Marketing of High-Technology Products and Innovations [Hardcover]

"The highlights and comments from business executives and other sources were especially insightful." — Ashok Gupta, Ohio State University

"Clearly the most effective academic book on the market for teaching marketing strategies that are unique to organizations that are substantially impacted by technology." — Jim Simpson, University of Alabama Huntsville

"Path breaking, practical, and up-to-date. Squarely aimed at the engineer-marketer in the trenches." — Edward E. Rigdon, Georgia State University

"Provides excellent examples and cases which illustrates concepts and theories in the text." — Raj Rakhra, University of Washington Business School

"A very good book with a tremendous depth of reference." — Dan Maher, ACT Venture Capital

With this revised edition of the Marketing of High-Technology Products and Innovations, we invite you to consider the following ways in which the last three years have witnessed enormous changes in the technology arena:

• The economy has gone from one that characterized technology as a panacea, the driver of the economic engine, to a major source of the economic downturn in 2000-2002.
• Organizations and enterprise customers have tightened their enthusiasm for tech spending, monitoring more carefully the returns from investments in technology. In the area of consumer electronics and technology, the pace of innovation that offers a multiplicity of new products for customers continues unabated.
• In the Internet arena, businesses have more widely adopted electronic business technologies, designed to streamline business processes for enhanced effectiveness and efficiency.
• Companies and retailers are moving to harmonized distribution channels, offering customers bricks-and-clicks-models for a seamless shopping experience via a multitude of channel choices.
• Consumers continue to use the Internet for a wide array of activities, including searching for information, shopping, and joining virtual communities. The wider adoption of broadband technologies has allowed the sharing of more data, file-swapping of music, downloading of videos. Other bandwidth-intensive activities have also brought about a concomitant need to examine intellectual property rules, digital piracy, and legitimate use.

These are but a few of the many changes the technology arena has witnessed during the three years since the first edition of Marketing of High-Technology Products and Innovations was released. Our intent with this revised edition is to continue the development and synthesis of decision frameworks and strategies that reflect best practices in the area of high-technology marketing. This edition offers a cutting-edge treatment of research and practice related to the marketing of technology and innovations, supported with a plethora of examples and applications.

Thriving in the high-tech marketplace requires mastery of a diverse set of skills and capabilities. From adroitly reading market trends; investing wisely in future technologies; leveraging the skills and capabilities of technical and marketing personnel in a dynamic, interactive fashion; understanding customers intimately; offering a compelling value proposition; developing astute marketing campaigns; pricing with an eye to customer value; and harmonizing distribution channels and supply chains, high-tech marketing managers must be versatile, yet focused, flexible yet determined, tenacious yet open-minded.

In light of this complicated and challenging environment, we offer a systematic, thorough overview of the issues high-tech marketers must address. More specifically, based on feedback and reviews of the first edition, this second edition:

• Offers more in-depth treatment to the topical coverage in the chapters.
• Brings more examples to the book.
• Streamlines the presentation of the material.
• Updates the material to reflect new developments both in the area of high technology marketing research and practice (for example, in the area of micro payments and subscription pricing), as well as new technological developments.
• Adds coverage of under-developed areas in the first edition, such as the marketing of high-technology services.

Importantly, the addition of Sanjit Sengupta of San Francisco State University and Stan Slater of Colorado State University as new co-authors on this edition brings new expertise and perspectives. Their biographies appear at the conclusion of this preface; in brief, Professor Sengupta brings experience in e-business and executive education in high-tech marketing, and Professor Slater brings an extensive background in business strategy and market orientation.

As in the first edition, our primary aim is to show how marketing strategies must be modified and adapted for the high-tech environment. Marketing high-technology products and innovations is not the same as marketing more traditional products and services. For example, the marketing of a familiar product, say Coca-Cola, is very different from marketing products with which customers may be unfamiliar, say, new computer hardware or software such as a Pentium chip, customer relationship management software, or even a new computer video game. Customers' fear, uncertainty, and doubt about how to use and attain the full benefits of using the product contribute to the need for different marketing considerations. In addition, the competitive environment found in high-tech industries is different from that found in more traditional contexts: Innovations are often introduced by industry outsiders that industry incumbents are not aware of. Another factor contributing to high-tech marketing challenges is the velocity of change. Due to technological breakthroughs, products change so rapidly that standard marketing concepts may not be sufficient.

