
C Convenience and Acceptable Performance
Segment Profile
Demographics/Firmographics
Industry Firm Size Location, etc.
Operating Variables --Company Technology
level --Heavy Users/Light Users --Current
Customers/Potential Customers, etc.
Purchasing Approaches --Centralized/Decentralized
--Purchasing Policies --Purchasing Criteria, etc.
Situational Factors --Urgency of order
fulfillment --Product Application --Size of
Order, etc.
Buyers Personal Characteristics --Attitudes
towards Risk --etc
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Crossing the Chasm

• Development of Segment Scenarios - one way to
  arrive at needs-based segments.

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BREAK
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3. Evaluate Market Segments

• Attractiveness of segment
• Segment size
• Growth
• Competition
• Profitability
• Company (your own) objectives/resources
• mesh with long-term objectives
• skills/resources to address

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3. Segment Attractiveness
Segment Profitability
Roger Best, 2000, Market-Based Mgmt
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Evaluating Segment Attractiveness Crossing the
Chasm Scenarios

• Show Stoppers
• Target Customer
• Compelling Reason to Buy
• Whole Product
• Competition
• Nice-to-Haves
• Partners Allies
• Distribution
• Pricing
• Positioning
• Next Target Customer

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ExerciseProject Teams

• Work in your teams and, using the approach
  described in Crossing the Chasm, Ch. 4 (pp.
  89-98), create a scenario for ONE potential
  target customer for your project.
• Use Segmentation Exercise Worksheet.
• Using the rating system described in Crossing the
  Chasm, pp. 89-106, rate the segment scenario from
  1 to 5.
• Report out.

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4. Select one Segment to Target

• Unless you have highly substantial resources, it
  is best to start by aiming at being a big fish in
  a small pond.

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Consciously choosing one segment upon which to
focus your marketing efforts.
Targeting
Very Hard
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Why is Clear Targeting Important?

• Clearly targeted products diffuse more rapidly
  than non-targeted products.
• (a study of telecommunications products)

Easingwood Lunn, 1992
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The Marketing Plan
I. Executive Summary
II. Current Marketing Situation
III. Opportunity and Issue Analysis
IV. Objectives
V. Marketing Strategy
Differentiation, Positioning
VI. Action Programs
VII. Research Next Steps
VIII. Financials
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Differentiation

• Definition . . . offering customers
  something they value that competitors dont
  have.
• The process of differentiation is finding out
  what those things are.
• things that customers value
• that your competitors dont have

Discovering New Points of Differentiation
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Positioning
Two Steps

• Determine how your idea/product/ service is (or
  could be) different from the competition
  (Differentiation)
• Design the companys offering or image so they
  occupy a meaningful and distinct competitive
  position in your target customers mind.
  (Positioning)

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Steps in Differentiation

• Rank customers key desired attributes
• Determine which attributes competitors have/dont
  have
• Find the differentiating idea
• A differentiating idea of importance to
  customers
• Perceptual Maps help
• Have the credentials/proof
• Communicate your difference (i.e., positioning)

Differentiate or Die (2000), p. 67
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Beliefs (bi)
Brand A Brand B Brand C Brand D Brand
E Brand F
Rank Customers Desired Attributes
Attribute (xi) Eval. (ei)
Battery Life
5.6
2.8
2.3
2.1
1.0
1.7
0
Light Weight
5.4
2.0
1.3
2.1
0.2
1.9
-0.7
Price
5.4
1.1
1.9
1.8
1.6
1.3
1.0
Resolution Quality
5.2
1.8
1.9
1.7
1.4
0.2
1.0
Customer Description This research was
conducted by using surveys with Electrical
Engineers who travel heavily for their jobs.
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Perceptual Maps

• A tool to visualize how customers perceive the
  differences between competitive products and
  services.
• Very helpful in determining points of
  differentiation.
• Can use two or more axes.

