Principles of Hi-Tech Marketing (1) Overview This lecture deals with the principles on which hi-tech marketing is based. It explores the major issues and strategies involved in marketing a hi-tech product and how these affect the marketing communication effort. ACQUIRED KNOWLEDGE AND SKILLS By the end of the lecture, you should be able to do the following: • Understand the concept of a hi-tech market. • Understand the concept of Positioning. • Create a position for a hi-tech product. • Write a position statement for a hi-tech product. Marketing WHAT'S A MARKET? A market is sometimes described as a product or group of products intended for sale to buyers within a particular geographical area. Alternatively, markets are sometimes defined with respect to a given group of buyers such as teenageers women, English speakers, etc. WHAT’S A HI-TECH MARKET? While markets for low tech products such as soft drinks or clothes, depend on factors such as age, geographical location, gender, cultural influences, popular trends, etc., hi-tech markets are more a function of common technical background, business responsibilities, and experiences and interests. Thus, a hi-tech market is normally not influenced by geography. For example, a market may consist of VLSI engineers (chip designers – don’t worry about understanding what VLSI means, we’ll come to © Copyright YEDA School 2 that in the Technology lectures) regardless of whether they reside in Japan, the U.S., or Israel – since they all have the same kind of education and training, and share common professional concerns, they constitute a single hi-tech market. Who Buys Hi-Tech Products? Although we all benefit from hi-tech products, when we speak of a hi-tech market, we are usually referring to people in organizations rather than isolated individuals. For example, most Israeli hi-tech products consist of software, data communications systems, security systems, medical systems, etc. that are used by other businesses and organizations (banks, hospitals, corporations, factories, the military, etc.). The idea of a hi-tech system is to increase the efficiency of those organizations and allow them to perform their tasks in a way that allows them to cut costs and surpass their competition. This is an important point to remember when thinking about how we will “pitch” a hi-tech product and we will come back to it again in more detail later when we deal with developing messages. Referencing – The Key to Understanding Hi-Tech Markets The key to understanding hi-tech markets is understanding how their members make the decision to buy a hi-tech product. Investing in a hi-tech system is often an enormous risk for a business. It is not only the price of the system – that is relatively minor compared to whether it will actually work or not. If the system does not live up to expectations it may lead to inefficiencies that cause the business to lose its competitive edge and actually lose part of its customer base. For example, a poor Customer Relationship Management system might lead to irate customers leaving for a more sympathetic company. Added to the cost of the product, and the risk of its not living up to expectations, is the problem of training personnel how to use the new system. This may involve countless hours and a great deal of resources. In general, then, before investing in a hi-tech system, companies want to make sure that they get a “Return On Investment” (ROI). They want to at least have some evidence that the investment in the product, training, etc. will produce results. ROI © Copyright YEDA School 3 Therefore, before buyers purchase a hi-tech system, they, reference others, i.e. they rely on the recommendations and referrals of others that have common interests. Thus one way to define a hi-tech market is a group of individuals with common interests, training, and education, that reference each other when making the decision to buy a hi-tech system. Exercise 1: Identifying Markets Identify markets for the following: Customer Relationship Management System Excel spreadsheet FrameMaker Positioning POSITIONING A PRODUCT People look at things in pre-conceived categories. These categories influence our buying patterns -in fact, they are the major determinants in getting us to choose one product over another. For example, when you think of a "trip to the Bahamas" you think of sun, fun, relaxation, etc. You probably have never actually been there, or spoken to anyone who has been there, but the image is there in your mind just the same. To successfully market a product or new technology, you have to create a category for it, and an image of this category in the prospect's mind. For example, the cellular phone was originally placed in the category of "necessary business tool". Every business executive "had to have" a cellular phone. Whether or not the cellular phone was actually a business necessity, it eventually was perceived as such, and that is all we are concerned about. Or, a Tag watch may not actually keep time any better than a Casio, but it has positioned itself in the prospects' mind as a "perfect" timepiece -its high price actually enhances the image and makes it more marketable. If Tag were to lower its prices to that of a low priced Casio watch, the quality image would fade and so would its market. The categories that people carry around in their heads in which they view products are called "positions". Creating a position A more accurate definition of hiteec market. © Copyright YEDA School 4 for a product is called "positioning". Marketing a product means creating a position for the product in a