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Marketing of High-Technology Products and
InnovationsJakki J. Mohr
Chapter 1: Introduction to High-
Technology
© Jakki Mohr, 2001
Technology is ubiquitous Examples of traditional “high-tech” industries:
Computers and information technology Biotechnology Telecommunications Internet
Examples of some industries where technological innovation is creating radical changes: Waste management Agriculture Automotive Oil and Gas Consumer Products
© Jakki Mohr, 2001
The “New Economy” Substitution of knowledge and
information for physical assets Massive investments in
information technology Enhanced productivity Falling prices for technology Faster growth and lower
inflation at the same time
© Jakki Mohr, 2001
Drawbacks to Technology Impact on Economy Volatile Relies on constant stream of
innovation Dot-com crashes Stock market effects Global effects
© Jakki Mohr, 2001
Definitions of “High-Tech” Government perspective “Common underlying
characteristics” perspective
© Jakki Mohr, 2001
Definitions of Technology: the practical application of knowledge
especially in a particular area (e.g., engineering)
a manner of accomplishing a task especially using technical processes, methods, or knowledge (e.g., new technologies for information storage)
scientific technology involving the production or use of advanced or sophisticated devices (as in computers or electronics)
© Jakki Mohr, 2001
Definitions of Technology: Government Perspective
Classify industries based on objective, measurable indicators: the number of technical employees $ spent on R&D # of patents filed in industry
Used by the Bureau of Labor Statistics, Organization for Economic Cooperation and Development, and the National Science Foundation
© Jakki Mohr, 2001
Level 1 Industries: Technology-Intensive
SIC code
Industry Percent research and development
employment Total......................................................................................................... 100.00 Level 1 industries
1................................................................................ 86.5
131 Crude petroleum and natural gas operations........................................... 1.9 211 Cigarettes ................................................................................................ .4 281 Industrial inorganic chemicals.................................................................. 1.3 282 Plastics materials and synthetics ............................................................. 1.8 283 Drugs ....................................................................................................... 2.3 284 Soap, cleaners, and toilet goods.............................................................. 1.6 285 Paints and allied products........................................................................ .6 286 Industrial organic chemicals..................................................................... 1.5 287 Agricultural chemicals.............................................................................. .5 289 Miscellaneous chemical products ............................................................ 1.0 291 Petroleum refining.................................................................................... 1.2 299 Miscellaneous petroleum and coal products............................................ .1 335 Nonferrous rolling and drawing................................................................ 1.8 355 Special industry machinery...................................................................... 1.6
© Jakki Mohr, 2001
Level 1 Industries (Cont) Technology-Intensive
© Jakki Mohr, 2001
Level II Industries: Technology Moderate
© Jakki Mohr, 2001
Shortcomings to the classification approach: Some industries are R&D intensive (i.e.,
high-tech), but new products are not revolutionary Ex: Cigarettes
May exclude industries who are technology-driven Ex: Textiles production
Some industries with standardized output produced in mass quantities Ex: Some computing equipment
© Jakki Mohr, 2001
Definitions of Technology: Common, Underlying Characteristics
Market Uncertainty Technological Uncertainty Competitive Volatility Other Characteristics
© Jakki Mohr, 2001
Market Uncertainty: ambiguity about the type and extent of customer needs that can be satisfied by a particular technology
Consumer fear, uncertainty and doubt (FUD)
Customer needs change rapidly and unpredictably
Customer anxiety over the lack of standards and dominant design
Uncertainty over the pace of adoption Uncertainty over/inability to forecast
market size
© Jakki Mohr, 2001
Technology Uncertainty: not knowing whether the technology or the company can deliver on its promise
Uncertainty over whether the new innovation will function as promised
Uncertainty over timetable for new product development
Ambiguity over whether the supplier will be able to fix customer problems with the technology
Concerns over unanticipated/unintended consequences
Concerns over obsolescence
© Jakki Mohr, 2001
Competitive Volatility: changes in competitors, offerings, strategies
Uncertainty over who will be future competitors
Uncertainty over “the rules of the game” (i.e., competitive strategies and tactics)
Uncertainty over “product form” competition competition between product classes vs.
between different brands of the same product Implication: Creative destruction
© Jakki Mohr, 2001
Market Uncertainty
Technological Uncertainty
Competitive Volatility
Marketing of High-Technology
Products & Innovations
Characterizing the High-Tech Environment
© Jakki Mohr, 2001
Other Characteristics Common to High-Tech Markets:
“Unit-one” costs: when the cost of producing the first unit is very high relative to the costs of reproduction Ex: development vs. reproduction of software
Demand-side increasing returns: When the value of the product increases as more people adopt it Also called network externalities and
bandwagon effects Ex: portals on the Internet Implications: may give away products for free
© Jakki Mohr, 2001
Other Characteristics Common to High-Tech Markets: (Cont.)
Tradeability problems arise because it is difficult to value the know-how which forms the basis of the underlying technology
Ex: How much to charge for licensing the rights to a waste-eating microbe?
Knowledge spillover: Another type of externality that arises from the fact that technological developments in one domain spur new developments and innovations in other areas.
Ex: Human Genome Project
© Jakki Mohr, 2001
Supply Chain for Auto Industry
Suppliers Car Manufacturers Car Dealers Customers
-raw materials-components-production equipment-services
-personal consumption
-business use (fleets, etc.)
© Jakki Mohr, 2001
A Supply Chain Perspective on Technology
Often, technological innovations occur at upstream (i.e., supplier) levels in the supply chain
Such innovations may radically affect the manufacturing process or the inner workings of a product, but
End-user behavior may not be significantly affected
Examples: cars, food, computing, hair styling, Internet
© Jakki Mohr, 2001
Continuum of Innovations
Incremental Radical
Extension of existing product or process Product characteristics well- defined Competitive advantage on low cost production Often developed in response to specific market need "Demand-side" market
New technology creates new market R&D invention in the lab Superior functional performance over "old" technology Specific market opportunity or need of only secondary concern "Supply-side" market
© Jakki Mohr, 2001
Supplier vs. Customer Perceptions of Nature of Innovation
Mismatch: Delusion
Incremental
Breakthrough
Mismatch: Shadow
© Jakki Mohr, 2001
Contingency Theory
Type of marketing strategy is contingent upon the nature of the innovation.
Marketing Strategy
New Product Success
Type of Innovation -Breakthrough -Incremental
© Jakki Mohr, 2001
Examples of Implications of Contingency Theory:
R&D/Marketing Interaction
R&D leads; “technology push”
Marketing leads; “customer pull”
Type of Marketing Research
Lead users; empathic design
Surveys; focus groups
Role of Advertising
Primary demand; customer education
Selective demand; build image
Pricing May be premium
More competitive
Breakthrough Incremental
© Jakki Mohr, 2001
Framework for High-Tech Marketing Decisions
Marketing – 4Ps and the Internet (Ch. 7-11)
High-Tech Firm Internal Considerations (Ch. 2, 3, 4) Core Competencies/Core Rigidities Funding Considerations Market Orientation Relationship Marketing R&D/Marketing Interactions Planning Process (Ch. 12)
Customers Understanding Customers (Ch. 5,6) High-tech Research Forecasting Customer Decision-Making Adoption Diffusion of Innovations Target Marketing
Societal, Ethical, and Regulatory Concerns (Ch.12)
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