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Chapter Outline
Factors Affecting Technology Adoption Categories of Adopters The Chasm Market Segmentation Process Migration/Upgrade Decisions
Mohr, Sengupta, Slater 2005
Problem
Recognition
Information
Search
Evaluate
Alternatives
Purchase Decision
Post-purchase
Evaluation
Perceived Attributes
1. 2.
3.
4. 5. 6.
Relative advantage Compatibility Complexity Trialability Ability to communicate product benefits Observability/visibility
Mohr, Sengupta, Slater 2005
Relative Advantage Benefits of adopting the new technology compared to the costs, i.e., P/P ratio Implication: Marketers must understand customer perceptions of benefits vs. costs Compatibility Similarity/familiarity to existing ways of doing things Compatibility with cultural norms Implication: Marketers must educate customers if compatibility is low
Mohr, Sengupta, Slater 2005
Complexity
Difficulty of use of new product Implication: Try to simplify use; easier to learn; offer training and education The extent to which a new product can be tried on a limited basis. Reduces perceived risk. Implication: Design products as independent modules or offer on trial basis.
Mohr, Sengupta, Slater 2005
Trialability
Ease and clarity of communicating benefits to prospective customers Implication: Talk in terms customers understand and that meaningfully convey the compelling reason to own the new technology Customers ability to assess benefits Ability of others to observe customers benefits obtained from using new product Implication: If benefits are elusive to both the users and theirMohr, friends, adoption will be slow. Sengupta, Slater
2005
Observability
These six factors are crucial hurdles to overcome in effective marketing. Marketers must provide compelling reasons for adoption, and overcome customers fears, uncertainties, and doubts. Traditional marketing methods (which assumes customers understand the usefulness of the products and know how to evaluate them) are often insufficient. Often, must focus more on educating potential users
about benefits and how to use new product
Mohr, Sengupta, Slater 2005
Involve customers in evaluating new product ideas Dont base assessment on inventors familiarity with, and enthusiasm for, technology. Understand who is likely to be an early adopter and how they differ from the mainstream market.
Mohr, Sengupta, Slater 2005
Demonstrable advantage Reduce risk Secure testimonials from early adopters Price to create value Patience! How does TiVo stack up?
Competitors: Intel Viiv CPU platform aligned with Microsoft Window XP Media Center Edition (MCE) Mohr, Sengupta, Slater
2005
Categories of Adopters
-2 -
The Chasm! +
2.5%
Innovators
13.5%
Early Adopters
34%
Early Majority
34%
Late Majority
16%
Laggards
{ {
Technology Enthusiasts
Visionaries
Pragmatists
Mohr, Sengupta, Slater 2005
Conservatives
{
Skeptics
The Chasm
Appreciate technology for its own sake Motivated by idea of being a change agent Will tolerate initial glitches Will develop make-shift solutions Willing to alpha/beta test and work with technical personnel in compensation with lower pricing Provide early revenue for marketersbut not a large group Importance: They are the gatekeeper to the next group of adopters.
Mohr, Sengupta, Slater 2005
Want to revolutionize competitive rules in their industry Attracted by high-risk/high-reward projects (in returns of
psychological and substantive benefits)
Not necessarily very price sensitive Demand customized solutions and intensive tech support
Early adopters communicate horizontally (across industry boundaries) Opinion leaders, change agents
Mohr, Sengupta, Slater 2005
Comfortable with only evolutionary changes in business practices, in order to gain productivity enhancements Risk aversion to disruptions in their operations Want proven applications, reliable service Seek the convenient whole product design
same industry
Pragmatists (Cont.)
They want to move together (herd mentality). They want to pick the same technology solution (avoid risk). Once they make a decision, they want to implement it quickly (high visibility of performance).
Risk averse, technology shy Very price sensitive Require completely pre-assembled, bulletproof (reliable performance) solutions Motivated only by need to keep up with competitors in their industry Rely on single, trusted advisor
Mohr, Sengupta, Slater 2005
Laggards: Skeptics
Luddites
Low ratio of innovators to majority users Profit margins decline slowly with time Long time period for market acceptance (the
danger of chasm!)
