LESSON 7

LEARNING CONTENT
Introduction: 
While marketing has always focused on the customer, the internet is changing this focus from customer segments to
actual individuals.  Why and how this is happening is the third part of the DNI framework.  Effective interactivity sets the
stage for online relationship building (Hanson, 2000). 
Lesson Proper:
The Dell Triangle

 
Online Marketing 
      Direct interaction creates customer value and sets the stage for relationship building
      This creates opportunities for
o      personalization
o      community building
o      real-time marketing

Online Behavior & Interactivity 

       Interactivity depends on
o     Direct communication – dialogue is possible when there is direct communication between
marketer and customer, without intermediaries filtering or blocking feedback
o     Individual choice – The Net is more than just a communications medium. It is also a vehicle
for assortment, advice, choice, and transactions.
o     Friendly technology – The Internet can be a difficult and challenging environment for users. In
order to realize the potential of the medium, firms must make the Net friendly and more
appliance like.
      Online marketing requires a careful understanding of how consumer behavior changes in an online world.
This reflects how users relate to on-screen material, how communication occurs when social and quality cues
are limited, how hard it is to find material, and online activities range from challenging to tedious.
      All marketing is concerned with the demographics of current and potential customers. Demographics become
even more important when marketing efforts are mediated by technology, global in scope, and are individual-
based.
 
Let’s take a look at each of these 
Direct Communication
     Dialogue is possible when there’s direct communication between marketer and customer
o      Intermediaries can filter or block feedback

 
Different Communication Modes
1. One-to-many broadcast
2. Direct Targeting
3. One-to-one Interactive
 
From Broadcast to Dialogue

 
 Comparing Communication Methods
 Hoffman & Novak (1996): Compared traditional and online communication methods
 They looked at
 1. Communication model: different media were categorized into one-to-many « one-to one; there is an
additional category of few-to-few, representing small group discussion.
2. Media symmetry: is the information flow symmetric? Media differ in the symmetry of the information
flow. For example, two people exchanging e-mail have symmetric capabilities. Each can receive and send
the same amount and quality of information.  On the other hand, a Web site sends much more
information to individuals in Web pages then it receives from individuals in clicks.
3. Media content: Media differ in their use of text, images, audio, video and experiential content.
4. Diversity of information: Communication methods differ in the number of information sources available
through the medium (billboards vs. cable TV or the Web)
5. Communication timing: Some communication methods are synchronous (real time) white others are
asynchronous. A face-to-face meeting is synchronous.  Discussions cannot be stored; participants must
respond or not immediately.  The same is through of a telephone call. E-mail, voice mail, and the Web
are important examples of asynchronous methods.  Users can communicate without their schedules tied
to the presence of others.
6. Personal interactivity: takes place between groups of individuals, such as in a personal meeting or in an
online chat room. Machine interactivity refers to interactions between the user and Web technology,
where the machine can respond to an individual’s choices. person-to-person vs. machine-mediated
interaction
 
COMPARING COMMUNICATION METHODS
- The Web is a flexible technology.
- It’s evolving into a personal and dynamic communication medium.

- The figure above combines the results of these media comparisons by using a market research technique that
groups similar media together.  This clustering techniques reduces all the attribute levels of the technologies to
a two-dimensional similarity map, where proximity suggests similar features and capabilities. 
- After a map is produced, an analyst has one more step.  Clustering produces a two-dimensional map without
axes labels.  This is up to the analyst.  Hoffman and Novak view the horizontal axis as ranging from impersonal to
personal and the vertical axis as ranging from static to dynamic. 

- The figure above illustrates several important points.  The first is the compromise inherent in many Internet
techniques.  The Web is located near the middle of the diagram, away from the extremes.  When an extreme
form of communication is desired, the Web may not be the best approach. On the other hand, the Web has
elements of many other methods.
  
