Review

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Review
Please sit with your STC380 teammates
Cold Call 5 key learnings from last time
2
Marketing Concepts in Commercialization of High
Technology

• Session 8
• Marketing Mix
• Place Strategy

3
Agenda

• Review
• Lecture Word of Mouth
• Exercise Word of Mouth/Opinion Leaders
• Lecture and Discussion Distribution Channels
• Lecture and Discussion Strategic Alliances

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Review
? Kate Mackie, Ph.D. 2001, Center for Lifelong
Engineering Education, University of Texas at
Austin
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Elements in the Communication Process
RECEIVER
Media
SENDER
Message
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Four IntroductoryPrice/Promotion Strategies
Promotion
High
Low
Rapid- skimming strategy
Slow- skimming strategy
Rapid- penetration strategy
Slow- penetration strategy
Source Kotler, Marketing Management, 10th
Edition, 1999, p. 307
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Session 8 Objectives

• Apply Word-Of-Mouth and Presence/ Credibility
  strategies in the development of a marketing
  plan.
• Describe the concept of channels, the types of
  channels available for the high-tech market, and
  selection criteria to consider when making
  channel design decisions.
• Describe the roles of marketing alliances in
  launching and promoting a high-technology product
  or service.

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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
Positive Word-of-Mouth
Place
VI. Action Programs
VII. Projected Profit-and-Loss
VIII. Controls
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Positive Word-of-Mouth

• Opinion Leaders
• Methods

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Exercise Coming

• How would you find people who would be considered
  opinion leaders for the product or technology in
  your projects?
• Individually 5 minutes
• Teams 5 minutes
• Report out 10 minutes

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Word-of-Mouth as Influence

• Twice as effective as radio advertising
• Four times as effective as personal selling
• Seven times as effective as newspapers and
  magazines

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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)

McKenna, 1985
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Targets for W-O-M Campaigns

• Financial Community
• Industry-watchers
• Customers
• The press
• The selling chain
• The community

McKenna, 1985
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Opinion Leaders

• People whose opinions widely respected within
  social groups
• They
• are usually trend setters stay current with
  trends
• focus on specific product categories
• are either regular purchasers or watchers in
  the category
• get information from first hand experience
• read magazines, watch news reports, attend
  conventions
• may be perceived as mavericks by their own group
• think of themselves as giving information to
  others

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Exercise

• How would you find people who would be considered
  opinion leaders for the product or technology in
  your projects?
• Individually 5 minutes
• Teams 5 minutes
• Report out 10 minutes

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How to Influence and Create Opinion Leaders

• Involve them in beta testing
• Provide them with sample of product/service
• Involve them in product and/or package design
• Offer incentives for referrals
• Use advertising designed to stimulate or simulate
  word-of-mouth, i.e., show one person telling
  another about your product/service.

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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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Presence and Credibility
Presence and Credibility
The unofficial 6th P
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Credibility is Paramount
Presence and Credibility

• Start-ups the perception
• Strong scientific know-how weak business
  know-how
• New, unproven therefore possibly unreliable
• Customers need
• Confidence in company

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How Credibility is Developed
Presence and Credibility

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

McKenna, 1985
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Strategies vs. Action Programs

• Strategies Broad statements with rationale
• Positioning
• 4 Ps
• Action Programs
• Execution details 4 Ps
• Specific description
• Timing
• Cost

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Strategies (Examples)

• Product
• Design the product to include the X, Y, Z
  attributes (rationale)
• Use the brand name of XXX because (rationale)
• Pricing (policy)
• Price to (skim, penetrate, maximize ROI,
  higher/lower than competition, etc.) because
  (rationale)
• Promotion
• Promotion Objectives Stimulate awareness,
  knowledge, and liking in target audience.
• Advertising Media (see earlier Media Strategies
  slide)
• Advertise in (industry) trade journals
  (rationale)
• Use direct mail advertising to (people)
  (rationale)
• Advertising Message Convey (positioning) to
  (generate awareness/inform/ persuade)
• Sponsor seminars for (people) (rationale)
• Attend key industry trade shows (rationale)
• Use print collateral materials (brochures,
  flyers, etc.)

