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

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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

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Drawbacks to Technology Impact on Economy Volatile Relies on constant stream of

innovation Dot-com crashes Stock market effects Global effects

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Definitions of “High-Tech” Government perspective “Common underlying

characteristics” perspective

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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

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Level II Industries: Technology Moderate

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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

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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

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Supply Chain for Auto Industry

Suppliers Car Manufacturers Car Dealers Customers

-raw materials-components-production equipment-services

-personal consumption

-business use (fleets, etc.)

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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

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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

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Supplier vs. Customer Perceptions of Nature of Innovation

Mismatch: Delusion

Incremental

Breakthrough

Mismatch: Shadow

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Contingency Theory

Type of marketing strategy is contingent upon the nature of the innovation.

Marketing Strategy

New Product Success

Type of Innovation -Breakthrough -Incremental

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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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