Visionary market is saturated, but mainstream not yet ready to buy. Marketing that was successful with visionaries simply is not effective with pragmatists.
Mohr, Sengupta, Slater 2005
Visionaries
Pragmatists
Want to be first in implementing new ideas in their industries Think pragmatists are pedestrian
2005
These two groups want no part of each other! Mohr, Sengupta, Slater
High level of customized tech support given to visionaries pulls firm in too many directions costly
Yet, its a catch-22 (i.e., a self-contradictory, circular logic) because this is the initial source of revenue.
Products sometimes released too early Vendor goal: Establish reputation Exciting time!
Engineering drives, brilliance is rewarded. Focus on developing the best possible solution.
Mohr, Sengupta, Slater 2005
The Chasm
Cost too much!
Firm takes on more visionaries than it can handle. Cannot take on more custom projects, but no pragmatists ready to buy. Idle growth damage! Early market becomes saturated, and revenue growth tapers off or declines Key personnel become disillusioned VC well (venture capital stock) begins to runs dry Marketing strategies that lead to success in selling to visionaries actually hinder success in selling to pragmatists.
Mohr, Sengupta, Slater 2005
Look to the new strategies necessary to reach the mainstream market. Pick a single target market with specific application. (Establishing reputation quickly) R&D must:
work with partners (for gathering complements) ride the line between service and engineering
Mohr, Sengupta, Slater 2005
Marketing to Pragmatists
Vendor must assume total responsibility for complete, end-to-end solution (whole product)
Hardware, software, connectivity, training, support, etc. Requires significant work with partners Develop standards and compatibility
Customer services vital (seeking the useful applications) Focus on best solution possible
Find partners to complete product offerings Leverage partner power changes with market evolution
Mohr, Sengupta, Slater 2005
Marketing to Conservatives
factor Until a high-tech firm has established itself in the mainstream market, it has not proven itself. To manage the mainstream market effectively, firm must work with partners in a disciplined fashion (that prioritizes partners).
Mohr, Sengupta, Slater 2005
The Tornado
The Chasm
Early Majority
Late Majority
Laggards
{ {
Technology Enthusiasts
Visionaries
Pragmatists
Mohr, Sengupta, Slater 2005
Conservatives
Skeptics
Firms that are successful in crossing the chasm typically experience dramatic sales increases when they enter the mainstream (pragmatist) market.
New product gains acceptance from niches within the mainstream market and extends easily
through developing a common platform
Each niche requires expertise in that vertical market, and potentially leads to access to related markets. Market coverage propagates neighborly and develop the complete product lines
Seg 1 App 3
Whole Product
Customer References
The first movers vs. the followers As a trusted advisor Engagement through
Discovery (awareness), Evaluation (customer-specific), Implementation (reliable & minimize risk), Operations (stable & convenient), Continuous improvement (fine tune existing solutions) Product modifications for future releases (satisfy the majority)
Mohr, Sengupta, Slater 2005
2. The Tornado:
Period of mass-market adoption when the general marketplace switches over to the new technology Driven by application that provides compelling benefits to mass market: the killer app Requires strong operational excellence to keep up with demand
Mohr, Sengupta, Slater 2005
Moore refers to the dominant, post-tornado competitor as the Gorilla. Typically, there are two other major competitors, the Chimps. The rest of the market is accounted for by numerous niche competitors, the Monkeys.
Mohr, Sengupta, Slater 2005
3. Main Street
A single target market from which to pursue the mainstream market Cannot afford to pursue many segments at once
Starting point / Igniting the fire
Make offering simple and valuable without costing much.
Mohr, Sengupta, Slater 2005
Usage Volume (heavy or light users Benefits Sought (ease or functionality) Usage Occasion
Mohr, Sengupta, Slater 2005
SIDELINED CITIZENS:
HANDSHAKERS:
TECHNOSTRIVERS:
FAST FORWARDS:
BUSINESS
TRADITIONALISTS:
DIGITAL HOPEFULS:
FAMILY
MEDIA JUNKIES:
GADGETGRABBERS:
MOUSE POTATOES:
.
