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Selecting the right rep firm
350
J PROD INNOV MANAG 1993;10:348-359
techniques helped: (1) The product manager offered $100 bounties to any cluster member who could break the chip’s final logic (create a bug); (2) A special technology (called Quickturn) permitted them to simulate the chip’s operation when talking with potential customers, well before the first prototype appeared (Compaq decided not to switch to RISC, as they had been planning); (3) The intensity of the development led to some engineers rarely going home during the last six months-they slept beneath their desks, covered in bubble wrap. Though coming in six months late, the writer was told that the delay was Intel’s attempt to slow up long enough to let their 486 customers unload their computers. Grove said: “Talk is cheap, development is expensive.” Why Companies Kill Their Technologies, Rajendra S. Sisodia, The Journal of Business Strategy (JanuaryFebruary 1992), pp. 42-48 It seems to be a fact that many companies do not take advantage of technologies readily available to them. This author feels there are several reasons for this behavior, though none are excuses. First, there is the “Lab-in-the- Woods” phenomenon. Many firms build their research facilities well removed from operating managers in manufacturing and marketing. This demands conscious and concerted effort to bridge the distance gap. 3M doesn’t let it arise in the first place; not only are research and operational facilities near each other, but the firm arranges office layouts to maximize incidental contacts. Second, there is Not Invented Here. Scientists know this well, but it still operates against them. Even within the firm. For example, GTE Labs, in New England, essentially ordered a West Coast division to utilize an output of the research center. Division management, without ownership in the technology, dragged things out until such time that the entire division had to be shut down. The lack of saleable products cost 3000 workers their jobs. Third, If It Ain’t Broke . . . If the firm’s current technology is working OK, then why would customers want to change it? Because, a new, more powerful technology will find its own uses, even though they aren’t known now. Look at the ever-enlarging hard disk drive. Fourth, the Technology Life Cycle. Some firms feel they can ride with a technology until its life cycle turns down. But, no one can forecast such turning points. After they appear, it’s too late to be ready with a new one.
ABSTRACTS
Fifrh,a$rm may keep its Head in the Sand. It is easy to have a good market position, make money from it, and assume it will continue. But companies must constantly rock their own boat. Otherwise someone will sneak up and take that market position away. Sixth, That’s Not the Business We Are In. The author feels this is what happened at Xerox, where the rank-and-file continued thinking copiers, long after their business changed. Kodak’s move into photo CD systems is a better way. Seventh, Let’s Just Research This Thing to Death. Here there is a problem. Ashton-Tate moved too fast on dBASE IV, marketed a bug-infested product, and ultimately was taken over by Borland. But Motorola moved too slow on its 68040 microprocessor, and yielded the field to Intel’s 80386 and 80486 chips. Since it’s impossible to catch the right point in every case, the author urges getting on with the task, marketing a product that is still weak or tentative, but providing customers an inexpensive way to get the improved versions as they become available. They will usually cooperate, but not if left hanging out to dry. Eighth, sometimes the new technology is Just Too Complicated. The three common excuses here are that (1) our customers will not understand the new approach, (2) our workers are not skilled enough to make this, and (3) Wall Street does not like us. Experience shows that these either are not so, or should not be so. Ninth, Design Is a Frill. Good design can often help a technology succeed, by winning customer acceptance and by lowering the cost of production, assembly, and repair. For each of these the author offers some suggested actions and policies. In the main, they involve making a deliberate and strong effort to transfer technology, moving personnel around, having technology champions, encouraging employees to seek out ways of making current technologies obsolete, rewarding people for actions that bring new technologies, refusing to accept complacency, extensive internal marketing by scientific and engineering staff, adopting good design practices, and keeping continuous communication with all audiences whose support is needed. Selecting the Right Rep Firm, Michael Marshall and Frank Siegler, Sales & Marketing Management (January 1993), pp. 46-49ff A new product often catches a firm unable to handle the field selling of it. They need a new rep firm, which
