Crafting a Deployment Strategy
Timing
Strategic timing of entry
firms can use timing to take advantage of business 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 firm 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 willingly 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)
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
Pricing
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 (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 costumer'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)
e.g. computer games and services often have a "freemium" model, where the base product is free, but additional features or capacity have a price
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
Manufacturers' representatives: independent agents that may promote and sell the product lines of one or a few manufacturers
Wholesalers: firms that buy manufacturer's products in bulk then resell them (typically in smaller, more diverse bundles)
useful for direct selling when its impractical for manufacturer ti have own direct sales force for all markets
provide bulk breaking and carry inventory
handles transactions with retailers and provides transportation
Retailers: firms that sell goods to public
provide convenience for costumers
enable on-site examination and service
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, info 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
These factors help determine 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 pre-purchase 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 or large and influential end users
Guarantees and consignment
Reduces risk to intermediaries and complements providers
Marketing
Advertising
requires effective message
requires that conveys message to appropriate target market
Must strike balance between making sth memorable and making it useful
varies in match to audience, richness reach na cost
Promotions
several temporary selling tactics, e.g. samples or free trial...
Publicity and PR
attempt to generate free publicity and word-of-mouth
produce own internally generated publications
sponsor special events
viral marketing: is an attempt to capitalize on social networks by "seeding" information to well-connected individuals
Use marketing to Shape Perceptions and Expectations
Preannouncements and press releases
can build "mind share" in advance of actual market share
can forestall purchases of competitor's products
Reputation
provides signal to market of likelihood of success
Credible commitments
substantial irreversible investments can convince of firm's confidence and determination
Information Epidemic by Connectors, Mavens and Salespersons