Individual Choice
Selection + Suggestion = Value 
      The modern economy presents a staggering amount of variety
o      Typical supermarkets contain 25,000 different items
o      Variety expands even further without the physical constraints of inventory and shelf space
      Choice is confusing without a way to compare, evaluate & select among the huge number of possibilities
o      New technologies combine selection and suggestion
o      Enable consumers to make more effective choices

 
 Impact on Consumer Choice
 
Selection Suggestion

        Shopping on demand         Personalization

        Greater value consciousness         Customization
        Power shift to consumers         Automation of consumption
“Friction-Free Capitalism “Captive Consumers”

 
 Friendly Technology
 Technology is technology only if it was invented after you were born 
      Televisions, radios, telephones, and VCRs have market penetrations > 85%
      The Web must become even easier & friendlier to reach the 98% household penetration of TV
      As Web access devices becomes more appliance-like, increasing numbers of consumers will be online
      Internet marketers must understand consumer behavior online

 Web Stage and User Challenges

- The easiest type of online consumer activity is when loyal and experienced users perform simple tasks
- More complicated tasks require marketers to develop better user interfaces
- More risky transactions require marketers to establish trust and pay attention to customer needs
 

 
Online Consumer Behavior
The Media Equation
Media = Real Life
- Byron Reeves & Cliff Nass 
 Users relate to virtual information in many of the basic social ways they interact with people in their everyday
lives
 Users treat machines and software like people

 
Why Are There Social Responses to Information Technology?
 The human brain isn’t well adapted to 20th century media
 New media is engaging old brains

 
Simple Technological Features Can Elicit Strong Social Responses
     Manners are critical in online & computer messages
     Good Manners = positive responses
     Behavior that is considered rude in real life is considered rude onscreen

 
Social Cues
 E-mail lacks the social cues that a phone conversation or a face-to-face meeting provide
 Misunderstandings develop more easily because people it’s harder to judge confusion
o People don’t get the signals that make them stop and explain themselves in face-to-face
discussion
 People tend to use stronger language and express themselves more frankly
 And they tend to circulate their thoughts to a much wider audience
 Unhappy customers may resort to flaming
o E-mail makes it easy to escalate negative word of mouth
o Flaming can lead to bad press
 Customer service reps have to be careful not to respond similarly
o Requires deliberate policy and training

 
Cognitive Difficulty
 One of the challenges of providing online information is making it accessible to users
 Providing effective search functionality is key
 Site developers must understand how their users are likely to search and browse
 
Flow
 Consumers respond enthusiastically when there is an effective balance between the difficulty of using the Web
and its rewards. One of the experiences that many new users report with amazement is the ability to get lost in
their activity and suddenly discover that an hour or two has passed.  Of course, some view this as lost work and
productivity.  But from the user’s point of view, it has been an enjoyable and stimulating activity. 
Csikszentmihalyi has called this the state of flow, which represents the “process of optimal experience.” 
Hoffman and Novak feel this is an important aspect of online activity.  They find that flow occurs when the
online experience is:
o     Characterized by a seamless sequence of responses
o     Intrinsically enjoyable
 o     Accompanied by a loss of self-consciousness
o     Self-reinforcing
 Achieving flow can be very important for recreational uses of the Web. Digital environments will never be
entirely persuasive and “real” if a consumer is constantly having to figure out the mechanics of navigation and
choice within the virtual world.  There needs to be a delicate balance between capability and challenge.  Too
much capability leads to boredom, and too much challenge leads to frustration.  This type of design problem is
very common to videogames and other forms of online immersion.
 Flow may also be connected to the effectiveness of ad-supported medium. One of the leading theories of ad
effectiveness on television stresses the passive and uncritical state of mind television induces in many viewers.
While the state of flow can be quite entertaining, it can also induce a suspension of active critical thinking. This
may make the Web user in a flow state more susceptible to these forms of ad campaigns. Flow can also be
influential in increasing the duration of visits to the site or digital environment.  This further reinforces the ad-
based model, as it gives more time to the advertiser to include advertisements. 
 
Who’s Online? 
 High income
 Above average education
 Heaviest users: 30-49 years old
 students & kids also online
 seniors & older middle-aged less likely
 Gap between male & female is closing
 US dominates
 wealthiest European & Asian countries coming online quickly
 
Why Does It Matter? 
As Time Passes

o More people online

o More people connecting at higher speeds
o More people using the Web to shop and transact business
o >40% of those with 4+ years experiences on the Web regularly shop and conduct Web commerce
o as opposed to only 12% of people who have been online for <1 year

Lesson 8 - Customer Support and Online Quality

 
Included in this 8th week module are the following: 

1. Weekly Study and Assessment Guide

2. Worksheets to be submitted to your teacher
 
This Week’s Time Table: (October 12 - 16, 2020) 
For this week, the following shall be your guide for the different lessons and tasks that you need to accomplish. Be
patient, read them carefully before proceeding to the tasks expected of you.  HAVE A FRUITFUL LEARNING
EXPERIENCE 😊
  
Introduction: 
Much of the power of the Net is being used to increase quality and customer satisfaction.  This is through product
improvement, better support of customers throughout the entire sales process, and an understanding of consumer and
business productivity. As part of this effort, companies need to understand what extensions to their products and
images work, and what makes financial and customer-oriented sense. 
Customer support and quality improvement provide two of the strongest justifications for investing in the Web.  They
drive adoption of the Web by many companies, with the marketing department leading the way.
 
