Marketing of Technology
Intensive Products
0011 0010 1010 1101 0001 0100 1011
Dr. Matti J. Haverila
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2
4
Table Contents
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Issues for High Tech Companies (1-5)
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Hurdle1010
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)
©Matti Haverila, Infacs Oy
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•
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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)
1
2
4
Issues for High Tech Companies (1)*
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Finance related factors
The difficulty to get financial support
High cost of financing
Acquisition of financing
Total of finance related factors
R&D related factors
The credibility of the company amongst the customers
The capability to follow the development of technology
Lack of R&D competence
The technological ageing of products
Total of R&D related factors
* See Autio et al: Uudet teknologiayritykset...
©Matti Haverila, Infacs Oy
Weight of the problem
84
79
72
235
1
2
4
94
65
45
10
214
Issues for High Tech Companies (2)
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Competition related factors
The competition by replaceable products
Domestic competitors
International competitors
Total of competition related factors
Weight of the problem
64
47
25
136
Labour related factors
The acquisition of employees
The high cost of employees
Total of labour related factors
4
©Matti Haverila, Infacs Oy
1
100
59
159
2
Issues for High Tech Companies (3)
Management related factors
Lack
of accounting
competence
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The difficulty to get management team
The difficulty to get board
Total of management related factors
Production related factors
The acquisition of machinery and equipment
The long production time of the product
Total of production related factors
Other factors
The bureaucracy of the government and local authority
The acquisition of factory space
The attitude of the university
The attitude of the family
Total of other factors
©Matti Haverila, Infacs Oy
Weight of the problem
109
14
14
137
1
66
63
129
2
4
106
43
29
25
203
Issues for High Tech Companies (4)
0011
0010or
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Market
marketing
related0100
factors
Minor identity of the company
Lack of marketing competence
Getting of customers and creating customer relationships
The high price of the product or service
Difficulty to get to the distribution channels
Acquisition of international contacts
Total of market or marketing related factors
©Matti Haverila, Infacs Oy
Weight of the problem
143
124
98
88
59
52
564
1
2
4
Issues for High Tech Companies (5)
0011 0010 1010 1101 0001 0100 1011
Issue Area
Weight of the problem
Market or marketing related factors
564
Finance related factors
235
R&D related factors
214
Other factors
203
Labour related factors
159
Management related factors
137
Competition related factors
136
Total of production related factors
129
1
©Matti Haverila, Infacs Oy
2
4
Hurdle of Internationalization
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S
a
l
e
s
Hurdle of Internationalization
North-American
technology
companies
1
4
Technology Companies
©Matti Haverila, Infacs Oy
2
Finnish
technology
companies
What seems to be the problem?
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Richard M. Cyert, the president of Carnegie-Mellon
University:
1
2
America's most formidable high-tech problem is not
innovation - the problem is marketing new ideas.
Sam Walton
4
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.
©Matti Haverila, Infacs Oy
The Types of New Products
0011 0010 1010 1101 0001 0100 1011New
High
Product Lines
(20%)
Newness
to the
Company
Low
Improvements
/Revisions to
Existing Products
(26%)
Additions
to Existing
Product Lines
(26%)
Cost Reductions
(11%)
Repositionings
(7%)
Low
New to the
World Products
(10%)
1
2
4
High
Newness to the Market
©Matti Haverila, Infacs Oy
GoTo
New Product Development Process (NPDP)
Business Strategy
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Exploration
Idea Generation
Concept development
Business Analysis
Screening
Protype development
Market testing
Plant Scale-Up
Product Launch
Post Launch Check-Up
©Matti Haverila, Infacs Oy
1
2
4
Commercialized Products
Stage-Gate NPD (1)
Initial Screen
Second Screen
Idea
0011
0010 1010Gate
1101 10001 0100Stage
1011 1
Gate 2
Stage 2
Preliminary
Investigation
Decision on
Business case
Gate 3
Detailed Investigation
(build business case)
Postdevelopment
Review
Stage 3
Gate 4
Development
Gate 5
©Matti Haverila, Infacs Oy
Stage 5
Production &
Launch
2
4
Testing &
Validation
Post Launch
Review
Prelaunch Business
Analysis
1
Stage 4
PLR
Stage-Gate NPD (2)
Initial Screen
Idea
0011
0010 1010Gate
1101 10001 0100 1011
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.