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Action Programs (Examples)

• Send direct mail piece to 344 Gizmo-User CEOs
  during month 1 of launch. Cost list
  production 2,750.
• Place the following print ads in trade journals
• Appliance - 3 ads (May, June, Oct), ½ page,
  4-color 2925 each production
• Design News 6 ads (May 8, 22, June 12, July 10,
  Sept. 11, Oct. 16), ½ page, b/w 5815 each
  production
• Conduct customer seminars on (dates) cost
  3000 each
• See Programming Calendar

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Programming Calendar
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(No Transcript)
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Advertising/Promotional Timing

• Objective Increase effect/efficiency of
  advertising and customer/distributor promotion
• Public Relations Campaigns 7 to 30 days before
  launch
• Avoid dead seasons (Summer, November,
  December)
• Plan advertising exposures to maximize effect
• After initial filling of distribution channels
  (launch)
• Prior to customer/distributor promotions
• Prior to and during early-middle stages of
  seasonal purchasing cycles

Rossiter Percy, 1987, p. 331, 445 Kitchko,
1998
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BREAK
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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
Positive Word-of-Mouth
Place
VI. Action Programs
VII. Projected Profit-and-Loss
VIII. Controls
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4 Ps

• Product What products/services will we provide?
• Price How will we price them?
• Promotion How will we communicate their
  availability, features, and benefits?
• Place Where will we offer them and how will we
  deliver them?

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• Strategic Alliances
• Market Entry
• Learning
• Logistics

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Discussion Coming

• In-Class Students
• Individually sketch what you think the channel
  structure looks like for your company/organization
  .
• Be prepared to share it with the class

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Channel Theory

• Channel Function
• Channel Evolution
• Channel Strategy Design Considerations

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Common Distribution System Functions(In-House
and/or Outsourced)

• Sales contact
• Shipping and delivery
• Inventory holding
• Order processing
• Invoicing
• Collecting information on customers/competitors
• Financing/Credit terms
• Customer support

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Stern, El-Ansary Coughlan, p. 109
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Channel Theory

• Channel Function
• Channel Evolution
• Channel Strategy Design Considerations

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Channel Evolution
Mass Market Distribution (1950s, early 60s)
Manufacturer
CUSTOMERS
Rationale Dont do both because it would result
in channel conflict.

• The 1960s rule of thumb
• Go direct as soon as sales volume
• justified it because
• more control
• more direct contact with customers

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CUSTOMERS
CUSTOMERS
Two-part strategy, generally w/ direct sales and
distributor network to reach different segments
(e.g., one needing intense pre-sale education,
the other not)
Single direct sales force or distributor network
used to support easiest-to-reach customers.
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Segmented Distribution (late 70s, early 80s)
Mass Market Distribution (1950s, early 60s)
Segmented Distribution (late 60s, early 70s)
Single direct sales force or distributor network
used to support easiest-to-reach customers.
Two-part strategy, generally w/ direct sales and
distributor network to reach different segments
Add direct marketing (direct sales and/or
telemarketing) to supplement two-part strategy,
and reach low tier customers efficiently
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Matrix Distribution (late 80s, 90s)
Manufacturer
Adapted from Stern, El-Ansary Coughlan, p.
109 and Viardot, p. 202
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Welding Rod Manufacturer
Independent Wholesalers (41)
Company-Owned Wholesalers (21)
Distributor (13)
Direct Marketing Systems
Indirect Marketing Systems
(Best 1997)
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A Hybrid System Becton-Dickinsons Vacutainer
Systems Division
Indirect Marketing Systems
Direct Marketing Systems
(Anderson, Day Rangan, 1997)
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Discussion

• In-Class Students
• Individually sketch what you think the channel
  structure looks like for your company/organization
  .
• Be prepared to share it with the class

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Channel Theory

• Channel Evolution
• Channel Function
• Channel Strategy Design Considerations

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Channel Choice Generalities

• Indirect Sales Force (Distributors)

• Direct Sales Force

• Larger market size
• Geographically diverse
• Heterogeneous targets
• Lower education needs
• Standardized products
• Lower knowledge of customer
• Less control
• Less flexibility

• Smaller market size
• Geographically limited
• Homogeneous target
• High education needs
• Non-standardized products
• High knowledge of customer
• Need more control
• Need flexibility

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Elements Driving Changes in Distribution Channel
Design

• Proliferation of information technology
• Polarization of customers
• Consolidation and Fragmentation
• Mfg. systems that can mass-customize
• Quick shipment distribution logistics

Reorienting Channels of Distribution Rangan,
(1994)
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Questions Central to Distribution Strategy
Old Questions
New Questions How can channels

• Direct vs. Distributor?

