TIMG 5005 – Customer Value Creation

in Technology Firms

Mika Westerlund

Technology Innovation Management @ Carleton University

Tuesday, January 19, 2016

mika.westerlund@carleton.ca
Instructions for online participation

Classes are delivered both in-class and online. To join online, go to the Technology Innovation
Management conference server, type your name in the "Full Name" field, select room “TIMG 5005”
with password “student”, and click "Join". The TIM conference server is here:

http://present.carleton.ca/

For the audio portion of the online class, call 613-366-1985 (local) or 866-964-7085 (toll-free) from
a telephone and enter conference room 85005 on the telephone keypad when prompted.

Alternatively, you can click the headphones icon in the web conference for a VoIP connection
through your computer. Be aware that a VoIP connection through your computer is often lower audio
quality than a telephone, both for you and for others; if you use a VoIP connection, it is essential that
you wear a high-quality headset.

Detailed instructions and video tutorials on joining and using the online classroom are available from
the BigBlueButton website:

http://www.bigbluebutton.org/content/videos

Slide 2
Schedule - Tuesdays
Date Topic Details
Jan 12 1#: Welcome and introduction to 5005 --
Jan 19 2#: Marketing thinking in technology firms --
Jan 26 3#: Aligning marketing and corporate strategy Readings, Pitching
Feb 2 4#: Choosing the market and brand strategy Readings
Feb 9 5#: The what-to-sell decision Readings
Feb 16 No Classes Winter Break
Feb 23 6#: Marketing channels and networks Readings
Mar 1 7#: Pricing and revenue strategies Readings, Pitching
Mar 8 8#: Understanding customers Readings
Mar 15 9#: Product launch and promotions Readings
Mar 22 10#: Making a sale and sales management Readings

Mar 29 11#: Presentations of Assignment #1 --

Apr 5 12#: Presentations of Assignment #1 cont’d Delivery of take-home exam

Slide 3
Assignments and marks
Each student must complete two assignments:

• Marketing plan (group effort; up to three students)

• 3 minutes pitching about the idea (January 26 & March 1)
• No slides; Your group? Your chosen product/service?
• Presentation of a slide deck (March 29 & April 5)
• Recommended length 10~12 slides.
• Max. 40 points

• Take home final exam (individual effort)

• Questions distributed (by email) : April 5
• Completed examination report (by email): Wednesday April 13
• The maximum length of the final exam report is 10 pages.
• Max. 60 points.
Slide 4
Course framework: today’s lesson

Marketing thinking aligned Corporate strategy

Segmentation, Marketing Sales

Understanding
positioning, channels management
customers
branding

The what-to- Pricing Product launch

sell decision and promotions

Slide 5
Objectives
The objective of the course is to study customer value creation,
marketing and commercialization in technology firms.

The objective of session 2 is to study marketing of technology

firms from the marketing thinking perspective; understand
marketing’s critical role in firm operations and culture.

Upon session 2 you will know about

• How marketing strategy affects marketing planning.
• What are the basic steps of marketing planning.
• What marketing thinking means in companies.
• How to become market oriented.

Slide 6
Agenda

• Marketing thinking

• Marketing planning

• Marketing resources

• Competitor analysis

• Marketing orientation

Slide 7
Marketing thinking and marketing action

Slide 8
Today’s innovative marketer: MyKea
Founded: November 2010

Redesign your Ikea furniture

decorate IKEA furniture units with printed vinyl stickers

• Easy to peel off and decorate with other design

• Online shopping and retail stores (partners)
• Shipping to 25 IKEA countries worldwide
• Crowdsourcing of ideas/designs using toolkits
• Crowdvoting of designs through Facebook
• The artist gets 10% of all his/her sales
• Marketing through social media (Facebook,
Twitter, etc.; creating “social buzz”)

Choose your design

Make money by
Slogan: say NO to NAKED Furniture participating
Slide 9
Today’s innovative marketer: MyKea
Founded: November 2010

Slide 10
The dualistic nature of marketing

Marketing can be seen at two levels…

…as a fundamental, underlying business philosophy.

