Internet Marketing

New Product Development

andthe Net

Marketing ProcessesThat Can Be Digitized

Understand Markets

& Customer

s

Involve Customer

s in Design Process

Market & Sell

Products &

Services

Deliver Value

Through Distributi

onProvide

Customer Care

Manage Customer Informati

on

Topics

High-tech battlesSpeedFlexible new productsStandards

High-Tech BattlesThe Browser Wars

The browser battles started with a strong showing from Netscape. From a startup in 1995, Netscape became a billion-dollar company, the fastest-growing software

company ever.

Four generations of browser technology took Microsoft… from sideline player to

browser lead. The battles also led to controversy, anti-Microsoft newspaper editorials, and governmental antitrust

attention.

The Need for Speed

Internet time refers to rapid change and evolution of Internet tools The marketplace Business practices

An entire industry created in < 5 years Internet time also refers to acceleration of

New product development Competitive activity Business tactics

Using the Net’s communication & research capabilities to bring new products to market quickly is essential

Speed and Profits

High profits from a successful early market entry can be plowed back into next generation products

Slow entry and lost profits lead to erosion of a company’s fortunes

Figure 8.3

Profits and Speed to Market

3x

2x

1xX

06 months early 6 months late

Time of Market I ntroduction Relative to Competitors

Speed and Innovativeness

Slowness to market erodes consumers’ positive perceptions of a company

Best-in-class companies use time pacing to govern new product activity

Rapid product introduction is critical in high-tech markets Market leaders can count on high consumer interest,

feedback and free advice Speed to market leads to learning

Companies that use customer feedback have an important advantage over rivals

Speed and Alliances

Early market entrants attract leading-edge partners Third-party suppliers approach market leaders with

enhancements and improvements Allies fill in product and marketing gaps to provide a

complete solution for customers

For the market leader, money and talent are too scarce to “go it alone”

Distribution partnerships are key to getting product to market

Speed and Standards

Market leaders often play a key role in setting standards

Companies that define standards can be in a strong strategic position for decades

Rivalries between competing standards don’t usually last long Once a standard is established, the marketplace

swings dramatically toward it The losing standard sinks quickly VHS vs. Beta Max

When standards matter, success breeds success

Traditional New Product Development

Too slow for Internet time Two main goals

Uncover unmet customer needs

Eliminate design mistakes before too many resources are committed

Many new ideas enter the new product process

Only a few new products emerge

This process is expensive and time consuming

Figure 8.5

General Product Design Funnel

Rapid New Product Development

• Internet time forces firms to find new ways to identify user needs and rapidly launch new products

• The keys– Maintain flexibility as long as possible– Accelerate the process of market feedback

• These methods work especially well for online products

• But they are spreading to the rest of the economy

Figure 8.6

Sensing the Market

Specifi cation

Design

Testing

I ntegration

Stabilization/ Ramp-Up

Modularity in Design

Modular design breaks a new product into subsystems or modules Each module can be designed and tested separately Teams can work in parallel, rather than wait for a

preceding group to finish its work

Parallel efforts reduce dramatically the total time to launch new products

Enables firms to handle speed and complexity in new product development

Modularity in Design Modularity requires two design features

Visible design rules Hidden design parameters

Visible design rules: define the ways that modules interact with each other and describe how they should fit together

Hidden design parameters: define how each module works internally Each team has full control over the hidden design parameters of its

module Enables the team to delay final design choices as long as possible,

to reflect marketplace feedback and to accommodate changing technologies

Early Feedback Flexible new product development relies on the

ability to get meaningful and rapid feedback from customers Identify new opportunities React to new designs Spot declining interest in existing products

E-mail enables low-cost, rapid access to customers Can speed up feedback from lead users Faster and cheaper method of conducting surveys

Using the Net to release early prototypes also permits valuable learning and testing

Rapid Prototyping and Testing

Alpha release: limited release to trusted lead users and company employees May be asked to sign NDA The goal is to shape the product and understand how functional it is The competitive clock starts ticking with the alpha release

