Lecture 4

Marketing (cont.)Jan 13, 2011

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What are some of the intrinsic problems in introducing a new product into a new

market from a new company with a new team?

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Marketing triangle for an established company

Company

Market

Technology

Risk is minimized by changing only one of the vertices

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Fundamental Problem of Initial Introduction of a New Product from a New Company

• How do you know what the “market needs”?

• Your Low Bandwidth requires High Focus- lots of targets, little resource

• Optimization- biggest bang for the buck

• Achieving “Customer intimacy”- understanding the customer

• Credibility- Why should anyone give you the time

• Counter to culture of attacking a big target- contrary to why you are doing this in the first place

High Wire ActBig decisions based on insufficient data

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But not no data!

Where do you start?

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Ben Shapiro Harvard Business School

“Because different customers have different needs, a marketer cannot effectively satisfy a wide range of them equally. The most important strategic decision is to choose the important customers. [To align priorities in a timely manner] Customer selection must involve all operating functions.”

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Market segmentation• Market “strategy”

– This product would be attractive to Teenagers. There are 25 M teenagers. All we need is 1% of the market to be successful

– Comment?What’s wrong with this?

people are differentwrong 1%competition and substitutesNo room for growth

–

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Segmentation• Consumer Markets can be characterized by Segment : Example:

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Segmentation• Consumer Markets can be characterized by segment including

– Demographic• Age• Sex• Ethnicity• Income• Occupation• Education• Household status• Geographic location

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Segmentation- continued

• Psychographic variables – Life-style– Activities– Interests– Opinions– Product use patterns– and product benefits.

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See Also• http://www.businessplans.org/Segment.html• http://en.wikipedia.org/wiki/Market_research• http://www.telesian.com/techlibrary/archive/po

sitioning.cfm

• Need to think through: What is the demographic for your product (if consumer)? What are the key companies in the market (if B toB)?

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Advantages of knowing segment

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The Technology Adoption Model as the Basis for Segment Focus

A measure of the rate of adoption of a cluster of new technologies by a community over time

Early Majority

Innovators

Rate

of A

dopt

ion

Laggards

Late Majority

Early Adopters

Time

Where are you on this curve?

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Consider adaptation of a new technology

• Age ?• Income ?• Geography?• Education ?• Sex ?

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Why should a customer adopt a new technology?

Early adopter?

Late majority?

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Can corporate customers be characterized in a similar way?

• Are there companies who are leaders• Are there companies who are followers?• What determines whether a company will be

aggressive in adopting a new technology?

Who are the leaders?

– Aviation– Computers Hardware– Computers software– Biotech– Energy– Medical devices

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Example: A new medical imaging methodology(MRI+)

“I love writing papers and Peer approval

“Can I build mypractice by doingbetter surgery?”

“Can I recover my Fees from insurer and keep my patients?

Top 100Teaching Institutions

Top 15 Luminary Medical Centers

Mass of US Hospitals

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Thus for medical imaging equipment (MRI, PET, Ultrasound, X-Ray etc.)

• GE Strategy– Target segment: a few luminary institutions– Presentation at large professional meetings and

Publication of results in peer-reviewed journals; – Sell to larger hospitals– Eventually reduce price, de-feature and sell to

smaller institutions– Globalize to Europe and Asia (typically lower cost)– Move to service model of installed base

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Use www/Library Data Base Sources to Determine:

• Major trends in technology, standards, regulations (Barriers and enablers)

• Drivers and barriers to growth- consider rate of market adoption• Business model options and key players (competitors/ partners) at

each layer of the food chain• Size of segment, major sub-segments/rough distribution of market

revenues/units• Forecasts or prognostications of rate of segment growth• Value chain, ecosystem and customer players

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What about dealing with large industrial companies (e.g., OEMs)?

Are all customers the same?• Look for the “Teacher customer”

– Not always easy to find!– Opinion Leader– Early adopter of New Technologies– In pain– Respected– Influencer

• Inside company• Within industry

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The Teacher customer is necessary

• To teach you your value and your position in the market• To provide credibility to investors, employees, partners• To strongly influence other early adopters• To co-create your product strategy, priorities and plans• To generate early revenue from volume deployments• To be patient with your failures

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Finding the Teacher Customer 1. Talk to friends and friends of friends (Mentor(s), academics,

experts) Network!!2. Do your (secondary literature research) homework. Use

Library and Internet. Consultant studies? Kristin can help get you started here.

3. Industry Groups, Publications can very helpful 4. Develop hypotheses and assumptions you MUST validate 5. Review literature to identify community influencers and

potential Innovators• Each segment has Innovator companies• Every company has Innovator individuals (the “go-to” person)

6. Look for Scientific or Journal publications/ Contact author

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Finding the Teacher customer

7. Talk to the wrong people to get to the right people

8. Assemble your interview tools:60 second “elevator” pitch2-pager on what “it” isOpen ended questionsInterviewee should do 90% of the talking

9. Say “thank-you”, follow-up and nurture the relationship as appropriate

Breakout

• Who is your Prime Customer?