Lesson Proper:

 
 
SOLVING PROBLEMS ONLINE 
Provides Strong Justification for Investing in the Web
       Lower customer support costs
       Improved online value for customers
       Companies and consumers benefit
o          Lower costs improve profit margins
o      Savings can be passed through to consumers
       Benefits are strongest for companies that are first to innovate
o          Increased market share
o      Improved customer satisfaction
o      Improved customer acquisition and retention

 Lower Costs
 Cost savings from using the Internet to support customers are more measurable and controllable that many
other customer support investments
 These savings can be quite large

 
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
 
Virtual Problem Solving
          Online solutions
o            Many companies practice call avoidance, making people log on instead
o       Difficult / impossible to find a phone # on the site
      Stored answers
o          FAQ
o       E-mail auto-responders
      Customers help each other
o          Bulletin boards

 
Traditional Customer Service Methods Are Expensive
 

Customer Service Method Agent : Customer Ratio Type of Interaction Type of Service
Sales Force 1:1 Real-time Assisted

Call Center 1:1 Real-time Assisted

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

Inexpensive Web-Based Communication

 
Customer Service Method Agent: Customer Ratio Type of Interaction Type of Service

E-mail 1:1 Messaging Assisted

E-mail with AI 1:many Messaging Self

Web: FAQ 1:many Messaging Self

Web: self 1:many Messaging Self

Web: chat 1:many Real-time Assisted

Web: Phone 1:1 Real-time Assisted
 
 Many of these methods do not require real-time intervention
 Customers are able to solve their own problems
 
Traditional and Web-Based Customer Support
 

Customer Service Method Agent: Customer Ratio Type of Interaction Type of Service
Traditional Support

Sales Force 1:1 Real-time Assisted

Call Center 1:1 Real-time Assisted

Internet Support
E-mail 1:1 Messaging Assisted

E-mail with AI 1:many Messaging Self

Web: FAQ 1:many Messaging Self

Web: self 1:many Messaging Self

Web: chat 1:many Real-time Assisted

Web: Phone 1:1 Real-time Assisted

Web-Based Customer Support
 Merging e-mail, artificial intelligence, and smart routing shows promise
o          First: the system tries to find a stored answer
o       Second: the system tries to find the best customer service rep to handle the request
o       Third: the response becomes a part of the database
 Over time, the database becomes richer and more inquiries can be handled automatically by the system

 
So What?
Success on the Web is Becoming More & More About Customer Care
 Provide Customer Care Through Online Content
Headline
Name of Publication – Date
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.
 
Customer Care
Q: How do you create a Nordstrom-like experience on the Internet?
 
Online Quality Enhancements
 Virtual value activities can improve quality
 Companies have multiple constituencies
 It’s possible to use the VVAs to design Web content that supports multiple customers and needs

 
Virtual Value Activities and Customer Support Solutions

VVAs Investor Relations Technical Support

Product manuals
Capture SEC Filings
Product design documents
Record Press Releases
Gathering Help desk information
Stock information
Field engineers
Analyst Reports
Warranty information

Chronological listing
Product line listing
Keyword Search
Organizing Search
News flashes
Index
Product group

New flashes FAQs

Selecting SEC reports High-hit requests
CEO speeches Frequent call center requests
Reporter pages Getting started pages
Synthesizing
Analyst pages Solution pages
Distributing Homepage link Navigation bar links
Investor channel Solution CDs
Key customer extranet Mass Media acts
 Key suppliers extranet

 
Online Quality Enhancements
       Effective use of the Web can increase customer satisfaction
       Product design: online discussions provide early feedback that provide valuable insight and suggestions
       Sales: consumers have access to online product information and dealer locations
       After-sales support: self-help problem solving, technical support & user groups
       Company culture: Web content communicates and reinforces corporate culture

  
Drivers of Customer Satisfaction

 
 