• marketing puts customers at the center of an organization’s considerations.
• reflected in basic values; the necessity to understand and respond to customers’
needs and to search constantly for new market opportunities.
• an attitude that applies to everybody who works for the organization; in a
marketing-oriented organization, these values are instilled in all employees and
should influence their behavior without any need for prompting.

…as a set of applied techniques.

• e.g. market research for finding out about customers’ needs or advertising for
communicating the benefits of a product offer to potential customers.

Slide 11
Cumulative effect of marketing thinking
ENHANCED
t thinking ODDS OF
SUCCESS
a action

Effective
t
Cross-Functional Marketing “marketing spirit”
/R&D Collaboration a
Being Market-Orientated t
Acquire Disseminate Use Information a
Relationship Marketing t
Partnering with important stakeholders a
Access to Resources t
Funding Management Expertise
a
Maintaining Innovativeness t
Creative Destruction Corporate Imagination Expeditionary Marketing Culture of Innovation a

(mod. Mohr, 2001)

Slide 12
Marketing thinking is changing

The marketing strategy-as-practice -view

• Strategy forms at the customer interface

• Customers are co-creators of value

Marketing
• Horizontal marketing: customers as marketers strategy

Top down

Bottom up
• Marketing is an attitude, not a department

• Marketing thinking is “marketing spirit” Marketing actions

Slide 13
Factors affecting marketing thinking

Slide 14
Marketing in entrepreneurial context

Slide 15
Finding opportunities
• Dog treat a multi-billion
category growing at a
double-digit rate
• Dog as family member,
owners as “pet parents”
caring about healthy, all-
natural tasty treats

• The world’s first bakery for

dogs – “because of a love for
dogs, especially Gracie”
• Premium, all-natural
ingredients, slowly baked to
preserve flavor and nutrients
Your dog is family. We get it.
Mission: “To fresh-bake, from scratch, the world’s best dog treats and give pet parents everywhere yummy,
all-natural dog food they can feel good about sharing with their furry family members.”
http://www.threedog.com/about/our-story/ Slide 16
Technology marketing characteristics

Market Technological
uncertainty uncertainty
Marketing of
technology
products and
services

Competitive
volatility

(Mohr, 2001)

Slide 17
1. Market uncertainty

Ambiguity about the type and extent of customer needs

that can be satisfied by a particular technology.
• Consumer fear, uncertainty and doubt (FUD)
• Customer needs change rapidly and unpredictably
• Customer anxiety over the lack of standards and
dominant design
• Uncertainty over the pace of adoption
• Uncertainty over/inability to forecast market size

(Mohr, 2001)

Slide 18
2. Technology uncertainty

Not knowing whether the technology or the company can

deliver on its promise.
• Uncertainty over whether the new innovation will function
as promised
• Uncertainty over timetable for new product development
• Ambiguity over whether the supplier will be able to fix
customer problems with the technology
• Concerns over unanticipated/unintended consequences
• Concerns over obsolescence
• technology is no longer wanted even though it may still be in good
working order, because e.g. a replacement has become available
that is superior in one or more aspects
(Mohr, 2001)

Slide 19
3. Competitive volatility

Changes in competitors, offerings and strategies.

• Uncertainty over who will be future competitors
• Uncertainty over “the rules of the game” (i.e., competitive
strategies and tactics)
• Uncertainty over “product form” competition
• competition between product classes vs. between different brands
of the same product; e.g. tablet computers vs. smartphones
• Implication: Creative destruction
• dynamic process of existing products, production techniques,
professions, companies and industries dying out as a result of
technological advances; e.g. typewriters; portable data storage
medium (magnetic/optical/flash memory/cloud computing).
(Mohr, 2001)

Slide 20
Factors impacting on marketing strategy

Assets/skills that a firm Opening and closing

possesses or can readily
of strategic windows
acquire/access

The nature of
Impact of market Marketing
competition in the
drivers strategy
marketplace

Stage of the market

or industry lifecycle

Slide 21
Marketing planning

Slide 22
Simplified marketing planning process

“traditional view”

Slide 23
Simple to complex strategic marketing
“Strategic marketing as seen as a process consisting of: analyzing
environmental, market competitive and business factors affecting the
corporation and its business units, identifying market opportunities and
threats and forecasting future trends in business areas of interest for the
enterprise, and participating in setting objectives and formulating
corporate and business unit strategies. Selecting market target strategies for
the product-markets in each business unit, establishing marketing
objectives as well as developing, implementing and managing the
marketing program positioning strategies in order to meet market target
needs”.
(Drucker, 1973)