• The company identifies potential wants and needs of each customer
segment, examines the external market and competitive trends.
1
2
• It offers tangible needs, wants, complaints and problems that customers
have about a certain activity, function or product performance.
4
•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.
©Matti Haverila, Infacs Oy
Stage-Gate NPD (3)
Second Screen
Stage
1
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Gate 2
Preliminary
Investigation
1
• 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.
©Matti Haverila, Infacs Oy
2
4
• In gate 2 the project is re-evaluated in the light of the new
information obtained in stage 2.
Stage-Gate NPD (4)
Decision on
Business case
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Stage 2
Detailed Investigation
(build business case)
Gate 3
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.
1
2
• 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.
4
• 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.
©Matti Haverila, Infacs Oy
Stage-Gate NPD (5)
Postdevelopment
Review
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Stage 3
Development
Gate 4
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.
1
2
• 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.
4
• 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.
©Matti Haverila, Infacs Oy
Stage-Gate NPD (6)
Prelaunch Business
Analysis
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Stage 4
Testing &
Validation
Gate 5
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.
1
2
• 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.
4
• 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.
©Matti Haverila, Infacs Oy
Stage-Gate NPD (7)
Post Launch
Review
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Stage 5
PLR
Production &
Launch
2
• 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.
1
4
• 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.
©Matti Haverila, Infacs Oy
Approaches to NPD Process
Consumer driven
Competition driven
Technology driven
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Idea generation
Market Analysis
Technology needs and
application ideas
Concept development
and consumer screening
Concept identification
and screening
Concept development
and consumer screening
Business Analysis
Product development
Business Analysis
Product development
4
Production testing
Test marketing
©Matti Haverila, Infacs Oy
2
Prototype development
Consumer/Lab testing
Market Launching
1
Advanced development
Market Launching
Market Launching
NPD Strategies
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Low budget,
conservation
High-budget,
Shotgun
Focused, but
weak technology
©Matti Haverila, Infacs Oy
Success
Rate
Marketing and
technology
integrated
1
2
% of company sales
from new products
4
Technology
driven
Marketing - Technology Balance
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Relative
Effort
Allocation
Marketing efforts
1
Engineering efforts
Cutting
Edge
State of
The Art
Advanced
Mainstream
©Matti Haverila, Infacs Oy
4
Mature
State of Technology
2
Decline
Marketing Mix - Product (1)
Slow Learning Cycle
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1011
Sales-customer feedback
Develop
product
Launch
Improved
Product
1
Rapid Learning Cycle
Salescustomer
feedback
Develop
product
©Matti Haverila, Infacs Oy
Salescustomer
feedback
Launch
Improved
Product
Launch
Improved
Product
2
4
Salescustomer
feedback
Launch
Improved
Product
Learning Cycle
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Rapid Learning Cycle
1
©Matti Haverila, Infacs Oy
2
4
Slow Learning Cycle
Marketing Mix - Product (2)
40
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Market0010
share 1010 1101 0001 0100 1011
achieved
30
1
20
10
Introductory
Growth
Product not Modified
©Matti Haverila, Infacs Oy
Mature
2
4
Decline
Product Modified
Degree of product modification
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Incremental
gains
0
2
4
Zone of minimal
product
adaptation
©Matti Haverila, Infacs Oy
6
8
10
Costs
1
12
Zone of minimal
Product adaptation
(minor type)
14
2
4
16 18
20
Zone of minimal
Product adaptation
(major type)
Research Project
•
The % of R&D of the sales
0011 0010 1010 1101 0001 0100 1011
Mean = 9,62
Mode = 15
• The % of marketing of the sales
Mean = 10,02
Mode = 10
• The % of export share of the sales
Mean = 62,4