PRODUCT DESIGN SATISFACTION DRIVERS AND ONLINE METHODS

  Satisfaction Components Online Methods
Design
Valuable online enhancements,
Product          Messages and quality signals Product information, Useful
additional products, FAQs
         Sales and support effectiveness
Feedback from early users, Usenet
  Feedback and incentives
groups. E-mail from users
Sourcing and manufacturing
         Customer contact Collaborative design with suppliers,
  Intranet and extranet sharing of
         Quality information
         Cost
 
 
SALES ACTIVITY SATISFACTION DRIVERS AND ONLINE METHODS
   Satisfaction Components Online Methods

Messages Web site positioning and

requirements, Information and
Sales Activity          Overt
editorial content, Use of
         Covert personalization when valuable

Attitudes
Brand reinforcement by site, Ease of
           Sales force training
use, Responsiveness
         Sales force rewards

Intermediaries Guides to dealers and dealer support

information, Advance and in-depth
         Incentives
support to dealers using extranets,
           Selection Archives of sell sheets, Effective
transaction systems and delivery,
         Training
Online product and service
         Monitoring information

 
 
AFTER-SALES ACTIVITY SATISFACTION DRIVERS AND ONLINE METHODS

  Satisfaction Components Online Methods

Support services
Self-help problem solving and FAQs,
After-Sales          Coverage
Tech support online, User groups
         Quality and performance

Feedback and restitution

Customer service e-mail, repair
           Coverage tracking, Warranty explanations and
personalized coverage
         Responsiveness
 
 
CULTURE SATISFACTION DRIVERS AND ONLINE METHODS

  Satisfaction Components Online Methods

Formal symbols and systems
         Mission statements Online image and branding,
Culture
         Performance standards Performance measures online

         Compensation
Informal symbols and systems
Mission statements and public works
           Beliefs
involvement, Social activities
         Values
 
 Justifying Online Enhancements
       Two possible methods for justifying a firm’s investment in an online presence
o Breakeven investment analysis
o Customer-centered method, looking at customer acquisition, development and retention rates
       Let’s take a closer look

  
BREAKEVEN INVESTMENT ANALYSIS
Cost Focus vs. Quality Focus
 
The Cost-Quality Tradeoff for Traditional Support 
        Traditional customer support technologies
o        customer-support call centers
o        sales force help
o        dealers
        Steep curve due to increasing difficulty of providing higher quality levels

 
Limited Quality Pure Online Support 
       Exceptional service not yet attainable using online only
       Online content is low cost for basic levels of support
       Costs rise rapidly at higher levels
       Pure online support attractive for cost-oriented firms

  
The Cost-Quality Tradeoff for Traditional Support

Creating a Hybrid High-Quality Support System

          Hybrid systems combine online content and technical help from staff
o Online material handles routine inquiries
 o Customer-support staff focuses on difficult issues
       Staff also provide support to customers without access to online materials
       Quality-oriented firms use
 
BREAKEVEN INVESTMENT ANALYSIS
A Dynamic Implementation Path
       Cost savings from migrating to an online support model free up funds to enhance customer support over the
long run
       Managers often opt to achieve hard savings first
       Then use those savings to improve quality

 
CUSTOMER LIFETIME VALUE ANALYSIS
Closed Loop Web Enhancements
       Web marketing as direct marketing
       The Internet’s digital nature make it possible to capture, store & manipulate huge amounts of data on
individuals
       Three activities related to marketing at the individual level
o           Customer acquisition
o        Customer development
o        Customer retention

The ADR Framework

Acquisition Supported Development Supported Retention Supported

Web advertising
e-mail accounts Community and personalization spending Customer support
free trials Information collection Enhancement spending
Amazon partners Syndication express Effectiveness spending
Edmund’s QFN
 
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
 
 Co-Production
 A new view of the company and its customers as co-producers emerges when the Web is used in sophisticated
ways to provide customer support
 The customer is no longer a passive recipient of a product and some support material
  Rather the customer is a partner
  Closer links between companies and their customers provide opportunities for personalization and new product
development
Lesson 9 - Personalization
 
Included in this 9th week module are the following: 

1.       Weekly Study and Assessment Guide

2.       Worksheets to be submitted to your teacher
 
LEARNING CONTENT 
Introduction: 
          Personalization reflects the fundamental idea in marketing and customers want a product or service that best
matches their needs.  The Web can serve as the matchmaker that discovers and delivers personal information and
individualized products (Hanson, 2000).
 