Slide 24
Strategic marketing planning process

Implement the Define the Identify

Strategy Business Arena Attractive
Opportunities

Understand the Understand the

Profit Dynamic Market
Environment

Planning Process

Complete the Assess Resources

Winning Strategy and
Competencies

Plan Critical Make Tough Understand the

Relationships Strategic Competitive
Choices Challenge

(Mohr, 2001)

Slide 25
Modified marketing planning process

Define marketing
environment

Assess resources
and competition

Plan competitive
marketing strategy

Implement strategy and

marketing orientation

“more dynamic and actionable”

Slide 26
Marketing plan

• A marketing plan is the central instrument for directing

and coordinating the marketing effort.
• Plan that details a company's marketing effort.
• It operates at a strategic and tactical level.
• May be laid out for an individual product or for the entire
company and all its products.
• Specifies the marketing goals and objectives to be
achieved over a specific time period and lays out the
various strategies to be followed in achieving them.
• delineates the responsibilities for carrying out the plan.

Your email
Marketing plan contents

 Executive summary
 Table of contents
 Situation analysis
 Marketing strategy
 Financial projections
 Implementation controls

(Kotler, 2009)

Slide 28
The essence of marketing plan

Somewhat similar to the business model of a firm, but marketing

perspective (e.g. brand building strategy, advertising decisions).

Includes decisions on how to listen, inform and attract the

customers on company’s value propositions.

Explains how to promote image of the seller and their

products/services, aims at achieving sales directly or indirectly.

Slide 29
Evaluating a marketing plan

 Is the plan simple?

 Is the plan specific?
 Is the plan realistic?
 Is the plan complete?

(Kotler, 2009)

Slide 30
Step 1: Define marketing environment

Example of McDonalds guerilla marketing in Switzerland

Slide 31
Micro and macro marketing environment

Technology

Economic
Suppliers Technological
environment environment

Marketing
Competitors Complementors
strategy

Political &legal Cultural & social

environment Customers environment

End user preferences

Slide 32
Economic environment (macro)
The economic environment must be considered in marketing
strategy planning, because it:
… affects the way firms and the whole economy use resources and
emphasizes certain business areas from time to time; e.g. security.
… is affected by the way all of the parts of a macro-economic
system interact; e.g. income, economic growth, tax, inflation.
… varies from one country to another, but economies around the
world are linked.
• Exchange rates; how often to update prices due to changes in
exchange rates; similar/dissimilar prices in different markets;
global/local pricing in online business?
… can change rapidly and require changes in marketing strategy;
e.g. consumers’ incomes drop and they shift their spending patterns;
inflation causes pressures in costs and pricing, etc.
• Inflation rate in Canada 1.6% vs. ~3.25% during 1915-2012.
Slide 33
Political and legal environment (macro)

The attitudes and reactions of people, governments and social critics

affect the political and legal environment and strategy, because...
… nationalism and protectionism can be limiting in international
markets; e.g. the “Buy American” policy in government contracts.
… ethics policy matters; bidding vs. bribes.
… regional groupings are becoming more important; e.g.
• European Union free trade and economic unification (euro, legal issues)
• The North American Free Trade Agreement (NAFTA) plans to knock down
barriers and ease trade among the U.S., Canada and Mexico.
… The rise of consumerism; a social movement seeking to increase
the rights and powers of consumers and consumer protection laws.
… (de)regulation of competition, antimonopoly laws, product safety
laws requiring expensive recalls to correct problems, etc..
Slide 34
Ex. Rise of consumerism

