1. overview:

 A large part of the value of a technological innovation is determined by the degree to which people understand and use it.

An effective deployment strategy is thus a key element in a technological innovation strategy.

Some of the key elements of an effective deployment strategy include timing, licensing and compatibility, pricing, distribution, and marketing.

2. timing:  The timing of a market launch can be an important deployment strategy

• Strategic Timing of Entry

-Firms can use timing of entry to take advantage of business cycle or seasonal effects

E.g., video game consoles are always launched just before Christmas.

-Timing also signals customers about the generation of technology the product represents.

E.g., if too early, may not be seen as “next generation”

-Timing must be coordinated with production capacity and complements availability, or launch could be weak.

• Optimizing Cash Flow versus Embracing Cannibalization

-Traditionally firms managed product lifecycles to optimize cash flow and return on investment  would not introduce new generation while old generation selling well.

-However, in industries with increasing returns this is risky.

-Often better for firm to invest in continuous innovation and willing cannibalize its own products to make it difficult for competitors to gain a technological lead.

-Cannibalization: when a firm’s sales of one product (or at one location) diminish its sales of another (or another location).

3. Licensing and Compatibility

Protecting a technology too little can result in low quality complements and clones; protecting too much may impede development of complements. Firm must carefully decide:

• How compatible to be with products of others

-If firm is dominant, generally prefers incompatibility with others’ platforms but may use controlled licensing for complements.

-If firm is at installed base disadvantage, generally prefers some compatibility with others and aggressive licensing for complements.

• Whether to make product compatible with own previous generations (“backward compatibility”)

-If installed base and complements are important, backward compatibility usually best – leverages installed base and complements of previous generation, and links generations together. Can be combined with incentives to upgrade.

4. pricing

Price influences product positioning, rate of adoption, and cash flow.

• What are firm’s objectives?

-Survival

-Maximize current profits

-Maximize market share

• Typical pricing strategies for new innovations:

-Market skimming strategy (high initial prices)

--Signals market that innovation is significant

--Recoup development expenses (assuming there’s demand)

--Attracts competitors, may slow adoption

-Penetration Pricing (very low price or free)

--Accelerates adoption, driving up volume

--Requires large production capacity be established early

--Risky; may lose money on each unit in short run

--Common strategy when competing for dominant design

-Can manipulate customer’s perception of price

--Free initial trial or introductory pricing

--Initial product free but pay for monthly service

--Razor and razorblade model: Platform is cheap but complements are expensive (as in video games)

5. distribution : 

Selling Direct versus Using Intermediaries

• Selling direct

-Gives firm great control over selling process, price and service

-Can be expensive and/or impractical

• Intermediaries may include:

a. Manufacturers’ representatives: independent agents that may promote and sell the product lines of one or a few manufacturers.

-Useful for direct selling when its impractical for manufacturer to have own direct sales force for all markets.

b. Wholesalers: firms that buy manufacturer’s products in bulk then resell them (typically in smaller, more diverse bundles)

-Provide bulk breaking and carry inventory.

-Handles transactions with retailers and provides transportation.

c. Retailers: firms that sell goods to public

-Provide convenience for customers

-Enable on-site examination and service

d. Original equipment manufacturers (OEMs):

-A company that buys products (or components) from other manufacturers and assembles them or customizes them and sells under its own brand name. E.g., Dell Computer

-Aggregates components from multiple manufacturers

-Provides single point-of-contact and service for customer

• In some industries, information technology has enabled disintermediation or reconfiguration of intermediaries. E.g., online investing enables customers to bypass brokers; online bookselling requires retailer to provide delivery services.

whether and what types of intermediaries the firm should use:

• How does the new product fit with the distribution requirements of firm’s existing product lines?

•How numerous and dispersed are customers, and how much product education or service will they require? Is prepurchase trial necessary? Is installation or customization required?

•How are competing products or substitutes sold?

Strategies for Accelerating Distribution

•Alliances with distributors

-Providing distributor with stake in product’s success or exclusivity contract can motivate them to promote more.

•Bundling relationships

-Sell in tandem with product already in wide use.

•Contracts and sponsorship

-Provide price discounts, special service contracts or advertising assistance to distributors, complementary goods providers or large and influential end users.

•Guarantees and consignment

-Reduces risk to intermediaries and complements providers.

6. marketing

• Advertising

-Requires effective message

-Requires media that conveys message to appropriate target market

-Varies in match to audience, richness, reach, and cost.

-Must strike appropriate balance between entertainment or aesthetics (to make memorable) versus information content (to make useful)

•Promotions

Temporary selling tactics that include:

-Samples or free trial

-Cash rebates after purchase

-Including an additional product (a “premium”) with purchase

-Incentives for repeat purchase

-Sales bonuses to distributor or retailer sales representatives

-Cross promotions between two or more non-competing products to increase pulling power

-Point-of-purchase displays to demonstrate the product’s features

-Publicity and Public Relations

--Attempt to generate free publicity and word-of-mouth (e.g., mention in articles, television programs, etc.)

--Produce own internally generated publications

--Sponsor special events

Tailoring the Marketing Plan to Intended Adopters

• Innovators and Early Adopters respond to marketing that offers significant technical content and emphasizes leading-edge nature of product.

-Need media with high content and selective reach

•Early Majority responds to marketing emphasizing product’s completeness, ease o fuse, consistency with customer’s life, and legitimacy.

-Need media with high reach and high credibility

•Late Majority and Laggards respond to marketing emphasizing reliability, simplicity, and cost-effectiveness.

-Need media with high reach, high credibility, but low cost.

Using Marketing to Shape Perceptions and Expectations:

Perceptions and expectations of value can be as important as actual value. To influence, can use:

• Preannouncements and press releases

-Can build “mind share” in advance of actual market share

-Can forestall purchases of competitors’ products

• Reputation

-Provides signal to market of likelihood of success

• Credible commitments

-Substantial irreversible investments can convince market of firm’s confidence and determination