Lesson Proper: 
PERSONALIZATION & MARKETING
 Marketing has the responsibility to reflect customers’ goals, needs and wants
 The result is that companies create product lines with many product and service variations in order to meet the
needs of various target markets
 Personalization is a special form of product differentiation
o A standard product is transformed into a specialized solution for an individual 

Choice Assistance
 An explosion in the number of choices leads to customer confusion
 The Web is rapidly developing methods to help consumers choose wisely from the wide array of available
products
 Choice assistance can help the consumer discover his or her own tastes 

Customization
 Mass customization has emerged by combining individual-level information and flexible manufacturing
 By incorporating individual preferences, marketing more closely reflects the “voice of the customer”
 Using specialized software, it is possible to deliver truly unique and dynamically personalized Web sites in real
time
 The Web is emerging as an essential piece of the customization puzzle 

Relationship Marketing
      Choice assistance and customization lead to more powerful personalization
      Personalization becomes the basis for retaining loyal and committed customers
      When successful, customers are satisfied and profits are high 

The Personalization Continuum

Choice Design

Mass
Differentiated Customized Relationship
Market

      On the left of the continuum, there’s no personalization

      Further to the right, products are customized for individual tastes
       On the far right, consumers collaborate with companies to create customized products, which builds
relationships
 
Personalization and the DNI Framework
      Digital technology makes it possible
o      Encyclopedic storage of information provides a rich base of material
      The network makes it available
o      Internet connections can tap into databases and data archives, get news feeds, and provide
time-sensitive information or accumulate information for later use
       Individuals make it valuable
o      Personalization provides value by focusing on specific individual needs

 
PERSONALIZATION & BENEFITS
 
The “Democracy of Goods”
      Technology has the power to make available to the masses what was previously available only to the rich
      “Democracy of goods” refers to open and low-cost access to products and services
      Automation and leverage of existing digital assets makes personalized goods and services cheap to provide
and widely available to consumers
 
The Internet Benefits Consumers by Turning Experience Goods into Search Goods
 
     SEARCH GOODS are products and services that are easy for a consumer to evaluate
o      Example – well-known branded products such as gasoline from Texaco
 
      EXPERIENCE GOODS tend to be difficult to understand and evaluate. They are too complex to judge easily.
They may be highly subjective, with personal taste being the most important determinant of usefulness
o      Example – health care services 
      Consumers benefit from reduced uncertainty about experience goods
      An accurate personalization system that can match products to taste can eliminate unpleasant consumption
experiences
 
Personalization and the Total Product
Levitt’s rules for success through differentiation
      Any product can be customized
      Consumers use products to solve problems
      Do not ignore hard-to-measure features of the product such as fun or friendliness
      Make the intangible tangible. Provide signals that demonstrate quality and reliability

 
Use the Wells Fargo example to illustrate Levitt’s framework
Increasing amounts of differentiation
Personalization is a rich area for augmenting the product and finding ways to achieve the potential product
  
THE PERSONALIZATION BALANCE
Providing Useful Information
 A key challenge is to determine the type and scope of information consumers will value and use
 Customers judge information programs by their efficiency and the ratio of usage costs with usage
benefits
 Information programs that are linked to customers’ personal targets and objectives are often successful

 
Personalization Backlash
      A natural result of personalization is treating customers differently
o     More valuable customers will receive special/preferential treatment
     This can lead to a backlash among customers who don’t receive special treatment
     Preventing resentment may be easier online where preferred programs are less visible

 
 
IMPLEMENTING PERSONALIZATION 
     Personalization has powerful potential competitive advantages
o     The first company to create an effective personalization approach in an industry can capture
many of the most profitable customers
     Personalization creates the opportunity to learn more about
o     Customers’ current desires
o     Future trends
o     New opportunities for product features and extensions
  
TYPES OF CUSTOMIZATION
 Adaptive Customization
 Offer the same basic product and representation to everyone
 Let users filter out most of the possibilities using pop-up menus, search functions and preference settings
 Example:
            At Spinner.com, users can select the music they want to hear using a pop-up menu
 
Cosmetic Customization
 Present a standard product differently to each customer
 Use of unique packaging, presentation, etc.
 Example:
                        New York Times uses cookies to store registration information and show the user’s name at the top of the
page
 Essential requirement is modularization – division of a product into components
 
Transparent Customization
 User needs and behaviors are observed
 The product is automatically changed to reflect individual tastes
 The user isn’t told or made aware of changes
 Example:
Smart ads – use observable behavior to show different ads
 
Collaborative Customization
 Conduct a dialogue with individual customers
 Help them articulate their needs
 Identify the precise offering that fulfills those needs
 Make customized products
 Example:
 Using a password protected extranet to communicate with customers via real-time sound and video
sessions
 
CUSTOMIZATION / PERSONALIZATION
Q: When is one-to-one marketing worthwhile?