People against the leading soda-making machine (“Set the Bubbles Free”) based on
environmental reasons, violation of human rights, Israeli-Palestinian political tensions etc.
Slide 35
Technological environment (macro)
The technological environment must be considered in marketing strategy
planning, because:
… it affects opportunities and addresses major trends; e.g. we are
moving from an industrial society to an information society; from product-
technologies to service-technologies  technology supporting user’s
content-creation (social media) and self-service (online banking, IOT).
… technology transfer is rapid; new technologies have created industries
that didn’t even exist a few years ago.
… Internet technologies are reshaping marketing, including promotion
and pricing; e.g. digital marketing, auction pricing, long-tail marketing.
… technology also poses challenges, e.g.
• Faster R&D and production cycles; “technology wars”.
• Ethical issues; product- (recyclability/environmental issues) and
customer-related (caller IDs, website stats/hits, spam, privacy concerns)
Slide 36
Example: Technical environment

Slide 37
Example: Technical environment

Canada
93 %

United
Arab
Emirates
92 %

Global
42 %

India
19 %

Slide 38
Example: Technical environment

Slide 39
Example: Technical environment

Slide 40
Example: Technical environment

Slide 41
Example: Technical environment

Slide 42
Example: Technical environment

22-39 yrs. = 72 %

Slide 43
Example: Technical environment
Facebook India / Age

UAE
Facebook China / Age

18-44 yrs.
67 % (worldwide)
70 % (USA)
80 % (UK)
85 % (India) (48% 18-24)
89 % (China) (35% 18-24)
Slide 44
Example: Technical environment

Slide 45
Example: Technical environment

Slide 46
Example: Technical environment

Slide 47
Cultural and social environment (macro)
The cultural and social environment affects how and why people
live and behave as they do which is important, because…
… changing women’s roles create new business opportunities in
technology markets; e.g. women buy 50% of cars.
… more women are delaying marriage making a large single
household market; e.g. young women as a target market in Japan.
… women have different purchasing profiles; e.g. no advance plan
which smartphone model to buy vs. men determining in advance.
… the growing importance of children as factors affecting
technology purchase; e.g. type and model of cars, electronics.
… the elderly as technology users; e.g. online banking, homecare
technology, cell phone /w large screen and buttons and loudspeaker.
Slide 48
 Ex. technology for seniors as opportunities

Computerless email service

Brain, memory and physical

fitness training games
Keyless locks
(fingerprint scan)
Easy-to-use computing
Medication dispenser
and mobile technologies

Sensors for stove safety

against kitchen fires Alzheimer's wandering
Personal emergency response systems safety (Comfort Zone)
Slide 49
Step 2: Assess resources and competition

Slide 50
Market opportunity assessment

• Does the company possess or have access to the

critical capabilities and resources (core competences)
needed to deliver the customer benefits?
• Can the company deliver the benefits better than any
actual or potential competitors?
• Can the benefits involved in the opportunity be
articulated convincingly to a defined target market?
• Can the target market be located and reached with
cost-effective media and trade channels?
• Will the financial rate of return meet or exceed the
company’s required threshold for investment?
(Kotler, 2009)

Slide 51
Characteristics of core competences

• A source of competitive advantage

• It must contribute to the end consumer's experienced benefits.

• Applications in a wide variety of markets

• It can be re-used widely for many products and markets

• Difficult to imitate
• It is not easy for competitors to imitate.

Slide 52
Competitor analysis

Step 1: Recognizing and classifying the competition

Step 2: Evaluating the competition and predicting rivalry

Slide 53
Competitive rival types

Direct
Indirect competitors competitors
(substitutes)
• easy to recognize; offer
• difficult to recognize;
Market commonality

similar products to same

fulfill same needs with customers; e.g. AMD vs. Intel
totally different products;
e.g. airlines vs. bullet trains

Potential
• potential to enter the market and competitors
become a direct competitor; e.g.
catering service vs. local restaurant
Resource similarity
(Bergen & Peteraf, 2002)

Slide 54
Evaluating rivalry 1/2

Internal factors External factors

Strengths Opportunities

Firm’s brand name Demand for product

and resources and size of market

Weaknesses Threats

Low product awareness Bad economy and

and poor facility location indirect competitors

Example of a competitor SWOT Analysis (generic level)

(Bord Bia, 2010)

Slide 55
 Evaluating rivalry 2/2

Driving for rapid growth?

Wanting to gain market share?
Entering into new markets?
Focus on internationalization?
Etc.

Views on trends Products

Views on own Pricing
products (“best”, no Delivery
need to change even Promotion
market needs change) Target market
Views on failed
Etc.
products (did not
work, will not work)
Technology
Etc. Staffing
Financials
Resources & skills
Partners
Etc.

