chapter 7: understanding high-tech customers. what is meant by “design” and “design...
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Chapter 7: Understanding
High-Tech Customers
What is meant by “design” and “design thinking?”
How do marketing strategies compare amongst individuals in different adoption categories?
What does “the chasm” represent? How can a firm get across?
©2010 Pearson Education, Inc. publishing as Prentice Hall
© 2010 Pearson Education, Inc. publishing as Prentice Hall
Stem from a solid understanding of the how/why of customer decisions ◦ERP example
Marketing must be tailored to address at least 6 issues (see next slide)
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Steps in the
Purchase Process
Segmentation,
Targeting, and
Positioning
Timing of
Upgrades and
Migration
Consumers’
Paradoxical
Relationships
with Technology
Process of
Adoption and Diffusion
- Factors Affecting Adoption
- Categories of Adopters
Crossing
the Chasm
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ProblemRecognition
InformationSearch
EvaluateAlternatives
Purchase Decision
Post-purchaseEvaluation
To better understand behavior of potential buyers, begin with a basic behavior model
1. 2. 3. 4. 5.
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1. Problem Recognition
Buyer recognizes a need◦ Problem◦ Opportunity
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2. Information Search
Buyer actively searches for resolution◦ Personal, commercial, public, experiential sources◦ Trade shows
(see box 7-1 for additional insights)
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3. Evaluate Alternatives
Buyers may experience anxiety and uncertainty◦ Vital to understand factors affecting the customers’
product evaluation
(see research techniques in previous chapter)
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3. Evaluate Alternatives (cont.)
Design: the conscious effort to combine functionality and aesthetics◦Huge part of customer evaluation◦ “Cool” factor◦ Business case- increased company value◦ Incorporating sustainability
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Human
Factors
Business
Factors
Technology
Factors
DesignDesign
ThinkinThinkingg
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3. Evaluate Alternatives (cont.)
Design thinking
◦Analysis brainstorming rapid prototyping final solution
◦How human beings interact with products and their environment
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4. Purchase Decision
Terms of purchase◦Scope◦Price◦Payment terms◦Delivery
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5. Post-Purchase Evaluation
How well does product live up to its potential?
Issue: buyer’s remorse End-of-life issues of high-tech products
Valuable to marketers: post-adoption usage patterns
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Factors Affecting Customer Purchase Decision
Relative advantageThe benefits of adopting the new technology compared to the costs and in relation to other alternatives
CompatibilityThe extent to which adopting and using the innovation is based on existing ways of doing things and standard cultural norms
Complexity The difficulty involved in using the new product
TrialabilityThe extent to which a new product can be tried on a limited basis
Ability to Communicate Product Benefits
The ease and clarity with which the benefits of owning and using the new product can be communicated to prospective customers
ObservabilityThe extent that benefits of the new product are visible to everyone
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Innovators
Technology Enthusiasts
Early Adopters
Visionaries
Late Majority
Conservatives
Early Majority
Pragmatists
Laggards
Skeptics
{ { { { {
TheChasm
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Innovators: Technology Enthusiasts
Motivated by idea of being a change agent Develop make-shift solutions Willing to alpha/beta test and work with
technical personnel Tolerant of initial problems First customers (not typical customers) Importance: They are the gatekeeper to the next
group of adopters
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Early Adopters: Visionaries Want to revolutionize competitive rules in their
industry Attracted by high-risk/high-reward projects Not necessarily price sensitive Demand customized solutions, intensive tech
support Product form competition (between categories of
solutions) Communicate horizontally- across industry boundaries
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Early Majority: Pragmatists Comfortable with only evolutionary changes in
business practices Averse to disruptions in operations Want proven applications, reliable
service/results Buy only with a reference from trusted
colleague ◦ in same industry◦ catch-22
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Late Majority: Conservatives
Risk averse, technology shy Very price sensitive Require completely preassembled,
“bulletproof” solutions Motivated only by need to keep up with
competitors in their industry Rely on single, trusted advisor
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Laggards: Skeptics
Want to maintain status quo Technology is a hindrance to operations
◦ Luddites Buy only if all other alternatives worse
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Target Innovators or Majority?
