Technological products can be classified by the application of new technologies in existing products in relatively mature markets. In this case the key issue is to identify existing applications where the technology has a cost or performance advantage.
The industrial marketing has a bias towards relatively low technology products, and has failed largely to take into account the nature of high technology products and their markets.
The first and most radical distinction to make is between a technology and a product. Technologies are typically concerned with developing devices, whereas potential customers buy products, which marketing must create from the devices. Developing a product is much more costly and difficult than developing a device. Devices that do not function or are difficult to manufacture are relatively easy to identify and correct compared to an incomplete product offering. A product may fail or be difficult to sell due to poor logistics and branding, or difficult to use because insufficient attention has been paid to customer training or support. Therefore separating a product on the basis of its function or the performance of component devices can be expensive and may result in failure.
For example, a personal computer (PC) is a product consisting of a large number of devices or sub-systems, including the basic hardware and accessories, operating system, application programs, languages, documentation, customer training, maintenance and support, advertising and brand development. Therefore a development in microprocessor technology, such as RISC (Reduced Instruction Set Computing) may improve product performance in certain circumstances but may be undermined by more significant factors such as lack of support for developers of software and therefore a shortage of suitable application software.
Therefore in the case of high technology products it is not sufficient to carry out a simple technical comparison of the performance of technological alternatives and conventional market segmentation is unlikely to reveal opportunities for substituting a new technology in existing applications. It is necessary to identify why a potential customer might look for an alternative to the existing solution. It may be because of lower costs, superior performance, greater reliability or simply fashion. In such cases there are two stages to identify potential applications and target customers; technical and behavioural.
Typically technical segmentation begins with a small group of potential users being interviewed to identify differences and similarities in their requirements. The aim is to identify a range of specific potential uses. Next, a behavioural segmentation is carried out to find three or four groups of customers with similar situations and behaviour. Finally, the technical and behavioural segments are combined to define specific groups of target customer and markets that can then be evaluated commercially.
Several features are unique to the marketing of high technology products, and affect buying behaviour.
Buyers’ perceptions of differences in technology affect buying behaviour. In general, where buyers believe technologies to be similar, they are likely to search for longer than when they believe there to be identifiable differences between technologies.
Organizational buyers may have strong relationships with their suppliers, which increases switching costs. In general the higher the supplier related switching costs, the lower the search effort, but the higher the compatibility related switching costs, the greater the search effort.
Services differ from manufactured goods in many ways, but the two characteristics that most influence innovation management are their intangibility and the interaction between production and consumption. The intangibility of most services makes differentiation more difficult as it is harder to identify and control attributes. The near simultaneous production and consumption of many service offerings blurs the distinction between process and product innovation and demands the integration of back and front end operations.
For example, in our study of 150 service firms in it was found that a strategy of rapid, reiterative redevelopment (‘RRR’) was associated with higher levels of new service development success and higher service quality. This approach to new service development combines many of the benefits of the extremes of radical and incremental innovation, but with lower costs and risks. This strategy is less disruptive to internal functional relationships than not properly spaced but more radical service innovations, and encourages knowledge reuse through the accumulation of numerous incremental innovations. For example, in 90s a travel company implemented a strategy of RRR. In the previous decade, the group had introduced only two new service products. In late 90s one of the functional heads of product development has created cross functional teams. They were established a formal development process adopted, and computer tools, including prototyping and simulation were deployed. Since then the group has developed and launched more new service offerings, and has become the market leader.