Slide 56
Predicting rivalry

Competitor analysis grid aims at predicting high and low threats

Slide 57
Step 3: Plan marketing strategy

Slide 58
Formulate a good mission statement

Focus on limited number of goals

Stress major policies and values

Define major competitive spheres

Take a long-term view

Short, memorable and meaningful

Slide 59
Ex.1: Rubbermaid Commercial Products, Inc.

“Our vision is to be the Global Market Share

Leader in each of the markets we serve. We
will earn this leadership position by
providing to our distributor and end-user
customers innovative, high-quality, cost-
effective and environmentally responsible
products. We will add value to these products
by providing legendary customer service
through our uncompromising Commitment
to Customer Satisfaction.”
(Kotler, 2009)
Ex.2: Motorola

“The purpose of Motorola is to honorably

serve the needs of the community by providing
products and services of superior quality at a
fair price to our customers; to do this so as to
earn an adequate profit which is required for
the total enterprise to grow; and by doing so,
provide the opportunity for our employees and
shareholders to achieve their personal
objectives.”

(Kotler, 2009)
Slide 61
Ex.3: eBay

“We help people trade anything on earth.

We will continue to enhance the online
trading experiences of all — collectors,
dealers, small businesses, unique item
seekers, bargain hunters, opportunity
sellers, and browsers.”

(Kotler, 2009)

Slide 62
Ex.4: Interface

Slide 63
Marketing mix

Marketing mix Every P correspondents a C

• Customer solution
• Customer cost
• Communication
• Convenience / access
Product Target Place
Product variety
Quality
market Channels
Coverage Additional Ps
Design Assortments
Features Locations • People
Brand name Inventory • Positioning
Price Promotion
Packaging Transport • Process
Sizes List price Sales promotion
Services Discounts Advertising
Warranties Allowances Sales force
Returns Payment period Public relations
Credit terms Direct marketing
Revenue options Digital marketing
(Tanev, 2008)

Slide 64
Step 4: Implement strategy and marketing orientation

Slide 65
Different emphases of strategic orientation
Production
• Production orientation means
focus on manufacturing and
delivery of products.
• Production oriented firms aim
for efficiency in production
rather than effectiveness in
meeting customers’ needs.
• Production orientation comes
back occasionally in developed
economies during periods of
shortages; construction industry.
Selling
• Selling orientated firms shout louder •
to attract customers to buy their
products in order to increase sales.
• Sales managers use various sales
techniques, advertising, sales • Changing needs present potential
promotion and personal selling to
emphasize product differentiation.
• Little effort to research customers’ •
needs or to devise product offerings
that are customer-led rather than
production-led; packaged holidays.
Marketing
Marketing orientated firms focus
on customer needs, get close to
customers to understand problems,
and react to what they want.
market opportunities, which drive
the company.
The decisions taken are based on
information about customers’
needs and wants; not what the firm
thinks is right for the customer.
Slide 66
Examples of market orientation

• A car company will research

what consumers most want
and need in a car rather than
produce models meant to
follow the trends of other
manufacturers.
• FedEx added Sunday
deliveries based on
customer requests and
market demand
(Kotler, 2009)

Slide 67
Market orientation

Market orientation is defined as..

• a philosophy of doing business that emphasizes shared gathering,
dissemination and utilization of market information in decision
making.

Market orientation is…

• implementation of the marketing concept (Kohli & Jaworski, 1990)
• organizational culture (Narver & Slater, 1990)

Impact of market orientation on performance…

• Firms which are strong technologically see a greater impact of
market orientation on performance (than firms which are not
strong technologically).

(Mohr, 2000)

Slide 68
Elements of firm’s market orientation
understanding of target buyers to create
Customer superior value for them… through a

orientation
product/service… by increasing the
buyer’s benefits or by decreasing
the buyer’s costs… now and in the future.

look at how well the competitors are able
to satisfy buyers’ needs… understand the
short-term strengths and weaknesses…
and long-term capabilities and strategies
of current and potential competitors.
Focus on delivery of promises made to customers … by
everyone in the firm, not just marketing staff…
long-term requires that the organization integrates its
profitability human and physical resources effectively and
adapt them to meet customers’ needs.