prospect's mind. For example, it is apparent that the cellular phone in Israel has been repositioned as a household instrument rather than as only a business necessity. But, when it first appeared, positioning it as a household item would probably not have worked -it was too unfamiliar, too expensive, etc. Instead it was positioned as something that every modern business needed. Exercise 2: Understanding Positioning What positions do the following products occupy in your mind? MacDonalds Coca Cola Macintosh CREATING A POSITION To create a position for a product, you have to find some feature (characteristic) that sets it apart from others. The special feature may not necessarily be the first or the best, but it should be the first that has ever been positioned that way. For example, you may manufacture a small, cheap car that, in fact, may not be any smaller or cheaper than a dozen others on the market. However, if you are the first to decide to position it as a "small car" and add to this the idea that "small is better" you have a unique position for your product -that's what Volkswagen did in the '60's. Some Guidelines for Successful Positioning 1. Be the first in the position. Once you are perceived as the "company who makes the photocopy machines" (Xerox), it is difficult for anyone else to move into your position. In general, most people reserve a position (in their minds) for only one or two companies. For example, if I say "printer", you probably will think "HP, Canon". Yet there are dozens of other printers on the market which you won't think about at all. 2. Position yourself as a leader. Once you have established yourself as the first in a position, you must keep yourself there by emphasizing that you are the leader. This doesn't © Copyright YEDA School 5 mean advertising that you are "no. 1", since a slogan like that makes people suspect that you're worried about maintaining your position (i.e., there must be a number 2 around the corner). Rather, the psychology is more like, "HP stands for printers. How could you possibly entertain a foolish idea like buying a printer from someone else!" If your product is not first in the position, then you're in trouble -for example, who was the first person to fly across the Atlantic? Now, who was the second? Who was the first prime minister of Israel? Who was the second? Etc. 3. Reposition the competition. Here you establish yourself by destroying or altering the competition's position. If the competition makes big, beautiful, expensive cars, you can try to reposition him as producing machines that pollute the air, that take up too much space in town, that are difficult to maneauver in traffic and that are basically a thing of the past -a dinosaur for a past age. 4. Create a unique category and a Brand Name. There is no problem in competing with others in the marketplace -as long as you make sure to think up a unique position and a brand name to go with it. This does not mean that your product has to actually be unique -it could be identical to the competition's -but it should occupy a unique position. So, for instance, if you are going up against competition that has established itself as, "the most powerful word processor on the market", don't position your new text editor the same way, even if it is more powerful than the competition's. Instead, perhaps you want to say, "at last -a word processor that everyone can use.", or "the powerful word processor for those who hate computers." (This would, of course, only make sense if you knew that your competitor's product is difficult to use or requires a lot of training to be effective.) The bottom line is that, without a unique position, your product, no matter how good, doesn't stand a very good chance. © Copyright YEDA School 6 Exercise 3: Creating a Position How would you position the following: YEDA School Yahoo Messenger POSITIONING A HI-TECH PRODUCT The idea behind positioning a hi-tech product is to create a category for it that makes it "easy to buy". That is, you should create a position for your product that makes it the best in its category -and you should make sure that the position is unique. Here are the stages for creating a position: 1. Give it a name and a product category. (Knowing in what category your product falls -or thinking of a new one -is not as easy as it sounds for hi-tech products. When you start working in hi-tech companies you will be amazed to find out that many companies are confused on this issue). 2. Decide on who will use the product and what for. 3. Define your competition and differentiate your product from it. Why is yours different? Why are you a better alternative? 4. Clarify the future of your product by making clear your company's commitment to continued investment in the product and its future development. No one will invest in an expensive hi-tech system if he thinks that it is just a passing fad with no future (i.e., would you invest in a car, if you knew that its production would be discontinued and that parts and service would be increasingly hard to obtain). You should be able to express the position for your product in about two sentences according to the following formula: For (target customer) who (statement of need or opportunity), the (product name) is a (product category) that (statement of key benefit -compelling reason to buy). Unlike (main competitive alternative) our product (statement of differentiation). Positioning Formula © Copyright YEDA School 7 Exercise 4: Write position statements for 2 hi-tech products (your choice). How do the statements help marketers market and sell their products?