can provide the representatives for calling on the target market. But, they may lack the know-how for selecting such a firm. The authors here describe the characteristics of good rep firms-how to identify them and cull out the losers. They feel that only about one-third of all such firms work well, and getting the wrong one can be very expensive. For instance, a firm with a new high-tech product, selling between $5000 and $10,000, will want a rep firm that expects about 200 prospects/leads each month. Such leads may well cost $100 each, giving a monthly cost of $20,000, requiring that at least 10% of them be closed. Only the top one-third of rep firms can be expected to do this, and more. Such firms also want long-lasting relationships; they do not just skim leads. They have synergistic product lines and will not have to learn the market for the new product. They have a good program for pre-qualifying the leads provided, especially by in-house telemarketing that saves sales force time. They have well-trained personnel, long-standing relationships with their other supplier firms, they move fast, and have professional management of their business. The article gives information on rep organizations and associations and a scoring sheet that permits a weighted screening of potential candidates. Sources of Competitive Advantage in the Marketing of Technology-intensive Products and Processes, Charles Beard and Chris Easingwood, European Journal ofikfurketing (1992, no. 12), pp. 5-l 8 Makers of technology-intensive products have a unique problem, stemming from their generally short product life cycles. They must reach their markets fast and capture their investment returns fast. This puts unusual stress on the strategies they select to use upon product launch. This paper reports on a survey of 130 technologybased firms. The inquiry gave a list of eight tools or sources of competitive advantage. They were technical performance, product quality, distribution, rate of technological improvement, price, promotion, technical service, and financial service. These have appeared as important in past studies of technology-based marketing. Each marketing manager in the 130 firms was asked for the weights given to each of the above eight tools in the marketing of a recent new product. The results were as follows:
351
J PROD INNOV MANAG 1993;10:348-359
ABSTRACTS
Strategic Tool Technical performance Price Product quality Promotion Technical service Distribution Rate of tech. improv. Financial service
Weight 29% 21% 18% 12% 8% 6% 5% 1%
The results were somewhat surprising in the high weight given to price, and the low weights given to customer services. Thinking that the results might reflect a mix of groups, the researchers did a cluster analysis and found five distinct clusters or groupings within the 130 products’ strategies. They were as follows: Balanced-Small market industrial products, pharmaceuticals, and others: Used a mix of strategies, not dependent on any one tool. Pure quality--Surgical
laser, aroma chemicals, defoamers: Overwhelming use of product quality as an appeal.
Pure performance-Color
recognition, robotic gantry loaders, pulling gas spring, and others: Again, almost total emphasis on one tool, this time technical performance.
Muss marketing--Typical of industrial and consumer PCs and peripherals: Relied principally on promotion and distribution tools. Value
for the Money-Telephone answering machine, key and lamp telephone system, transducer for radio telemetry, autoinspector, and other telecommunications products: Relied more on price than any other tool, followed by technical performance.
The authors also thought of some other key factors that might have been playing a role here, and some of these were borne out. Type of market (industrial versus consumer) was important-industrial wanted pure performance, and consumer wanted value for the money. Pure quality strategy was used by firms whose products had a slower rate of product replacement (and thus had me-too competitors more often than did rapid replacement products). In general, it appeared that (1) one could predict the strategy that product innovators will use in technol-
J PROD INNOV MANAG 1993;10:348-359
techniques helped: (1) The product manager offered $100 bounties to any cluster member who could break the chip’s final logic (create a bug); (2) A special technology (called Quickturn) permitted them to simulate the chip’s operation when talking with potential customers, well before the first prototype appeared (Compaq decided not to switch to RISC, as they had been planning); (3) The intensity of the development led to some engineers rarely going home during the last six months-they slept beneath their desks, covered in bubble wrap. Though coming in six months late, the writer was told that the delay was Intel’s attempt to slow up long enough to let their 486 customers unload their computers. Grove said: “Talk is cheap, development is expensive.” Why Companies Kill Their Technologies, Rajendra S. Sisodia, The Journal of Business Strategy (JanuaryFebruary 1992), pp. 42-48 It seems to be a fact that many companies do not take advantage of technologies readily available to them. This author feels there are several reasons for this behavior, though none are excuses. First, there is the “Lab-in-the- Woods” phenomenon. Many firms build their research facilities well removed from operating managers in manufacturing and marketing. This demands conscious and concerted effort to bridge the distance gap. 3M doesn’t let it arise in the first place; not only are research and operational facilities near each other, but the firm arranges office layouts to maximize incidental contacts. Second, there is Not Invented Here. Scientists know this well, but it still operates against them. Even within the firm. For example, GTE Labs, in New England, essentially ordered a West Coast division to utilize an output of the research center. Division management, without ownership in the technology, dragged things out until such time that the entire division had to be shut down. The lack of saleable products cost 3000 workers their jobs. Third, If It Ain’t Broke . . . If the firm’s current technology is working OK, then why would customers want to change it? Because, a new, more powerful technology will find its own uses, even though they aren’t known now. Look at the ever-enlarging hard disk drive. Fourth, the Technology Life Cycle. Some firms feel they can ride with a technology until its life cycle turns down. But, no one can forecast such turning points. After they appear, it’s too late to be ready with a new one.