Competitor Inter-
orientation functional
orientation
(Narver & Slater 1990)

Slide 69
Product oriented vs. market oriented firm

Company Product- Market-

example oriented oriented
Missouri-Pacific We run a railroad We are a people-
Railroad and-goods mover
Xerox We make copying We improve office
equipment productivity
Standard Oil We sell gasoline We supply energy

Columbia Pictures We make movies We entertain

people
(Kotler, 2009)

Slide 70
Product oriented vs. market oriented firm

Slide 71
Market oriented vs product(ion) oriented

We provide “any colour, as long as it’s black!”

Slide 72
Ex. Benefits of achieving a market orientation
Barriers
Turf Protection

Results
Facilitating Core Rigidities
Conditions
Innovativeness
Top Management Served Market
Leadership
Market New Product
Decentralized Orientation Success
Responsibility

Market-based Superior
Rewards Profitability

(Mohr et al., 2005)

Slide 73
Barriers to being market-oriented

People hoard information

• selective behavior in the gathering and dissemination process

Core rigidities can cause people to disregard information

about/from users
• technology enthusiasm/arrogance

Tyranny of the served market

• Listening only to current customers (marketing myopia)

Users’ inability to envision new solutions

• Solving problems only with current technologies

(Mohr, 2000)

Slide 74
Overcoming the pitfalls in being market-oriented

• Don’t focus on what customers say; focus on what they do.

• Empathic design (observe customers in their own environment; pay
attention to the user's feelings toward a product)

• Match use of customer feedback to the type of innovation

• For incremental innovations: customer feedback is vital and useful.
• For breakthrough innovations: customers bounded by current solutions
and insights about new technologies may be sketchy at best.

• Focus on future customers (and not just existing customers)

• Champion new ideas
• Work in cross-functional teams

Slide 75
Implementing market orientation

1 Gathers information
-About customers Current and future customers
-About competitors
-About market trends

2 Disseminates
information throughout
the company
Across functions and divisions to enhance commitment
3 Makes decisions cross-
functionally based on
use of information

4 Executes decisions
in a coordinated
manner and with
commitment

(Mohr, 2000)
Downside to being market-oriented

• Risk of underestimating the market

• working with wrong data is worse than working with no data at all.
• Risk of underestimating the customer
• firms that have established an approach to market orientation but fail
to update it as needed run the risk of alienating their customers.
• customers may be inaccurate both in their positive endorsement of
new products as well as in their rejection of new ideas.
• Challenges of quickly responding to market changes
• Following an established market orientation and failing to take new
external factors into consideration can put a firm at a disadvantage.
• Listening too closely to customers can inhibit innovativeness
• feedback fanatic syndrome.
(Mohr et al., 2005; McQuerrey, 2012)

Slide 77
 Marketing strategy and performance
Marketing Innovation Firm
strategies orientation Performance

Focus on aggressive Price-winning -.22 (n.s.)

Financial
pricing and revenues strategy performance
Innovation
orientation Typically short-term benefits

.43 .71
Serving mass market Value-adding
needs and wants strategy .55 Typically long-term benefits

Market oriented firm Product .81

Market
.30 leadership excellence
Listening to customers
Value co- -.31
closely and co-
creation strategy Listening to customers too closely has a negative impact on product leadership
developing offerings
in the marketplace (too unique, too customized), but a positive impact on a
firm’s innovation development resources (new skills, assets, capabilities and
ideas and perspectives that may help future innovation development)

Industrial firms, the technology industry, N=130

(Kauppila, Rajala, Westerlund & Kajalo, 2008)

Slide 78
Marketing and corporate strategies

Slide 79
Lessons learned

• Marketing strategy is affected by changes in economic, technology,

political and legal, and cultural and social environments.

• Marketing planning includes four steps: define market environment,

assess resources and competition, plan competitive marketing
strategy, and implement strategy and marketing orientation.

• Competitor analysis includes identification, evaluation and prediction

of rivalry: direct, indirect and potential competitors.

• Planning and executing marketing strategy is not effective without

implementing marketing thinking throughout the organization.

• Marketing strategy needs to be aligned with corporate strategy

Slide 80