Techno-Ready Marketing

How and Why Customers Adopt Technology

Charles L. Colby, A. Parasuraman

• Publisher: Free Press
• Year: 2001
• Print ISBN: 9781416576631
• eBook ISBN: 9780743213707
• Topic: Business
• Subtopic: Business General
• Index: Business

Conventional techniques for marketing technology products fail primarily because marketers do not truly understand their customers. Do you know what customers really think about your technology? Now, drawing on their award-winning research and case studies ranging from America Online to the Discovery Channel, marketing experts A. Parasuraman and Charles L. Colby demonstrate how the adoption of technology is influenced by unique beliefs that do not apply to conventional products and services.
In the context of a general set of powerful techno-marketing strategies, Parasuraman and Colby introduce "Technology Readiness" (TR), a groundbreaking concept that enables you to measure and assess a customer's predisposition to adopt new technologies. Employing their TR construct -- a psychological amalgam of fears, hopes, desires, and frustrations about technology -- the authors identify five types of technology customers: the highly optimistic and innovative "Explorers," the innovative yet cautious "Pioneers," the uncertain "Skeptics" who need the benefits of technology proved, the insecure "Paranoids," and the resistant "Laggards." Using this typology, you can customize your technology strategies by combining insights from your context-specific assessments with general marketing strategies presented in the book. Essential reading in technology companies will be the chapter devoted to Parasuraman's Pyramid Model, which explains the critical role technology plays in a marketing organization as a link between employees, the organization, and the customer. Finally, the authors have included a self-administered quiz so you can score your own Technology Readiness and a chapter on the "Techno-Ready Marketing Audit" to provide a framework for taking immediate action based on the precepts in this book.

Chapter 1

The Craft of
Techno-Ready
Marketing

In an environment transformed by technological change, the best technology solution does not guarantee market success. The career of Thomas Alva Edison is a case in point. With over 1,000 patents to his name, he was one of the most prolific inventors in history. Edison possessed an uncanny ability to identify a lucrative opportunity and respond by commercializing a new technology with broad market appeal.1

Throughout his 60-year career, which ended only upon his death in 1931, Edison saw potential in a wide range of products that included improved telegraph transmission, the phonograph, electric lighting, construction cement, motion pictures, electric cars, and rubber refining. In almost every case, his efforts led to stunning success in the early formation of a market he helped bring into being. In the long run, his ventures were usually surpassed by ambitious competitors who were better able to navigate the turbulent market for the new technology. His company, TAE Enterprises, never achieved the status of an AT&T, IBM, or Microsoft.2

One particularly instructive example is the phonograph, which Edison first commercialized in the 1870s. Successful as a novelty item with a limited market, the invention languished for decades until the efforts of budding competitors caught Edison’s attention. One of these competitors was the Victor Talking Machine Company, which today might be called a “technology start-up.”

The Edison phonograph technology involved a rotating cylinder upon which sounds were etched by a recording needle. In 1908, Victor introduced a rotating disk (the record format used for decades until made obsolete by CDs in the 1980s). Edison clung to the cylinder technology because he believed it provided a higher quality reproduction of sound due to the constant speed of rotation. But the Victor disk system was capable of storing a longer playing recording. Consumers did not notice the difference in sound quality, but they did see an advantage to more music on an individual storage unit.

Under great pressure from distributors, Edison reluctantly authorized the introduction of a disk system in 1912. In an effort to improve on the technology, his company developed a thicker, heavier disk made of compressed wood flour covered with varnish. He argued that his disks, which weighed 10 ounces, would be less likely to shatter than the frailer disks made by the competition. But this feature offered little advantage because consumers were unlikely to drop their precious disks.3

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EXHIBIT 1-1

One of the most prolific inventors in history, Thomas Edison might have achieved greater commercial success if he had been a more savvy techno-ready marketer who was sensitive to customer requirements. He is shown here with an early version of a phonograph that used a rotating cylinder to record and store sound. Source: Edison National Historic Site, National Park Service, West Orange, N.J.