• What is the market segment of your Prime customer?

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Generate Hypotheses & Identify Underlying Assumptions

EVALUATION QUESTIONS:

For Which Customers Do I Solve Important Problems?

Does The Value vs. Competitive Alternatives Justify Change?

How Many Customers & What Will They Pay?

Requirements to Attract, Sell & Support These Customers?

State your assumptions regarding what your product is, what it does, and the implications for related technologies

Quantify the problem you solve vs. alternatives in each target segmentBy IndustryBy Application(Use the product to…)By other segmentvariable

Quantify total cost of adoption/ switching vs. current methods or alternatives for each target segmentIs it worth it to a customer?

Why will solving this problem be important to more customers over time?What will customers be willing to pay & what are the implications for your business model?

What will it take to generate word-of-mouth and brand awareness?What kind of distribution model does the business model require?What support will customers need to evaluate and use the product?

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Recruit Interview Targets• How do I get them to talk to me?

– Start now to identify and schedule conversations– Use phone and e-mail follow up– Tap your network for contacts, Mentors! Professors! Alums!– Go to friends, friends of friends, etc. Much better than blind

call!! – From company names get HQ city, find phone number– Email addresses and numbers often on the web– Calling early in morning sometimes gets people in before their

assistants can intercept phone– You are researching applications in products and services for key

segments and customers of a new Caltech technology (use the name!)

– Be prepared for disappointment- this is hard. Don’t take it personally! It’s not about you!

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Interview• How do I approach them?

– Use a 30-second pitch– E-mail with follow-up phone calls or reverse can both

work well– Send them a 1-pager.– Provide agenda and general topics in advance -- gives

the target a chance to think, and clarifies that this is not a sales call!

– They choose the time. Accommodate them!– Let them know that this will be brief

~ 20 minutes– Be persistent

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Open-Ended Interview Questions

• Write a script• Flow from general to increasingly specific,

but always open-ended• Question “DOs”

– Why? – How do you measure that? – How do you define that term? – What’s working, what isn’t?

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Open-Ended Interview Questions

–Can you draw a diagram so I can see where it fits into your overall system?

–How did you determine the value of that?–How would you make tradeoffs among

features? –How will you remove barriers to your

success? –What would the ideal situation look like?

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Question “DON’Ts”- Questions which pre-judge or “sell answer”

–Don’t you think that…? –Wouldn’t you like it if…? –Black or white, yes or no…? –We think this, what do you think? –If we do this, will you do that? –What do you want? –What should we do?

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6-Step Interview Planning Process

1. Select targets to interview2. Set objective for each interview3. Recruit and schedule interviews (Can be long lead

item!!)4. Develop the discussion guide (script) 5. Conduct the interviews6. Meet shortly after the interview (like immediately!) to

Agree on what you heardSummarize what you learned Focus on testing hypothesesChange path if necessary

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Formal Interview Roles• Moderator

– Asks most of the questions (from discussion guide)– Clarifies extensively– Controls flow and timing

• Note Taker– Primary stenographer– Leads post visit debriefing -- The Three Main Points– Devises format and “buckets” for notes – Compiles, distributes notes

• Observer– Notes body language and “emotional” quotes

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Telephone interviews

• Speakerphone for interviewers• International can use Skype (use

microphones)• Have info sent in advance• Identify everyone on the call• Thanks and follow up e-mail

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Trade Organizations

• Tens of thousands of them• Deeply knowledgeable• Library can help to identify • Best one-stop shopping for interview

subjects, market studies, innovation leaders

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Trade Shows• There are tens of thousands• Many are in LA region• People are in talk/marketing mode• One stop shopping for info, performing market

studies• Is there a meeting held during this quarter?• Student discounts or funds available as E102

expense

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Consultant Studies• Consider large and small

consultancies• Library can help• Interview subjects can help• Can negotiate cost- zero is good• Alternative- interview consultants

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On-line Market surveys you create

Zoomerang.com and others• Excellent for getting data “easily” and analyzing• Only as good as the questions and the respondent

list• Direct people to the site (trade group assistance?)• Keep short• Consider Colorado Avenue passers-by

Summary of HW for Next Tuesday,Jan 18

• All Teams E-mail HW in PDF form prior to noon on Tuesday to Weston ,Ken and Mentor. Presenting teams can use a pdf of ppt

• Volunteer two teams to present HW for Tuesday and two for Thursday

Content1. Prepare a signed Team Rules Statement2. Show roles and names of people initially assuming these roles3. Present Market Hypotheses4. Present Vision Statement5. Prepare elevator speech for mentors (doesn’t have to be sent)

HW for Tuesday Jan 25Begin Market Research!

• Write script• Call at least 5 people• Interview at least 2• After each interview

– Review what went wrong– Review what went right

• Revise Hypotheses• Continue to define the market using secondary

research