ENTERTAINMENT
SIDELINED CITIZENS:
HANDSHAKERS:
FAST FORWARDS:
BUSINESS
FAMILY
GADGETGRABBERS:
MOUSE POTATOES:
.
ENTERTAINMENT
SIDELINED CITIZENS:
HANDSHAKERS:
AND THE OPTIMISTS HAND-SHAKERS: MORE AFFLUENT Older consumers typically LESS AFFLUENT managers who don't touch their computers at work. They FAST leave that TECHNOFORWARDS: to younger assistants. STRIVERS:
BUSINESS
TRADITIONALISTS:
MEDIA JUNKIES:
TRADITIONALISTS: NEW AGE Willing to use technology but slow DIGITAL NURTURERS: to upgrade. Not convinced HOPEFULS: upgrades and other add-ons are worth paying for. MOUSE GADGETPOTATOES: . MEDIA JUNKIES: GRABBERS: Seek entertainment and can't find much of it online. Prefer TV and older media.
FAMILY
ENTERTAINMENT
DIGITAL HOPEFULS: Families with a limited budget but TRADITIONALISTS: . still interested in new technology Good candidates for the under$1000 PC MEDIA JUNKIES: GADGET-GRABBERS: They also favor online entertainment but have less cash to spend on it.
SIDELINED CITIZENS:
TECHNOSTRIVERS:
FAST FORWARDS:
BUSINESS
DIGITAL HOPEFULS:
FAMILY
GADGETGRABBERS:
MOUSE POTATOES:
.
ENTERTAINMENT
SIDELINED CITIZENS:
AND THE OPTIMISTS FAST FORWARDS: MORE AFFLUENT MORE AFFLUENT These customers are the biggest LESS AFFLUENT spenders, and they're early HAND- of new technology for FAST adopters TECHNOSHAKERS: FORWARDS: individual use. STRIVERS:
BUSINESS
NEW AGE NURTURERS: TRADITIONAlso big spenders, but DIGITAL focused on ALISTS: technology for homeHOPEFULS: users such as family PC.
MEDIA MOUSE POTATOES: GADGETJUNKIES: They like the online world for GRABBERS: entertainment and are willing to spend for the latest technotainment.
FAMILY
MOUSE POTATOES:
.
ENTERTAINMENT
Size of segment in terms of sales volume Growth rate of the segment Competition within the segment Ability of firm to effectively meet the needs of the segment
Purchase of new technology radically improves productivity on an already well-understood critical success factor
Firm must be able to dominate segment, with a whole product, and harvest in short period of time
Mohr, Sengupta, Slater 2005
New technology provides dramatic improvement in customer firms competitive advantage in its industry.
Easier to quantify
Compelling to a pragmatisttherefore best for crossing the chasm May appeal to conservative, BUT:
May be still risky and supporting infrastructure may not be Mohr, Sengupta, Slater sufficiently developed
2005
Consider customer perceptions Position relative to perceived competition Position on important, compelling attributes/benefits Question in each targeted segment
Basic Issue: Tension between adopting newest generations of technology and obsolete investments in prior generations. Marketing implication: Firms must manage a migration path for customers to the new generation.
Mohr, Sengupta, Slater 2005
Expectations about pace of improvements relative to price Expectation about magnitude of improvements relative to price
** The greater the anticipated product improvements and/or expected price declines, the greater the customers propensity to delay purchase. Wait and watch out!
Mohr, Sengupta, Slater 2005
Implication:
High-tech firms must provide upgrades that allow firms to take advantage of new technology without scrapping investments in the prior generation. A migration path is a series of upgrades to help transition the customer to new generations.
Mohr, Sengupta, Slater 2005
CUSTOMER OPTIONS:
Constrained
Enlarged
Cannibalizing totally
One-way compatibility
They will be willing to wait for price declines Migration assistance (i.e., trade-ins, etc.) mitigates against customer stalling and leapfrogging.
They realize smooth upgrading is unlikely Waiting for price declines may result in purchasing an obsolete product Therefore, migration path is less crucial, as it is meaningless, to a certain extent
Wait for the extreme finality/ the definite evolution
Mohr, Sengupta, Slater 2005