Marketing of High-Technology Products and Innovations

Advertising and Promotion in

High-Tech Marketing:

Tools to Build and Maintain

Customer Relationships

Chapter Agenda

• The Advertising and Promotion Pyramid

• Branding Concerns in High-Tech Markets

• New Product PreAnnouncements

• Using Marketing Communications to Manage Customer Relationships

Main Concepts

• Brand awareness/Brand equity (will be explained in class)

• Advertising and promotion pyramid

• CPM

• Public Relation

• Publicity

• Strategies for Branding in High-Tech Environment

• Rational Branding

Main Concepts

• Ingredient Branding (Cobranding)

• Derived Demand

• Preannouncement

• Vaporware

• Database Marketing/One-to-one Marketing

• Categories of Customers

• Strategies for Customer Relationship Management

• CRM

Advertising and Promotion Pyramid

Salesperson

Telemarketing

Catalog Literature

and Manuals

Trade Shows, Seminars, Training

Direct Mail

Public Relations /Publicity

Media Advertising

Narrow Broad

Coverage of Target Audience (Reach)

Cos

t p

er C

onta

ct

HIGH

LOW

Media Advertising

• Select media vehicle– Audience overlaps with firm’s target market– Cost efficiency (CPM)– “Fit” of editorial climate with brand message – Size/Frequency of ads– SRDS, CMP Media, media kits

• Select message strategy– Break through clutter/gain attention– Reinforce brand message

Public Relations/Publicity

• Event sponsorship

• Charitable events/cause marketing

• Corporate advertising

• Press conferences, press releases

• Product announcements

Positive image is vital, yet hard to quantify

Direct Mail

• Effectiveness a function of: – List quality– Appropriate mailing size/frequency– Message strategy

Trade Shows

• To launch new products, reach sales prospects, compare competitor’s products

• Expense vs. return

• Attract traffic to booth

• Follow-up on leads

Catalogs, Literature, Brochures

• Build on earlier communications

• Showcase key benefits in terms of– Relative advantage– Compatibility– Scalability– Service/warranty– Total cost of ownership

Telemarketing

• Outbound

• Inbound– Way to manage customer relationships

efficiently

Personal Selling

• Effectiveness of this most expensive tool a function of foundation established by lower-level tools in the pyramid.

Premise of the pyramid: Use the more cost-efficient/wider-reach tools at the base of the pyramid to establish foundation with prospects and to more effectively leverage more expensive/narrower reach tools.

Internet

• Can be used at all levels of the pyramid

• Focused attention in Chapter 11

Branding in High-Tech Markets

• Advantages of strong brands to firms: – Command premium prices – Have credibility which can be leveraged in new

markets• Can lower customer acquisition costs

– Reduces risks with new product introductions

• Advantages of strong brands to customers:– Signal of a safe choice: trustworthy and long-lived– Decision-making heuristic

Branding in High-Tech Markets

• Short product life cycle and customer fear, uncertainty, and doubt put a premium on having strong brand names.

Strategies to Develop Strong Brands

• Supply steady stream of innovations that deliver value

• Emphasize traditional media advertising and PR tools rather than sales promotion

• “Influence the influencers” to credibly stimulate word-of-mouth via opinion leaders

Strategies to Develop Strong Brands (Cont.)

• Brand the company, platform, or idea (rather than the individual product)

• Rely on symbols and imagery to create brand personality

• Effectively manage all points of customer contact

• Work with partners in co-branding

• Effectively use the Internet

The Internet as a Branding Tool

• Use when Internet is part-and-parcel of the company’s value proposition

• Accounts for the “viewer’s” active role (vs. passive viewing)

• Focuses on the customer experience at the Web site – “Rational branding:” emotion + meaningful

experience

Branding Strategies for On-Line Companies

• Brands very important where switching is easy.

• Make customer experience meaningful

• Understand importance of speed and response time

• Deliver on their promise

Ingredient Branding

Suppliers OEM/Manufacturers Dealers Customers

-raw materials-components-production equipment-services

-personal consumption

-business use

Ingredient Branding

• Stimulates “derived demand”

• Rely on cooperative advertising

Pros/Cons of Ingredient Branding

PROS CONS

Supplier Create competitive advantage Costly Possible risk if OEM has product problem Conflict with large OEMs

Large OEM Erodes ability to differentiate Risk if supplier’s product has performance problems If doesn’t co-brand, consumers might question product Worry about supplier forward integrating

Small OEM Lends credibility to its product Gets advertising support

Pros/Cons of New Product Preannouncements

PROS CONS

Pioneering advantage: pre-empt competitors Cue competitors

Stimulate demand Cannibalize current products

Encourage customers to delay purchase Delays damage reputation or survival of firm

Help customers plan Confuse customers

Gain customer feedback Create internal conflict

Stimulate development of complementary products

Generate antitrust concerns

Provide access to distribution

Pursuit of leadership position

Tactical Considerations in PreAnnouncements

• Timing: – Function of the innovativeness, complexity,

customer buying considerations, timing of product design decisions

Timing of PreAnnouncements

• Use EARLIER preannouncements when: – Product complements are needed – Products are novel or complex (engender buyer

uncertainty) – Long buying process – High buyer switching costs

Timing of PreAnnouncements

• Use LATER preannouncements when: – Need to keep development information from

competitors– Product features not known till late in the product

development process – Want to minimize risks of cannibalization

• Time preannouncements to coincide with purchase cycle of customers

Tactical Considerations in PreAnnouncements

• Nature and Amount of Information– Reveal product attributes? – Reveal how product works? – Reveal how it compares to existing products? – Reveal pricing/delivery?

Tactical Considerations in PreAnnouncements

• Communication Vehicles – Trade shows – Advertisements – Press releases/press conferences

Tactical Considerations in PreAnnouncements

• Target audiences – Customers– Competitors– Distributors– Partners– Shareholders– Employees– Industry Experts

PreAnnouncements Useful When:

• Firm has low market dominance– Faces lower cannibalization risks– Faces fewer antitrust concerns

• Firm believes competitors not likely to respond– Ex: specialized technology/patent protection

• To advance the customer decision process– Product requires customer learning or customers

face switching costs

Avoid PreAnnouncements When

• Cannibalization might be high– Firm has strong portfolio of products– Customers would postpone current purchases

• Firm is large and might be accused of predatory intent

Customer Relationship Marketing

• Use database marketing to categorize customers on volume and profitability and/or on share of customer purchases and consumption level– Rely on customer relationship management

software

• Tailor marketing communications appropriately

Categories of Customers

• Low share of purchases/Low consumption in category– Absent compelling reason, avoid the customers– “The Strategic Power of Saying No”– Risk of alienating wrong customers

Categories of Customers (Cont.)

• High share of purchases/Low consumption in category– Reasonably profitable, but not compelling

– Sustain with occasional offers

• Low share of purchases/High consumption in category– Major opportunity

– Grow firm’s share of business

– Aggressive marketing

Categories of Customers (Cont.)

• High share of purchases/High consumption in category– Bread and butter customers – Attractive to competitors! – Don’t be complacent

Other Strategies for CRM

• Capture the customer

• Event oriented prospecting

• Extended organization

• Manage by wire

• Mass customization

• Yield management

CRM Software

• Front office software to: – Automate the sales force

• Track accounts and prospects

– Automate call centers• Create customer profiles

• Provide scripts

• Cross-sell

• Coordinate communication

CRM Software (Cont.)

• Analyze customer purchase history– Design targeted campaigns– Measure results

• Develop Web interface – Product catalog, shopping cart, credit-card

purchases– Web configurator, for custom products – Web analysis of cookies