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Edison tried other strategies to gain an edge in the market. In a decision ominously similar to one made decades later by Sony with its Betamax VCR format, Edison created his own standard. He deliberately introduced disks that were incompatible with the Victor system (Edison’s disk rotated 80 times per minute, compared to Victor’s 78½). Edison then sought to monopolize the best recording talent exclusively for his system, personally selecting and screening the artists. This plan had one problem: the great inventor suffered from a serious hearing impairment, so his taste in music was rather idiosyncratic and not attuned to those of the general public.4

Victor proved to be a much more savvy technology marketer. For example, it signed up its own popular artists of the time, including Enrico Caruso of the Metropolitan Opera. The company also moved into technologies that met new consumer needs, such as electronic recording and radio. In 1929, facing mounting losses and unable to survive solely on sales in the lucrative high-end market where it had gotten its start, the Edison family closed down its phonograph business.5

PRINCIPLES OF SUCCESSFUL
TECHNO-READY MARKETING

Although he was not the most successful marketer, Thomas Edison claims an important place in history. Edison’s craft can be labeled techno-ready marketing, the process of creating and developing markets by deploying innovative technologies. The word techno implies advancing a body of knowledge; the term innovation, often used in conjunction with technology, implies striving for something new, fresh, novel, and unexpected.6 Used in reference to a product or service, an innovation is unique because it is cutting edge when it is introduced. Examples of technology innovations today include e-commerce (selling on the Internet) and genetically enhanced food crops. In most cases, technology-driven innovations remove a certain degree of human input from the creation and delivery of a product or service. Well-known cases include the introduction of the automated teller machine (ATM) replacing a bank teller, and a typewriter replacing a scribe.

Techno-ready marketing is the science and practice of marketing products and services that are innovative and technology-intensive, a subject of great interest because our times are shaped by an explosion in innovation. Techno-ready marketing should be considered a separate discipline within the broader science of marketing because of the unique critical success factors when technology is involved. Furthermore, the factors that lead to satisfactory customer relationships are different for technology.

The uniqueness of techno-ready marketing can be characterized by four core principles about technology markets:

• Principle I: Technology adoption is a distinct process. Technology marketers are successful only if their output is accepted. The customer behavior for a technology-based product or service differs from a more conventional one. We have discovered this through extensive research on consumer beliefs about technology. When the marketer is introducing a cutting-edge product that replaces more of the human element, a whole set of special consumer beliefs comes into play. This includes a varying level of optimism about technology, a tendency to innovate, a problem of discomfort with technology, and an inherent insecurity. These beliefs are less germane, if at all, when marketing a tastier cereal, a classier vehicle, or a smoother-shaving razor.
• Principle 2: Technology innovations require different marketing strategies. Because the adoption process is different when technology is involved, so must be the approach to product design, pricing, communication, distribution, and service. To illustrate, a soft drink (a product with little technology) might best be marketed by using advertising to build a positive image in the minds of the target audience, one that appeals to the desired self-image of the buyer. A computer also affects a consumer’s self-image, but primarily by how user-friendly it is. For instance, if the computer fails to operate as desired in front of others, the user could be embarrassed and suffer a loss of self-esteem. As such, a computer maker would do well to initially aim its advertising more selectively at early adopters who are more confident about using technology. The computer maker must also channel considerable effort into making the product easy to use. Once the product is in the market, the computer maker must direct efforts toward helping new users operate it.
• Principle 3: Ensuring customer satisfaction is a more weighty challenge for a technology-based product or service. Once consumers adopt, they must grapple with an unfamiliar and often more complex approach to satisfying their needs. Customers of technology-based offerings require education and support. Furthermore, customers will vary considerably in the level of help they require and in their receptivity to the support that is offered. To illustrate, a customer who walks into a bank branch will engage mostly in familiar transactions and will have access to employees to solve problems. A customer who starts to bank online will need to learn banking anew and will be faced with uncertainties about the entire process.
• Principle 4: Technology markets are governed by a law of critical mass, often resulting in a “winner takes all” outcome. In a technology-driven market, it is not uncommon for a single company to achieve a dominant position that, once achieved, is impossible to challenge until a whole new technology comes along. Early entrants offering a new technology can be quite successful, but ultimately, one company engulfs its competitors or relegates them to niche status. History has shown that this occurs as a result of economies of scale in production, ownership of a standard, or interconnectivity. Examples of techno-ready marketers who achieved dominance these ways include, respectively, the Ford Motor Company with its mass production of the Model T, Microsoft with its standardized Windows operating system, and AT&T with its telecommunications network, which remained a monopoly until the 1980s.