Mode = 90
Median = 8,0
1
Median = 8,7
2
4
Median = 70
• The number of product launches per year (total 536)
Mean = 6,6
Mode = 3
Median = 3,0
©Matti Haverila, Infacs Oy
Research results (1)
Marketing method
1. Personal selling
2. Marketing concept
0011 0010 1010 1101 0001 0100 1011
3. New product development strategy
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Sales promotion
8. Market segmentation
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Publicity
15. Market research
16. Advertising
17. Marketing information systems/ Marketing intelligence
18. Marketing consultants
©Matti Haverila, Infacs Oy
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
1
2
4
Research results (2)
Marketing method
1. Personal selling
2. Marketing concept
3. New product development strategy
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Sales promotion
8. Market segmentation
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Publicity
15. Market research
16. Advertising
17. Marketing information systems/ Marketing intelligence
18. Marketing consultants
0011 0010 1010 1101 0001 0100 1011
©Matti Haverila, Infacs Oy
Description of
importance
Very important
Very important
Very important
Very important
Rather important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Rather unimportant
Rather unimportant
Very unimportant
Very unimportant
Very unimportant
1
2
4
Research results (3)
Marketing method
1. Personal selling
2. Marketing concept
3. New product development strategy
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Sales promotion
8. Market segmentation
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Publicity
15. Market research
16. Advertising
17. Marketing information systems/ Marketing intelligence
18. Marketing consultants
0011 0010 1010 1101 0001 0100 1011
©Matti Haverila, Infacs Oy
Description of
importance
Very important
Very important
Very important
Very important
Rather important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Rather unimportant
Rather unimportant
Very unimportant
Very unimportant
Very unimportant
1
2
4
Research results (4)
Marketing method
1. Personal selling
2. Marketing concept
3. New product development strategy
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Sales promotion
8. Market segmentation
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Publicity
15. Market research
16. Advertising
17. Marketing information systems/ Marketing intelligence
18. Marketing consultants
0011 0010 1010 1101 0001 0100 1011
©Matti Haverila, Infacs Oy
Description of
importance
Very important
Very important
Very important
Very important
Rather important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Moderately important
Rather unimportant
Rather unimportant
Very unimportant
Very unimportant
Very unimportant
1
2
4
Successful vs. Unsuccesful (1)
Successful cases Unsuccessful cases
Marketing
0011 0010
1010method
1101 0001 0100 1011 Rank
1. Personal selling
2. NPD strategy
3. Marketing concept
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Market segmentation
8. Sales promotion
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Market research
15. Publicity
16. Advertising
17. MIS/ Marketing intelligence
©Matti
Haverila, Infacsconsultants
Oy
18.
Marketing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Rank
1
5
4
2
6
7
9
3
7
11
11
13
9
15
16
16
14
16
1
2
4
Successful vs. Unsuccesful (2)
Successful cases Unsuccessful cases
Marketing
0011 0010
1010method
1101 0001 0100 1011 Rank
1. Personal selling
2. NPD strategy
3. Marketing concept
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Market segmentation
8. Sales promotion
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Market research
15. Publicity
16. Advertising
17. MIS/ Marketing intelligence
©Matti
Haverila, Infacsconsultants
Oy
18.
Marketing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Rank
1
5
4
2
6
7
9
3
7
11
11
13
9
15
16
16
14
16
1
2
4
Successful vs. Unsuccesful (3)
Successful cases Unsuccessful cases
Marketing
0011 0010
1010method
1101 0001 0100 1011 Rank
1. Personal selling
2. NPD strategy
3. Marketing concept
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Market segmentation
8. Sales promotion
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Market research
15. Publicity
16. Advertising
17. MIS/ Marketing intelligence
©Matti
Haverila, Infacsconsultants
Oy
18.