• create entry barriers?
• enhance product differentiation?
• enable customer intimacy?

Rangan, (1994) - Reorienting
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So, whats new?

• Old Way
• Choose intermediaries that can reach (a.k.a push
  it out to) the customer
• New Way
• How can customers channel requirements be
  efficiently addressed?

Shift in focus customer-centric
Rangan, (1994) - Reorienting
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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. Channel Functions
Channel Types

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

Direct
Sales Force Internet
Intermediaries
Distributors
Agents/Brokers
VARs
Wholesalers
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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Matching Tasks to Channels, By Segment







Tasks


Qualify Sales

Pre-sales

Lead
Post Sales
Generation
Close Sales
Service
Acct. Mgmt.
Channels





National Acct.






Big

Mgmt.





Direct Sales












Medium



Telemarketing






Small





Direct Mail











Retail Sales









Distributors








Dealers/ VARs








Mohr (2001) p. 237


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4. Generate Alternatives
5. Analyze Cost/Benefit for Each
Rangan, 1994, HBS
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6. Adapt for multiple products/markets
Optimal Channels for 3 Segments
Rangan, 1994, HBS
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Second Best Option Hybrid
Dealers
Rangan, 1994, HBS
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Time



SALES
Mohr (2001) p. 231
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Stage in PLC

• Introductory stage
• channels that add substantial value, e.g.,
  service
• Growth stage
• Be able to handle greater sales volume
• Less service required than at introductory
• Maturity
• Do not emphasize value-added service because
  end-users focused on low price
• Decline
• Channels that add even less value, such as direct
  mail, become dominant.
• CAVEAT Self-fulfilling prophecies and different
  focus for different end-users, regardless of
  stage

Stern, El-Ansary Coughlan, 1996, Marketing
Channels, p. 191
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BREAK
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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
63
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 current 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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Review/Wrap-UpPlace/Strategic Alliances

• Word-of-Mouth and Presence/Credibility strategies
• Distribution channel function, evolution, design
• Strategic Alliances

Remember to complete evaluations
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Next Time

• Topics
• Reading
• Prepare/discuss study questions in Discussion
  Board Session 9
• Work on Final Marketing Plan (MPD3)
• Due 9/15.
• The Great Debate be prepared to debate either
  side
• There is NOTHING STRATEGICALLY NEW about the
  Internet
• VS
• The Internet has REVOLUTIONIZED marketing
  strategy.

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References

• Anderson, E., Day, G.S., and Rangan, V.K.
  Strategic Channel Design, Sloan Management
  Review, 38(4) 59-70, 1997
• Best, R. (2000) Market Based Management, Upper
  Saddle River, N.J. Prentice Hall
• Burgel Murray (2000). International Market
  Entry Choices of Start-up Companies in
  High-Technology Industries. Journal of
  International Marketing 8 (2).
• Davidow, W.H. (1986). Marketing High Technology,
  New York The Free Press
• Dowling, M.J., Roering, W.D., Carline, B.A.
  Wisnieski, J. (1996). Multifaceted Relationships
  Under Coopetition Description and Theory.
  Journal of Management Inquiry, 5(2), June, pp.
  155-167.
• Dwyer, F.R. Tanner, J.F. (1999). Business
  Marketing, Boston Irwing/McGraw-Hill
• Gersony, N. Peters, L. (1997). A strategic
  alliance typology for new technological ventures.
  American Business Review, January, 63-70.
• Lewis, J.D. (1990). Partnerships for Profit
  Structuring and Managing Strategic Alliances.
• Lilien, G.L. Rangaswamy, A. (1998). Marketing
  Engineering, Reading, MA. Addison-Wesley
• Michelet, R. Remacle, R. (1992). Forming
  successful strategic marketing alliances in
  Europe. The Journal of European Business,
  Sept/Oct., 11-15
• Moore, G. (1999). Crossing the Chasm. New York
  HarperBusiness.
• Rangan, V.K. (1994). Designing Channels of
  Distribution. HBS Note 9-594-116
• Rangan, V.K. (1994). Reorienting Channels of
  Distribution. HBS Note 9-594-118.

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Additional WWW Sources

• 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