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EXHIBIT 1-2
THE CYCLE OF CUSTOMER-FOCUSED INNOVATION

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As shown in Exhibit 1-2, each principle corresponds to a marketing practice, beginning with an effort to understand techno-ready consumer behavior. The logic of the first principle has been verified through consumer research, including work conducted by the authors. The first principle supports the logic of subsequent principles: if consumer behavior is indeed unique, then it is logical that marketing, servicing, and the path to success should also be unique. Eventually, an innovation ceases to be such, and a techno-ready marketer is left with the choice of competing in a mature market or innovating with technology as part of a continuous process.

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EXHIBIT 1-3
RATE OF ADOPTION OF A COMPANY’S
TECHNOLOGY-BASED PRODUCT OR SERVICE

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Many organizations engaged in techno-ready marketing could easily ignore the principles described above. Like Thomas Edison in the early years of marketing a hot new innovation like electric lighting, they could argue that their product resulted in a sustained commercial success. They could do more to understand consumer beliefs and adapt accordingly, but who can argue with profits? Marketers who hold this viewpoint should consider a few caveats relating to the principles above.

• If a company markets its technology in a manner that is more responsive to customer need, it will accelerate the speed of adoption and achieve greater sales volume sooner. (See Exhibit 1-3.)
• Poorly designed technology results in products and services that are harder to use. This taxes the customer support infrastructure, costing money. Technology that is customer-focused will cut product returns and service cancellations. It will also result in fewer calls to tech support. All of these outcomes reflect positively on the bottom line. (See Exhibit 1-4.)
• Perhaps the most pressing reason for being a smart techno-ready marketer is the principle of critical mass. It is possible for one company to completely win the game. The winner will be the company that does the best job of responding to the unique beliefs, adoption process, and educational requirements surrounding a technology-based product or service.

TALE OF TWO SERVICES: HOW BEING
THE “FIRST” DOES NOT GUARANTEE
LEADERSHIP FOREVER

Close to half of U.S. households use an online or Internet service, and growth in this market shows no signs of slowing. If credit were to be given to one company for creating this huge industry, a good candidate would be the venerable pioneer CompuServe. Before the World Wide Web even existed and few people had heard of the Internet, CompuServe had over a million subscribers interconnected by computer. The company was acquired in 1993 by H&R Block, and was considered at the time to be the crown jewel in the company’s portfolio.

How did this innovative company become so successful? To begin with, CompuServe offered a truly unique service that satisfied an unfulfilled niche. It used network technology to provide a mass market with instant access to valuable databases. It also connected users with each other, allowing them to interact by e-mail and forums. Another key to CompuServe’s success was its focus on serious users—the business, professional, and technical customers—who were the only ones willing to pay for the information-rich service.

Compared to the Internet world of today, the CompuServe system was a challenge to use. It required some tech-savviness to install, its IDs were long streams of numbers instead of an actual name, and file transfers over the Internet required extra steps. These obstacles did not stop the early consumers who were willing to innovate and could see the benefits of being online.

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EXHIBIT 1-5
AMERICA ONLINE SUBSCRIBERS

Source: AOL Communications

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While CompuServe was growing a base of loyal users, a technology entrepreneur named Steve Case was pursuing a vision of his own. He wanted to introduce online computing to a mass market. In his company, which took the name America Online in 1985, the key word would be simplicity, and the customer an average person who could be totally lacking in technology skill. The company got off to a rough start. Case was almost fired by his board after the first year, but a board member argued that the company could benefit from the lessons he gained from losing millions of dollars. Ultimately, the company began to accumulate market share rapidly—one million subscribers in 1994, seven mi...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Acknowledgments
• Contents
• Preface
• Chapter 1 The Craft of Techno Ready Marketing
• Chapter 2 Technology Readiness
• Chapter 3 The Technology Readiness Index TRI
• Chapter 4 The Five Types of Technology Customers
• Chapter 5 A Closer Look at Technology Customers
• Chapter 6 The Pyramid Model of Marketing
• Chapter 7 Acquiring Technology Customers
• Chapter 8 Satisfying The Technology Customer
• Chapter 9 The Techno Ready Marketing Audit
• Chapter 10 The Techno Ready Society
• Notes
• Index
• About the Authors