  
 

 
CUSTOMIZATION / PERSONALIZATION
Two Necessary Ingredients
 Direct interaction between the firm and individual customers / consumers
 Software capable of delivering customization
   
PERSONALIZATION SYSTEMS
 Rule-Based System
 Observe behavior  predict preferences
o Unobtrusive: consumers don’t have to answer questions or fill in extensive questionnaires
 Best when
o     Product space isn’t complicated
o     Product / service attributes can be quantified
 Example: American Airlines
 Require effective user models that are tied to observable online triggers
o     A trigger is a user action that a model can use to decide what personalized information to
send
 
Case-Based System
 CASE (computer-assisted self-explication)
o The system queries users about preferences  matches user with the right product / service
 Best when users only have to evaluate a small number of well-understood attributes and features
o     Example: Chipshot.com & Personalogic (Chapter 7 Online)
o     Require user cooperation to get relevant user data

 
Endorsement System
     Connects users with local preferred providers
     Best when
o     Users’ product needs don’t differ greatly
o     It’s a challenge for consumers to judge quality and for vendors to explain the value of
available choices
     Examples: Autobytel.com

 
Collaborative Filtering
     Match users who share similar tastes
o     Users share recommendations and preferences
     Best when
o     Product space is complicated
 o     Preferences are subjective, qualitative and complex
     Example: Amazon.com instant recommendations
     Requires user cooperation to get relevant user data

  

LESSON 10

HIGH-TECH BATTLES
The 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
o     Internet tools
o     The marketplace
o     Business practices
     An entire industry created in < 5 years
     Internet time also refers to acceleration of
o     New product development
o     Competitive activity
o     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
 
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
o     Market leaders can count on high consumer interest, feedback and free advice
o     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
o     Third-party suppliers approach market leaders with enhancements and improvements
o     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
o     Once a standard is established, the marketplace swings dramatically toward it
o     The losing standard sinks quickly
o     VHS vs. Beta Max
     When standards matter, success breeds success

 
Traditional New Product Development
     Too slow for Internet time
     Two main goals
o     Uncover unmet customer needs
o     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
Rapid New Product Development 

     Internet time forces firms to find new ways to identify user needs and rapidly launch new products
     The keys
o     Maintain flexibility as long as possible
o     Accelerate the process of market feedback
     These methods work especially well for online products
     But they are spreading to the rest of the economy
 
Modularity in Design
 Modular design breaks a new product into subsystems or modules
o Each module can be designed and tested separately
o 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 requires two design features
o Visible design rules
o 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
o  Each team has full control over the hidden design parameters of its module
 o     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
o     Identify new opportunities
o     React to new designs
o     Spot declining interest in existing products
     E-mail enables low-cost, rapid access to customers
o     Can speed up feedback from lead users
o     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
o      May be asked to sign NDA
o     The goal is to shape the product and understand how functional it is
o     The competitive clock starts ticking with the alpha release
     Beta release: public release to widely test and to continue to refine the feature set
o     Key goals are reliability, compatibility, and fixing user interface problems
o     Beta-testing is a form of advertising and sampling
o     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
o     How hard drives, floppy disks, screens, keyboards, and memory communicate with each other
o     How computers connect to the Internet
o     How files and messages are turned into packets
o     How packets reach their destination
     Conventions are also important
o     General practices that designers expect
o     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
o     Sun Microsystem’s has submitted Java to the ISO for acceptance as an open standard
o     Microsoft’s Active X: a proprietary standard owned and controlled by Microsoft

 
Creation of an Open Internet Standard

 
Standards Strategy
     High-tech companies often have formal staff positions that set standards strategy
o     Participate in the standards bodies
o     Project which standards seem to be winning
     Managers need to decide which standards to deploy in their products
o     Should base their products on open standards?
o     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

 
 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
o     Virtual showroom visits
o     Advertising (TV, magazines, newspapers)
 o     Review articles and consumer-oriented reports
o     Word of mouth
     Are these virtual environments realistic enough to accurately measure behavior?
o     Early evidence is positive, but mixed

 
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