Target the majority when: ◦ Word of mouth effects are low◦ Consumer products industries (vs. B2B)◦ Low ratio of innovators to majority users◦ Profit margins decline slowly with time◦ Long time period for market acceptance
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What is “THE CHASM”?
Present in high-tech environments
Gap between early market and mainstream market—◦ Visionaries vs. Pragmatists
Visionary market is saturated, and mainstream not yet ready to buy
Marketing that was successful with visionaries simply is not effective with pragmatists
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Visionaries◦Adventurous◦Think/spend big ◦Want to be first in
implementing new ideas in their industries
◦Think pragmatists are pedestrian
Pragmatists◦Prudent; stay within
zone of “reasonable,” and within budget
◦Make slow, steady progress
◦Think visionaries are dangerous
These two groups want no part of each other!
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High level of customized tech support costly
◦ Initial revenue is low
Products sometimes released too early
Firm’s goal: Establish reputation
Exciting time!
◦ Engineering drives, brilliance is rewarded.
◦ Focus on developing the best possible solution
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Firm takes on more visionaries than it can handle Pragmatists are not yet ready to buy
◦ Visionaries are not a credible resource
Early market becomes saturated◦ Revenue growth tapers off or declines
Key personnel become disillusioned
Venture capital well begins to runs dry
Goal: get out of the chasm ASAP!
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Marketing strategies that lead to success in selling to visionaries hinder success in selling to pragmatists
Look to new strategies necessary to reach the mainstream market
1.Identify a beachhead2.Develop a whole product solution
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1.Identify a beachhead: a single target market from which to pursue the mainstream market
A good beachhead:a) Gives customers a compelling reason to buy based on
the firm’s capabilities (see table 7-2)
b) Provides “adjacencies” to enter related segments Bowling Alley Analogy (see next slide)
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App 1
App 1
App 1
App 3App 2
App 2
Seg 1
Seg 2 Seg 1
Seg 1
Seg 3
Seg 2 WholeProduct
CustomerReferences
The Beachhead
b) Bowling Alley Market Development
1. Identify a beachhead
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1. Word of mouth relationship should exist between adjacent market segments
2. Quickly capture the beachhead 3. Risks:
Focus on one segment could lead to being outflanked by competitors
- Pursuing too many segments at outset without enough resources
1. Identify a beachhead
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2. Develop the Whole Product Complete, end-to-end solution Defined within confines of a specific target
market
Adjacencies are also determined by similarities in whole product needs.
Pragmatist market requires vendor responsibility for system integration
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2. Develop the Whole Product (cont.)
Utilizing Partnerships◦ Advantages:
Each player provides a part of the whole product solution
Partners may drive further expansion
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2. Develop the Whole Product (cont.)
Utilizing Partnerships◦ Risks:
Issue of PowerVisionaries technology providersChasm company with “best” beachhead,
whole product designPragmatists market leaders (and partners)
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Other Strategies…◦ Reputation already established, now focus on
growing revenue
Pragmatists need◦ An industry standard◦ Competitor’s proposal and product
Brand competition◦ Simplified, best solution possible◦ Superb customer services
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Innovators
Technology Enthusiasts
Early Adopters
Visionaries
Late Majority
Conservatives
Early Majority
Pragmatists
Laggards
Skeptics
{ { { { {
TheChasm
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© 2010 Pearson Education, Inc. publishing as Prentice Hall
© 2010 Pearson Education, Inc. publishing as Prentice Hall
GorillaChimp 1Chimp 2Monkeys
Gorilla: the dominant, post-tornado competitorChimps : typically, there are two other major competitorsMonkeys: the rest of the market is accounted for by numerous niche competitors
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Market to Conservatives
◦Make product simpler, cheaper, more reliable & convenient
◦This is not the time to add “wow” factors
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The whole product is the critical success factor
Until a high-tech firm has established itself in the mainstream market, it has not proven itself.