Beta release: public release to widely test and to continue to refine the feature set Key goals are reliability, compatibility, and fixing user interface

problems Beta-testing is a form of advertising and sampling A valuable substitute for extensive testing

Rapid Release

Rapid product development sets the stage for profitability

The ability to go to market quickly is a final key to success

Time lost in the distribution cycle is even more damaging than time lost in development

Once the product design is frozen and has been released to manufacturing, all time lost is pure cost

Standards Marketing

Standards are a defining feature of high-tech markets

Standards determine How hard drives, floppy disks, screens, keyboards, and

memory communicate with each other How computers connect to the Internet How files and messages are turned into packets How packets reach their destination

Conventions are also important General practices that designers expect Not formally set by a standards body

Two Types of Standards

Open standard: based on an official process of debate, consensus, and voting by an official standards body

De facto standard: established when a product or approach is so widely adopted that it becomes expected

De facto standards are controlled by a single company – open standards are not Sun Microsystem’s has submitted Java to the ISO for

acceptance as an open standard Microsoft’s Active X: a proprietary standard owned and

controlled by Microsoft

Creation of an Open Internet Standard

Figure 8.9Write

Specifi cation

Plausible?

Clear?

Proposed Standard

At least two independent

working versions?

Draf t Standard

Technically mature

consensus exists?

I nternet Standard

Rewrite

Wait f or working

code

Wait f or

resolution

NO

YES

YES

NO

NO

Standards Strategy

High-tech companies often have formal staff positions that set standards strategy Participate in the standards bodies Project which standards seem to be winning

Managers need to decide which standards to deploy in their products Should base their products on open standards? Or should they try to win a battle in the marketplace

with a proprietary standard? In high-tech markets, a single standard generally

emerges and the winner takes all

Standards Competition Leading to Domination

Figure 8.12

Unstable

sharing of

market

Market share of standard A in time t

0% 50%

100%

50%

100%

0%

A loses

A wins

Information Acceleration Systems

Place consumers in a virtual buying environment IA systems simulate the information that’s

available to consumers when they make a purchase decision Virtual showroom visits Advertising (TV, magazines, newspapers) Review articles and consumer-oriented reports Word of mouth

Are these virtual environments realistic enough to accurately measure behavior? Early evidence is positive, but mixed

Solving Problems Online

Lower customer support costs

Improved online value for customers

Companies and consumers benefit Lower costs improve profit

margins Savings can be passed

through to consumersFigure 6.3

Provides Strong Justification for Investing in the Web

Cost Savings

Q: Where do these cost savings come from? Online publishing saves the cost of printing and

shipping manuals Software updates can be downloaded, saving

the cost of burning and shipping CDs Virtual problem solving Inexpensive communication

Traditional Customer Service Methods Are Expensive

• Sales calls and call centers – Require expensive, assisted, real-time interactions– Are labor intensive

Customer ServiceMethod

Agent:CustomerRatio

Type ofInteraction

Type ofService

Sales Force 1:1 Real- time Assisted

Call Center 1:1 Real- time Assisted

Headline

Insert excerpts from a current article out of the business press (e.g. Wall Street

Journal, Wired News, Business 2.0, or Fast Company) that talks about the importance of online customer support. I usually take excerpts out of the lead paragraph, and highlight keywords. There have been a

number of articles talking about increased investments in online customer support.

Name of Publication - Date

The ADR FrameworkAcquisitionSupported

DevelopmentSupported

RetentionSupported

Web Advertising E- mail accounts Free trials Amazon partners Edmund's QFN

Community andpersonalizationspending

I nformationcollection

Syndication expenses

Customer support Enhancement

spending Eff ectiveness

spending

• Acquisition: the cost of bringing in new customers• Development: costs incurred expanding the share-

of-customer that firms receive from existing customers

• Retention: costs to keep the business and loyalty of current customers