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Exercise Compare the competitors on the two
most important attributes for this group of
customers/potential customers.
A
3 2 1 -1 -2 -3
Light
B
C
Battery Life
D
1 2 3
-3 -2 -1
E
Long
Short
F
Heavy
Weight
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Exercise Compare the competitors on the two
other important attributes for this group of
customers/potential customers.
A
3 2 1 -1 -2 -3
Light
B
C
Price
D
1 2 3
-3 -2 -1
E
Low
High
F
Heavy
Weight
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Other Thoughts

• Difficult to differentiate
• Finding the differentiating idea
• Having the discipline/courage to stick to one

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Positioning
Two Steps

• Determine how your idea/product/ service is (or
  could be) different from the competition
  (Differentiation)
• Design the companys offering or image so they
  occupy a meaningful and distinct competitive
  position in your target customers mind.
  (Positioning)

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Think of each category as a ladder in the
customers mind
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Dell
IBM
Apple
Personal Computers
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Apple
Different customers have different ladders
IBM
Dell
Personal Computers
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Positioning Strategy Positioning Statement

• Identifies all key elements in your
  differentiation
• Identifies the position that you want your
  product to occupy in your target customers mind.
• Drives all further elements of the marketing mix.
• Product strategy
• Pricing strategy
• Promotion/Communication strategy
• Place/Distribution strategy
• Positive W-O-M strategy
• Usually provided to an advertising/promotion
  agency that will help you develop your
  advertising and promotion.

Check Marketing Plan Template
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Positioning Statement

• For (target customers)
• Who are dissatisfied with (the current
  alternative)
• Our product is a (specify product category)
• That provides (point of differentiation)
• Unlike (the alternative competitive frame)
• We have assembled (key whole product features
  for your specific applicationi.e., major
  features)

Source Crossing the Chasm
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Target
Positioning Statement for Target (based on
differentiation)
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Review/Wrap-Up

• Opportunities/Issues Analysis
• Setting Objectives
• Financial objectives
• Marketing objectives
• Marketing Strategy
• Segmentation Steps, Variables
• Targeting
• Differentiation Perceptual maps
• Positioning
• Next Time Start the Marketing Mix

Remember to complete evaluations
65
Next Time

• Topics
• Reading
• Prepare/discuss study questions in Discussion
  Board Session 6
• Marketing Plan Del. 2 due on 08/18

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Marketing Plan Del. 2Due 8/18, via e-mail
Read the instructions

• Situation Analysis supplement and polish
• Market Potential supplement and polish
• O/I Analysis
• Strategy Recommendation Target Segment
• Presentation Guidelines
• 15 pages max
• Double-spaced 1 margins document sources

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References and Supplemental Reading

• Best, Roger J., Market-Based Management
  Strategies for Growing Customer Value and
  Profitability, Prentice Hall, 1997.
• Burgel Murray (2000). International Market
  Entry Choices of Start-up Companies in
  High-Technology Industries. Journal of
  International Marketing 8 (2).
• Easingwood, C. Lunn, S. (1992). Duffusion
  Paths in a High Tech Environment Cluster and
  commonalities. RD Management, 22(1), 69-80.
• Funk, T.F. Phllips, W. (1990). Segmentation of
  the Market for Table Eggs in Ontario,
  Agribusiness, 6(4) (July), pp. 309-327.
• Gatignon, H.A. Robertson, T.S. (1985). A
  propositional Inventory for New Diffusion
  Research. Journal of Consumer Research, 11(4),
  March, p849-867.
• Lilien, G.L. Rangaswamy, A. (1998). Marketing
  Engineering, Reading, MA. Addison-Wesley.
• MacMillan, I.C. McGrath, R.G. (1997).
  Discovering New Points of Differentiation,
  Harvard Business Review, July-August, 1997, pp.
  133-145.
• McKenna, R. (1985). Market Positioning in High
  Technology, California Management Review, 27(3),
  Spring, 1985, 82-108.
• Moore, G. (1999). Crossing the Chasm. New York
  HarperBusiness.
• Ries, A. Trout, J. (1986). Positioning The
  Battle for Your Mind. New York McGraw-Hill.
• Trout, J. (2000). Differentiate or Die. New
  York John Wiley Sons
• Viardot, E. (1998). Successful Marketing
  Strategy for High Tech Firms, Boston Artech
  House.

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If there is time, we will move into this next
section on the Product Life Cycle.

• It is more likely that we will address them in
  Session 6.