Marketing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Rank
1
5
4
2
6
7
9
3
7
11
11
13
9
15
16
16
14
16
1
2
4
Successful vs. Unsuccesful (4)
Successful cases Unsuccessful cases
Marketing
0011 0010
1010method
1101 0001 0100 1011 Rank
1. Personal selling
2. NPD strategy
3. Marketing concept
4. Differentiation
5. Product/service specialisation
6. Pricing
7. Market segmentation
8. Sales promotion
9. Marketing organisation
10. Distribution
11. Positioning
12. Marketing planning
13. Market share
14. Market research
15. Publicity
16. Advertising
17. MIS/ Marketing intelligence
©Matti
Haverila, Infacsconsultants
Oy
18.
Marketing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Rank
1
5
4
2
6
7
9
3
7
11
11
13
9
15
16
16
14
16
1
2
4
Conclusions (1)
•
The success rate when launching high technology products into the
export markets was in this study 80,41 %.
0011 0010 1010 1101 0001 0100 1011
•
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.
1
2
– Personal selling is the most important promotional element.
– Pricing and place factors are only moderately important elements in the
marketing mix decision.
•
4
The careful balance between the various marketing methods is
important in the successful launch of new high technology product into
the export market.
©Matti Haverila, Infacs Oy
Conclusions (2)
•
Publicity, promotion, marketing organisation, market share and
positioning are marketing methods, which are more commonly used in
0011 0010larger
1010companies.
1101 0001 0100 1011
•
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.
1
©Matti Haverila, Infacs Oy
2
4
Conclusions (3)
•
Publicity, promotion, marketing organisation, market share and
positioning are marketing methods, which are more commonly used in
0011 0010larger
1010companies.
1101 0001 0100 1011
•
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.
1
©Matti Haverila, Infacs Oy
2
4
Conclusions (4)
•
There were significant differences in relative marketing expenditure
among companies with different percentage of the sales of the
0011 0010company
1010 1101
0100
1011In companies where the export's share
sold0001
outside
Finland.
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 %.
1
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.
©Matti Haverila, Infacs Oy
4
Conclusions (5)
•
There were no differences in the outcome of product launches
depending upon the background of the president of the company nor
0011 0010were
1010there
1101 any
0001differences
0100 1011 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.
1
©Matti Haverila, Infacs Oy
2
4
Recommendations
•
Study carefully the marketing strategy when launching high tech
products. The launch of a new high tech product into foreign markets is
0011 0010different
1010 1101
0001
0100of1011
than the
launch
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.
•
1
2
4
Try to achieve critical mass in your export sales and marketing
expenditure. Find any, and all means to overcome this obstacle.
©Matti Haverila, Infacs Oy
Finland vs. California (1)
MARKETING
CONCEPT
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0001 0100 1011
1. Marketing concept
MARKETING MIX VARIABLES
1. Personal selling
2. Product/service specialization
3. Pricing
4. Sales promotion
5. Distribution
6. Publicity
7. Advertising
©Matti Haverila, Infacs Oy
CA
Finland Diff.
Significance
3.32
3.95
-0.63
0.02
4.22
2.60
3.07
4.00
3.23
4.00
3.50
4.13
3.70
3.49
3.26
3.10
2.48
2.33
0.09
-1.10
-0.42
0.74
0.13
1.52
1.17
1
2
*
0.0002
*
*
*
0.0001
0.0005
4
Finland vs. California (2)
CA
Finland Diff.
Significance
0011 0010 1010 1101 0001 0100 1011
MARKETING ORGANIZATION AND PLANNING
1. NPD strategy
2. Differentiation
3. Market segmentation
4. Marketing organization
5. Positioning
6. Marketing planning
7. Market share
8. Market research
9. MIS
10. Marketing consultants
©Matti Haverila, Infacs Oy
3.48
4.85
3.09
3.70
3.37
2.91
2.13
3.05
3.17
1.84
4.08
3.74
3.38
2.90
2.92
2.84
2.51
2.26
2.07
1.74
-0.60
1.11
-0.29
0.80
0.45
0.07
-0.38
0.79
1.10
0.10
0.0586
0.0000
*
0.0001
*
*
*
0.0385
0.0032
*
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©Matti Haverila, Infacs Oy
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