ABSTRACTS
Fifrh,a$rm may keep its Head in the Sand. It is easy to have a good market position, make money from it, and assume it will continue. But companies must constantly rock their own boat. Otherwise someone will sneak up and take that market position away. Sixth, That’s Not the Business We Are In. The author feels this is what happened at Xerox, where the rank-and-file continued thinking copiers, long after their business changed. Kodak’s move into photo CD systems is a better way. Seventh, Let’s Just Research This Thing to Death. Here there is a problem. Ashton-Tate moved too fast on dBASE IV, marketed a bug-infested product, and ultimately was taken over by Borland. But Motorola moved too slow on its 68040 microprocessor, and yielded the field to Intel’s 80386 and 80486 chips. Since it’s impossible to catch the right point in every case, the author urges getting on with the task, marketing a product that is still weak or tentative, but providing customers an inexpensive way to get the improved versions as they become available. They will usually cooperate, but not if left hanging out to dry. Eighth, sometimes the new technology is Just Too Complicated. The three common excuses here are that (1) our customers will not understand the new approach, (2) our workers are not skilled enough to make this, and (3) Wall Street does not like us. Experience shows that these either are not so, or should not be so. Ninth, Design Is a Frill. Good design can often help a technology succeed, by winning customer acceptance and by lowering the cost of production, assembly, and repair. For each of these the author offers some suggested actions and policies. In the main, they involve making a deliberate and strong effort to transfer technology, moving personnel around, having technology champions, encouraging employees to seek out ways of making current technologies obsolete, rewarding people for actions that bring new technologies, refusing to accept complacency, extensive internal marketing by scientific and engineering staff, adopting good design practices, and keeping continuous communication with all audiences whose support is needed. Selecting the Right Rep Firm, Michael Marshall and Frank Siegler, Sales & Marketing Management (January 1993), pp. 46-49ff A new product often catches a firm unable to handle the field selling of it. They need a new rep firm, which
can provide the representatives for calling on the target market. But, they may lack the know-how for selecting such a firm. The authors here describe the characteristics of good rep firms-how to identify them and cull out the losers. They feel that only about one-third of all such firms work well, and getting the wrong one can be very expensive. For instance, a firm with a new high-tech product, selling between $5000 and $10,000, will want a rep firm that expects about 200 prospects/leads each month. Such leads may well cost $100 each, giving a monthly cost of $20,000, requiring that at least 10% of them be closed. Only the top one-third of rep firms can be expected to do this, and more. Such firms also want long-lasting relationships; they do not just skim leads. They have synergistic product lines and will not have to learn the market for the new product. They have a good program for pre-qualifying the leads provided, especially by in-house telemarketing that saves sales force time. They have well-trained personnel, long-standing relationships with their other supplier firms, they move fast, and have professional management of their business. The article gives information on rep organizations and associations and a scoring sheet that permits a weighted screening of potential candidates. Sources of Competitive Advantage in the Marketing of Technology-intensive Products and Processes, Charles Beard and Chris Easingwood, European Journal ofikfurketing (1992, no. 12), pp. 5-l 8 Makers of technology-intensive products have a unique problem, stemming from their generally short product life cycles. They must reach their markets fast and capture their investment returns fast. This puts unusual stress on the strategies they select to use upon product launch. This paper reports on a survey of 130 technologybased firms. The inquiry gave a list of eight tools or sources of competitive advantage. They were technical performance, product quality, distribution, rate of technological improvement, price, promotion, technical service, and financial service. These have appeared as important in past studies of technology-based marketing. Each marketing manager in the 130 firms was asked for the weights given to each of the above eight tools in the marketing of a recent new product. The results were as follows:
351
J PROD INNOV MANAG 1993;10:348-359
ABSTRACTS
Strategic Tool Technical performance Price Product quality Promotion Technical service Distribution Rate of tech. improv. Financial service
Weight 29% 21% 18% 12% 8% 6% 5% 1%
The results were somewhat surprising in the high weight given to price, and the low weights given to customer services. Thinking that the results might reflect a mix of groups, the researchers did a cluster analysis and found five distinct clusters or groupings within the 130 products’ strategies. They were as follows: Balanced-Small market industrial products, pharmaceuticals, and others: Used a mix of strategies, not dependent on any one tool. Pure quality--Surgical
laser, aroma chemicals, defoamers: Overwhelming use of product quality as an appeal.
Pure performance-Color
recognition, robotic gantry loaders, pulling gas spring, and others: Again, almost total emphasis on one tool, this time technical performance.
Muss marketing--Typical of industrial and consumer PCs and peripherals: Relied principally on promotion and distribution tools. Value
for the Money-Telephone answering machine, key and lamp telephone system, transducer for radio telemetry, autoinspector, and other telecommunications products: Relied more on price than any other tool, followed by technical performance.
The authors also thought of some other key factors that might have been playing a role here, and some of these were borne out. Type of market (industrial versus consumer) was important-industrial wanted pure performance, and consumer wanted value for the money. Pure quality strategy was used by firms whose products had a slower rate of product replacement (and thus had me-too competitors more often than did rapid replacement products). In general, it appeared that (1) one could predict the strategy that product innovators will use in technol-