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The Marketing Plan
I. Executive Summary
II. Marketing Situation Analysis
III. Opportunity and Issue Analysis
IV. Objectives
V. Marketing Strategy
Segmentation, Targeting
Differentiation, Positioning
Product
Marketing Mix
Price
Promotion
Place
Positive Word-of-Mouth
VI. Action Programs
VII. Projected Profit-and-Loss
VIII. Controls
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Product Life Cycle
Decline
Maturity
Growth
Introduction
Time
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Product Life Cycle
Growth
Introduction
Product Development
Technology Development
Time
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(No Transcript)
73
General Marketing Objectives
Create product Maximize market share Maximize
profit Reduce expenditure awareness and
trial sustain growth as long while defending
share and milk the brand as possible.
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363
74
Marketing Mix Strategies
Product Offer a basic product Offer product
extensions Diversify brands/models Phase out weak
items Price Try to use price/ Price to
penetrate Price to match or best Cut price
value Cost-plus frequent market competitors s
kimming vs. penetration Distribution Build
selective Build intensive Build more intensive Go
selective phase distribution distribution dis
tribution out unprofitable channels Advertising
Build product awareness Build awareness
and Build preference stress Reduce to level
needed among early adopters interest in the
mass brand differences and to retain
hard-core and dealers market and
benefits loyals Sales Promotion Use heavy sales
promotion Reduce to take Increase to
encourage Reduce to minimal to entice
trial advantage of heavy brand switching level
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363
75
Marketing Mix Strategies
Product Offer a basic product Offer product
extensions Diversify brands/models Phase out weak
items Price Try to use price/ Price to
penetrate Price to match or best Cut price
value Cost-plus frequent market competitors s
kimming vs. penetration Distribution Build
selective Build intensive Build more intensive Go
selective phase distribution distribution dis
tribution out unprofitable channels Advertising
Build product awareness Build awareness
and Build preference stress Reduce to level
needed among early adopters interest in the
mass brand differences and to retain
hard-core and dealers market and
benefits loyals Sales Promotion Use heavy sales
promotion Reduce to take Increase to
encourage Reduce to minimal to entice
trial advantage of heavy brand switching level
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363
76
Marketing Mix Strategies
Product Offer a basic product Offer product
extensions Diversify brands/models Phase out weak
items Price Try to use price/ Price to
penetrate Price to match or best Cut price
value Cost-plus frequent market competitors s
kimming vs. penetration Distribution Build
selective Build intensive Build more intensive Go
selective phase distribution distribution dis
tribution out unprofitable channels Advertising
Build product awareness Build awareness
and Build preference stress Reduce to level
needed among early adopters interest in the
mass brand differences and to retain
hard-core and dealers market and
benefits loyals Sales Promotion Use heavy sales
promotion Reduce to take Increase to
encourage Reduce to minimal to entice
trial advantage of heavy brand switching level
consumer demand
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363
77
Marketing Mix Strategies
Product Offer a basic product Offer product
extensions Diversify brands/models Phase out weak
items Price Try to use price/ Price to
penetrate Price to match or best Cut price
value Cost-plus frequent market competitors s
kimming vs. penetration Distribution Build
selective Build intensive Build more intensive Go
selective phase distribution distribution dis
tribution out unprofitable channels Advertising
Build product awareness Build awareness
and Build preference stress Reduce to level
needed among early adopters interest in the
mass brand differences and to retain
hard-core and dealers market and
benefits loyals Sales Promotion Use heavy sales
promotion Reduce to take Increase to
encourage Reduce to minimal to entice
trial advantage of heavy brand switching level
consumer demand
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363
78
Characteristics
Sales Low sales Rapidly rising Peak
sales Declining sales
sales Costs High cost per Average cost per Low
cost per Low cost per customer customer cus
tomer customer Profits Negative Rising
profits High profits Declining
profits Customers Innovators Early
adopters Middle majority Laggards Competitors F
ew Growing number Stable number Declining
beginning to decline number
General Marketing Objectives
Create product Maximize Maximize
profit Reduce expenditure awareness and
trial market share while defending share and
milk the brand
Strategies
Product Offer a basic product Offer product
extensions Diversify brands/models Phase out weak
items Price Try to use price/value Price to
penetrate Price to match or best Cut
price Cost-plus frequent market competitors
skimming vs. penetration Distribution Build
selective Build intensive Build more
intensive Go selective phase distribution dist
ribution distribution out unprofitable
channels Advertising Build product
awareness Build awareness and Build preference
stress Reduce to level needed among early
adopters interest in the mass brand differences
and to retain hard-core and dealers market and
benefits loyals Sales Promotion Use heavy
sales promotion Reduce to take Increase to
encourage Reduce to minimal to entice
trial advantage of heavy brand switching level
Adapted from Kotler, Marketing Management, 9th
Edition, p. 363