Using a quantitative analysis

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Once a product has been shown to the sales force and the distributors prior to the actual marketing, the marketing manager can also adjust the sales forecast, as prepared by the sales force, or key channel partners, by correcting their traditional bias (underestimating demand for quota calculations, lack of long-term views). These forecasts can supply the marketing manager with interesting information.

One of the characteristics of high-tech-product marketing is the lack of historical data due to the product's short life and innovative quality. Also, a

Table 3.1 The Different Ways of Collecting Primary Data

Pros

Cons

Mail surveys

Lowest cost per interview

Return rate is often low (less than 25% in

consumer surveys and 1% in business

surveys)

No interviewer bias (anonymous

Lack of flexibility in the questionnaire

questionnaires)

(which must be short and easy to answer)

Phone surveys

Less expensive than face-to-face

No observation

interviews

Flexible because interviewers can probe

Sample limited to people listed with

or stimulate correspondents to answer

phone number

Relative anonymity

Interviewer bias

Engaged line and no answer can be

significant

Face-to-face

Very flexible: respondents can be

Interviewer bias

interviews

shown visual materials and helped to

answer questionnaires

Refusals may be lowered by a positive

Expensive

attitude from interviewers

Observation provides more quality data

quantitative analysis often involves working with product data that are going to be replaced (classic televisions by HDTVs, cassette recorders by compact disc players, and telephones by videotex computers). Scenarios should be made according to the hypothesis regarding the replacement of these products and on the expansion possibilities for other uses.

Quantitative analysis techniques and related models, frequently used for consumer goods, must always be dealt with carefully. Actually, even for consumer goods, such as microcomputers and HDTVs, the market changes so quickly that the obtained information is rarely reliable.

It is also very important to keep in mind another market limitation in high-tech business: Customers must be able to employ the product, which will limit the ultimate market potential. As an example, consider the original small size of the videotex market, which depended on people who had a terminal at home. On the French market, France Telecom, the videotex manufacturer, tried to solve this problem by giving away millions of Videotex terminals. Although this move helped to create the market for videotex, it did so at a significant cost for France Telecom. The demand for transponders in Europe was likewise limited until more transmitting and receiving dishes were installed. Similarly, there is a strong correlation between the development of the on-line services market and the PC equipment rate by households. For instance, it does not come as a surprise that the countries that have the biggest number of Internet users, namely, Finland, Norway, and the United States, also have the biggest number of households equipped with PCs.

Another issue for the marketers is to differentiate between customers' preferences and purchase behavior [32]. It has been shown for instance that for high-technology products, large organizations prefer innovative, radical impact products, but usually adopt incremental impact products. In other words, preferences and purchase behaviors do not fit mostly for two reasons. First, the importance of compatibility with the existing (and often costly) technology and equipments is extremely important and prevents the introduction of extreme and breakthrough innovative product and/or process. Second, most organizations are usually risk averse and favor conventional solutions, which cause minimal changes in the structure of the company.

Probably, the biggest danger for the marketing manager is to perform quantitative extrapolations based upon limited qualitative information, which can lead to a generalization of hastily acquired, limited results from a small sample.

Agencies that specialize in market analysis of the computer industry have a tendency to overestimate the level of demand and the rate at which demand will develop. This was the case for the evaluation of the PC home-consumer market, as well as for the system integration business-to-business market. Conversely, AT&T and other telecommunication operators underestimated the market for cellular phones and none expected the World Wide Web to explode like it has. Those two markets have grown at such a rate that the number of subscribers have beaten the number of fixed phone network accesses as early as in 2001 in Japan and Western Europe, according to ITU;and the United States is well on the way, with more than 146 million cell phone subscribers in 2003.

In fact, these forecasting methods are merely tools that can help reach the final decision. These methods contribute to the clarification of the company's choices, but they cannot guarantee results. In many cases, the ultimate decision (for example, launching a product) depends upon the attitudes of the company's managers toward a double risk: losing a market if the company expects too much or making a mistake by going too fast.

Such is the case, for instance, in the biotechnology business. One of the leading biotech companies, Synergen, lost more than 90% of its market value when it appeared that its major drug, Antril, had no real potency. Ultimately, Synergen was acquired by one of its main competitors, Amgen.

Besides, one must note that frequently incumbent companies fall short of realizing the potential effect of a new radical technology in their industry and consider visions of it as overhyped. Since the potential customers for this technology are usually not well identified, market research may infer that the potential for revenue is small and that the development of such a market will be too expensive. For instance, when early xerography technology was presented to IBM, senior management declined the offer, because their analysis concluded that demand for copiers was too low. In the 1980s, DEC made the same error in dismissing the potential of PCs as a growing computer solution for firms preferring to stick with their policy of offering more traditional minicomputers.

Conversely, one leading U.S. PC manufacturer underestimated demand for two of its best selling products and lost around $300 million in potential sales. Eventually, when it had its manufacturing capacity in line with the demand, the market for these products had already vanished.

At this point, common business sense appears at the same time as a business vision. According to the definition given by economist Schumpeter, isn't the entrepreneur the one who knows exactly what the market is waiting for, and doesn't the entrepreneur know it even better than the market itself?

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