Marketing in Technology-Intensive Markets (July 2014 updated)


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Review of John, G., A. M. Weiss, and S. Dutta (1999), “Marketing in Technology-Intensive Markets: Toward a Conceptual Framework,” Journal of Marketing, 63, Special issue, 78-91.

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Marketing in Technology-Intensive Markets (July 2014 updated)

  1. 1. Prepared by Michael Ling Page 1 LITERATURE REVIEW SAMPLE SERIES NO. 2 “John, G., A. M. Weiss, and S. Dutta (1999), “Marketing in Technology-Intensive Markets: Toward a Conceptual Framework,” Journal of Marketing, 63, Special issue, 78-91.” Michael Ling July 2014 updated
  2. 2. Prepared by Michael Ling Page 2 Key Ideas The authors lay out a conceptual model of the “technology-intensive (TI)” market. Taking into consideration of how “scientific know-how” is created, disseminated and used, the authors develop three distinct characteristics of the TI market, namely depth, externalities and evolution, from which eight market characteristics and four marketing decisions are derived. The eight characteristics are unit-one costs, tradability problems, diversity, network compatibility, demand-side increasing returns and expectations; and the four marketing decisions are vertical positioning, product design, transfer rights and migration. Overall Comments This paper is not supported by any empirical evidence. The reason, I assume, that it could publish in one of the top marketing journals is because it was written during the peak of the internet boom, prior to the dotcom crash in 2000, where there was considerable demand for new knowledge and insight in the technology industry. Regarding “Demand-side increasing returns effects”, the authors highlighted the adverse effect of addressing a “wrong” vertical position by citing “the difficulties faced by Apple Computer” as an example. As we know, Apple Computer suffered serious financial and management problems in the past but are now back on track, producing a good range of leading edge products that are well-perceived by the market. It might have suffered badly due to the “demand-side” effect but it was then sufficiently compensated by its focus on achieving excellence in innovation, design and system architecture. Regarding “Expectations of pace of improvements” as a feature of the TI market, the authors commented that “customers, recognizing this... they must balance the value (and potential obsolescence) of installed product generations against the potential value of current
  3. 3. Prepared by Michael Ling Page 3 offerings and future arrivals in making upgrade decisions.” While this sounds like a piece of good advice to customers, in practice, it would not be a key consideration for the customer in making major TI purchase decisions. The critical issue to the customer is to consider the alignment of products to the firm’s technology strategy and direction. Consideration for financing option is an operating decision which comes next. Regarding providing “a continuum of migration options”, the authors suggested a sliding scale in terms of offering various level of migration assistance to customers. I agree with the overall migration scheme, but it is almost impossible for a firm to withdraw old products without offering migration assistance to its customers. It is not a sound business practice to leave customers in dire straits. Migration should be a standard service, whether it is provided free or at a premium. In fact, the installed base is a very profitable segment of the firm as it offers ample opportunities for up-sell and cross-sell. It is worth noting that the authors have taken a rather product-centric perspective to establish their model. Specifically, the four marketing decisions are product-oriented: vertical positioning, product design, transfer rights and migration. It would be helpful if the authors could include other key considerations in their model such as technology adoption, competitive threats and customer’s business processes. Technology Adoption Rogers discussed five categories of technology adoption: innovators, early adopters, early majority, late majority and laggards. Technology adoption of customer should be a significant marketing consideration of the TI firm as it helps the firm map out its marketing and product strategy. The authors mentioned technology adopters (p.81) but it was discussed as an effect in the context of “increasing returns” rather than as a marketing decision.
  4. 4. Prepared by Michael Ling Page 4 Competitive threats To prevent obsolescence, a TI firm needs to benchmark its products against the industry standard to stay competitive. Moreover, it is important to gather competitive intelligence from the market and feed them into market and product planning. Thus, competition should be considered as a marketing decision variable in the model. Customer’s business processes Customers would normally not be able to buy and use TI products off-the-shelf. In most cases, the TI products need to be configured, customised and integrated into the customer’s business processes before their values can be extracted and realized. As a result, an important marketing decision variable is to offer consulting services to the customers so that the TI products are integrated in their business processes. Reference: Rogers, E. M. (1983). Diffusion of innovations (3rd ed.). New York: Free Press.