To manage the mainstream market effectively, firm must work with partners in a disciplined fashion (that prioritizes partners)
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Identify group(s) of customers who share similar needs & buyer behavior characteristics
4 Steps in the Segmentation Process
1.Divide the market into groups
2.Profile the customers in each segment
3.Evaluate and select a target market
4.Position the product within the segment
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1. Divide market into groups based on common characteristics
◦ Demographics § Role of women
Expect high level of customer service, user-friendly design Gender differences in shopping experience
◦ Geographics ◦ Psychographics (values and lifestyles)◦ Behavioral Variables
Usage Volume Benefits Sought Usage Occasion
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1. Divide market into groups based on common characteristics (cont.)
◦ B2B Industry codes Firm size Corporate culture
Vertical vs.Horizontal - industry specific - cuts across industry boundaries- different value - common approach among propositions customers
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2. Profile (describe) the “typical” customers in each segment
Segmentation of US ICT Users
Tier Segment% of US Adults
Elite Tech Users
Omnivores, Connectors, Lackluster Veterans, Productivity Enhancers
31
Middle-of-the-Road Tech Users
Mobile Centrics, Connected But Hassled
20
Few Tech Assets
Inexperienced Experimenters, Light But Satisfied, Indifferents
49
(see Table 7-4 for complete list)
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3. Evaluate and Select Target Market
◦Size of segment in terms of sales volume 80-20 rule
◦Growth rate of the segment Capture new customers, grow with the market
◦Competition within the segment Competitor defense of their existing customer base
◦Capabilities of firm to serve segment needs Partnering, core competencies
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4. Positioning the product within the segment
◦Consider customer perceptions
◦Position relative to perceived competition
◦Position on important, compelling attributes/benefits
Positioning strategy: Multi-Attribute Model: reveals relative importance
of attributes (see example on next slide)
Perceptual maps
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4. Positioning the product within the segment (cont.)
Illustration: Multi-Attribute ModelCompetitor
Attributes (Importance)
My Company
#1 #2
Scalability (8) 10 5 5
Security (6) 3 5 7
Ease of Use (7)
3 6 8
Total Score 119 112 131
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4. Positioning the product within the segment (cont.)
Perceptual Map for Smart Phones
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Basic Issue: Adopting newest generations of technology prior investments obsolete
Marketing implication: Firms must manage
a migration path for customers to the new generation
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What affects a customer’s decision to migrate?
◦Expectations about pace and magnitude of improvements relative to price
◦In general:The greater the anticipated product improvements and/or expected price declines, the greater the customer’s propensity to delay purchase
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High-tech firms must provide upgrades
Utilize a “migration path” ◦series of upgrades◦helps transition the customer
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Withdraw older generation immediately
Sell old & new generations
No migration assistance
Offer migration assistance
Sell simultaneously for brief periods
Indefinitely
CUSTOMER OPTIONS:
Constrained Enlarged
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When customers expect a rapid pace in technology advancement:
◦They will be willing to wait for price declines
◦Migration assistance (i.e., trade-ins, etc.) mitigates against customer stalling and leapfrogging
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When customers expect significant magnitude of improvement
◦They realize smooth upgrading is unlikely
◦Waiting for price declines may result in purchasing an obsolete product
◦Migration path is less crucial
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When customers have uncertainty about expectations:
◦Migration path makes sense
◦Sell old and new simultaneously
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Control
Chaos
Freedom
Enslavement
New
Obsolete
Intelligence
Stupidity
Efficiency
Inefficiency
Fulfilling Needs
Creating Needs
Assimilation
Isolation
Engagement
Disengagement
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Marketers must understand how customers cope with presence of paradoxical effects ◦Ex: Limits on computer usage◦Ways to lessen impacts via holistic activities◦Luddite movement
Marketers should not be blinded by their own enthusiasm for technology
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Understand consumers’ fears
Focus on positive benefits (without disregarding negative effects)◦ Educated trade-offs
Astute marketing via consumer education, labeling, and so forth
Be Proactive!
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Opening Vignette: RFID Chips
Technology Expert: Panasonic Mobile (Japan)
Technology Solution: Manila Water
End-of-Book Case: TiVo, ESRI, Goomzee
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