While a standard approach to marketing, such as the "4 Ps" of marketing (product, price, place, and promotion) is still relevant, the standard approach must be modified to account for the inherent uncertainty in high-tech environments. Using a framework to manage the marketing decision-making process fosters greater understanding of the common characteristics in high-tech environments, and helps manage the risk of marketing in a high-tech context.

This revised edition of the Marketing of High-Technology Products and Innovations is organized into twelve chapters. Although the material and concepts in each chapter are treated rather distinctly, much of the material, by its very nature, is interrelated and requires consideration from a multiplicity of angles. As a result, concepts are cross-referenced with treatment in other chapters. For example, the material on strategy development in high-technology organizations (Chapter 2) is part and parcel of the product development and management chapter (Chapter 7). Similarly, the discussion of customer relationship management, introduced in Chapter 3, is linked explicitly to pricing strategies (Chapter 9) and advertising and promotion strategies (Chapter 10) as well. This approach at thematic coverage of the underlying drivers of high-tech marketing strategy offers a more comprehensive view of how these issues play themselves out in the different areas of the marketing toolkit.

More specifically:

• Chapter 1 provides an overview of the high-technology environment and its key characteristics. Special attention in this edition is given to the issue of network externalities and the need to develop industry standards. Chapter 1 also introduces the notion that high-tech marketing strategies should be tailored to the type of innovation (incremental or radical). This notion of the contingent effects of the type of innovation on marketing strategies is carried through subsequent chapters.
• Chapter 2 addresses strategy and corporate culture in the high-tech firm. First, it presents the strategic planning process in high-tech companies; in particular, it focuses on the need to develop competitive advantage and how to do so. The second part of this chapter focuses on culture and climate in innovative companies, noting the forces that can lead established companies to become complacent (i.e., the innovator's dilemma), and the characteristics of companies that overcome such forces—characteristics such as creative destruction, corporate imagination, "unlearning," and reliance on product champions. The final section in this chapter addresses challenges for small high-tech startups, including the vexing problem of resources, as well as ways to leverage their unique strengths.
• Chapter 3 recognizes the vital role that partnerships and alliances play in effective high-tech strategies. Special attention is given in the second half of this chapter to customer relationships. This material has been strengthened with the addition of recent research linking customer loyalty to company profitability.
• Chapter 4 covers the domain of market orientation, a particularly important consideration for high-tech firms, yet a skill or mindset that is particularly difficult to implement in technology-driven organizations. The second half of this chapter addresses the difficult dynamic between R&D and marketing personnel. The incorporation of best practices and cutting-edge research offer insights to manage this important dynamic.
• Chapter 5 presents an overview of the research tools high-tech marketers can use to gather information about their customers. Concept testing, conjoint analysis, customer visit programs, empathic design, lead users, quality function deployment, prototype testing, and beta testing are covered, with examples provided for the types of insights each can offer. This chapter concludes with sections on gathering competitive intelligence and forecasting customer demand for high-tech products.
• Chapter 6 addresses a particularly challenging aspect of high-tech marketing: understanding customer behavior, including customer decision making for high-tech products, and how marketing to early adopters must be different than marketing to late adopters. This chapter draws heavily on the work of Everett Rogers (Diffusion of Innovations) and Geoffrey Moore (Crossing the Chasm and Inside the Tornado). The market segmentation process is reviewed. Finally, ways in which high-tech marketers can manage customers' migration decisions (in moving to subsequent generations of new technology) wrap up the final section of this chapter.

Chapters 7 through 10 provide coverage of the 4 Ps of marketing: product, place, price, and promotion:

• Chapter 7 presents the framework of a technology map to guide product development. Pertinent considerations include decisions about technology transfer and licensing, product modularity, platforms and derivatives, and protection of intellectual property. This chapter has been strengthened with the addition of material on new product development teams, as well as the intersection of technology and services and the marketing issues surrounding that intersection.
• Chapter 8 provides a framework for making distribution decisions. Focus is given to the use of the Internet as a distribution channel and the need to manage the transition, resulting conflict with existing channels, and how to harmonize/integrate across channels. The final section of this chapter navigates the complex world of supply chain management for high-tech products.
• Chapter 9 provides a framework for pricing decisions, with heavy emphasis on customer-oriented pricing. Moreover, in light of the rapid price declines in many high-tech industries, focused attention is given to strategies used to generate profits in light of the "technology paradox" (how to make money when the price of product is declining rapidly). New sections related to the pricing of after-sales services, moving from "free to fee," and price bundling offer new insights in this revised edition.
• Chapter 10 emphasizes the importance of using advertising and promotion tools to develop a strong brand name (as one mechanism to allay customer anxiety), the need to manage product preannouncements, and communication tools used in managing customer relationships. This chapter now includes material on using the Internet for advertising and promotion (covered in the prior edition in Chapter 11).
• Chapter 11 provides a focused lens on electronic business and e-commerce. It provides the context for e-business and e-commerce by providing brief highlights of the past three years. Key take-aways in terms of success factors and barriers to online success are highlighted. The chapter is organized into sections related to the Internet and Consumers and the Internet and Business Customers. New material related to Web services and other new Internet technologies are covered in this revision.
• Chapter 12 concludes with consideration of snafus and other concerns that can inhibit the ability of a new innovation to realize its potential. Issues include unintended consequences of technology, the paradoxes customers face in adopting and using technology, ethical controversies arising from technological advances, social responsibility of business in technology arenas, and government regulation. Updated coverage of digital piracy, the digital divide, and other timely issues reflect recent trends in this area.

Marketing does not occur in isolation in any firm, but rather, it is cross-functional in nature. This book brings marketing together with other business disciplines (for example, research and development, legal, and management and strategy) to offer insights on how marketing is interrelated and dependent upon interactions with other disciplines. Issues for both small and large businesses are addressed. The book provides a balance between conceptual discussions and examples, startup and established business, products and services, and consumer and business-to-business marketing contexts. Using examples from a wide variety of industries and technologies to illustrate the marketing tools and concepts covered in the book not only captures the richness of the high-tech environment, but also proves the utility of the frameworks presented; the variety also gives the reader experience in applying the frameworks to diverse situations. Some of the industries and contexts covered include telecommunications, information technology (hardware and software), biotechnology, and consumer electronics such as high-density TV and digital video disks.

The following special features bring the material in each chapter to life:

• Opening Vignette: Each chapter begins with an opening vignette, highlighting a particular company and how it has grappled with the issues in the coming chapter. The intent is to demonstrate the relevance of the chapter material and to provide a real-world example to facilitate understanding.
• Technology Expert's View from the Trenches: Each chapter has one or two technology experts sharing their views about specific issues pertinent to the chapter. These are insights from people working in the field in a variety of high-tech positions. For example, Judy Mohr, Patent Attorney, offers her insights in the section on intellectual property in the product management chapter; Tami Syverson, former Competitive Intelligence Analyst at Sun Microsystems, offers her insights in the market research chapter. Other experts include Wade Sikkink, Supply Chain Manager at Intel; Darlene Solomon, Vice President and Director of Agilent Labs (Agilent Technologies), Daria Schuster, Director of Pricing Strategy at IBM, and Eric Zarakov, Vice President of Marketing, Foveon Corporation.
• Technology Tidbits: Each chapter has a one- to two-paragraph summary about cool, cutting-edge technology of which the reader may be unaware, just to stimulate thoughts and knowledge about radical innovations coming down the pike. This material could provide an extemporaneous application of class concepts for the adventurous, motivated reader.
• End-of Chapter Discussion Questions: The Discussion Questions at the end of each chapter are designed to assess the reader's knowledge of the material covered, offer additional opportunities to apply the chapter's concepts, and allow students to generate additional insights about the concepts.