Technical products can often be described by two distinguishing characteristics. First, technical products often evolve through a series of generational changes in the underlying technology. Therefore, customers tend to view a product in the context of an on-going stream of technological advances. In addition, firms can advance the technology along different paths, creating product decisions based on the existence of industry standards. Second, technical products usually contain a significant degree of scientific knowledge. We now examine these two dimensions in turn, and some of their implications for product decisions.

Consider first the series of generational changes in the underlying technology. If the technology advances at a rapid pace (in terms of the speed and/or size of technological improvements), as it tends to with "high technology" products, two issues emerge. First, much of the information provided to customers about the current generation (or version) of a product becomes "time sensitive" [Glazer and Weiss, 1991]. Time sensitive information is information that quickly loses its value. For example, computers and the microprocessors on which they are based have been rapidly improving in terms of speed, capabilities, etc. Consequently, knowledge associated with a given generation of computer quickly diminishes, and both customers and engineers are finding it difficult to maintain up-to-date knowledge. As it relates to their purchase behavior, Weiss and Heide [1993] found that customers who perceive a rapid pace of technological improvements in computer workstations do tend to recognize the short "shelf life" of the received information. A second result of rapid technological change is the expectations it generates in prospective customers that they may purchase a soon-to-be-obsolete technology. These expectations have been shown to induce prospective customers to leapfrog current generations of technical products [Weiss 1994]. Presumably, these expectations reduce the perceived benefits of owning a current product generation.

When information is time sensitive and customers anticipate rapid improvements, marketers of technical products face several challenging product decisions. In particular, they must decide when to introduce new generations of a product and whether older generations should be sold concurrently. While the pressures of producing leading edge products are high, managers who quickly introduce new generations may both cannibalize their existing products and increase buyer’s perceptions that their technology is changing rapidly. This may reduce the benefits of owning a current generation decreases, and ultimately encourage customers to leapfrog.

At the level of product features, managers of products which are technologically changing must also decide whether to make their products backward compatible. Backward compatibility refers to the technical compatibility between a current generation and previous generations of a product. If the generations are not backward compatible, prior customers may be stranded. In some cases, this will reduce the core benefit of a customer owning the latest generation. For example, Microsoft originally confronted this problem in its most recent version of its word-processing software (Word 7.0) by not allowing it to save documents in Word 6.0. This lack of backward compatibility lowered customers ability to communicate and distribute documents with users of older versions. This reduced the stated core benefit of the product (i.e., communicating and working together). Eventually Microsoft corrected this problem. However, this example does point out the link between the generational changes in a technical product, a firm’s product decisions, and the level of benefits ultimately provided to customers.

Another product decision that follows from an on-going stream of technological advance is whether to introduce a product based on a substantially different technology, thus creating implications for industry standards. In these cases, customers must often choose among the competing standards and network externalities arise. When network externalities exist, the core benefits customers receive from a product based on a standard depend on the number of other customers who choose the same standard [Farrell and Saloner, 1992]. Research indicates that since later adopters receive greater benefits than early adopters the rate of new product adoption will be retarded. The infamous case of VHS vs. Beta versions of videotape devices demonstrates how the benefits of a videotape machine can depend on how many others adopt the same machine due to the availability of software (i.e., movies). Telephones, fax machines, computer platforms are obvious other examples of how network externalities affect the extent to which a technical product can deliver a core benefit. When making product decisions regarding the introduction of a product based on a new technical standard, and in contexts where network externalities are present, managers must consider the extent to which the core benefit of their product is affected by these externalities.

When customers make purchase decisions at the product system level, rather than at the level of a single product, decisions about products and standards are highly inter-linked. An example of a system purchase would be a telephone network, consisting of transmission and switching equipment, or a circuit board assembly system, consisting of separate products which mount, solder, and test devices. In these contexts, managers must make several product decisions, in particular the degree to which they want architectural control over the system. Architectures are the standards and rules of the system (e.g., interface protocols) that makes interconnections between components possible [Morris and Ferguson, 1993]. Architectural control is indicated by creating groups of component products with proprietary interfaces as compared to employing open standards and allowing other suppliers to provide the rest. The decision as to the degree of architectural control of a system is complex, and prior research [e.g., Wilson, Weiss and John, 1990] indicates is based on several factors. These include the extent to which customers want to mix and match products from different suppliers and the added growth in the market from employing open standards.

The second distinguishing characteristic of technical products is their relatively high level of embedded scientific knowledge. A unique characteristic of scientific knowledge is that it includes a large "tacit" component. Tacit knowledge is defined as knowledge that is difficult to communicate via documentation [Polanyi, 1958]. The concept of tacit knowledge is easily understood by contrasting it with codifiable knowledge that is amenable to the printed page and can be easily transmitted, such as in designs and specifications. Tacit knowledge, in contrast, is more easily exchanged via such methods as learning-by-doing. The tacit property of scientific knowledge has product decision implications for both customers and between firms involved in product development.

From the customer’s perspective, the tacit quality makes it difficult to quickly understand the benefits of technical products. Simply put, technical products tend to be complex. Consequently, from a product perspective managers need to identify vehicles for exchanging that knowledge efficiently to customers aside from written product information. For example, consider the large amount of tacit knowledge required to use a computer effectively, and the inability of inexperienced customers to gather relevant information from computer manuals. The products themselves can be designed to shield the customer from the need for tacit knowledge to understand the product’s benefit, for example by using simpler product-user interfaces. Alternatively, managers of technical products can use video as a means of providing instructional information since it is more amenable to transmitting tacit knowledge. Finally, the difficulty of transferring tacit knowledge may put product-support services at a premium, and technical product managers may need to devise creative service strategies.

The tacit property of scientific knowledge also has significant implications for the manner by which firms organize product development. As is often the case with complex products, separate firms may join to develop a technical product, as through a joint venture. Here, a potential problem arises due to the likelihood that one firm’s highly innovative tacit knowledge will leak to a partner firm who can then use this knowledge opportunistically. For example, the partner firm may autonomously develop improved versions of the technical product based on leaked knowledge. Protecting this leakage by appropriate price contracts is difficult because tacit knowledge, by its nature, must be revealed before it is understood. However, once revealed it is essentially given away for free. Some research in marketing [e.g., Dutta and Weiss, 1997] and economics has shown that firms organize their joint product development activities in particular ways (e.g., via licensing) to respond to this problem. Managers must carefully think about the leakage of scientific knowledge that is necessary when joint product development efforts are required.

SUMMARY

Are technical products uniquely different from products that are non-technical? In one sense, no. All products must provide benefits to customers regardless of the level of technology involved. Without a core benefit that solves a customer’s problem, products are likely to fail. Defining a technical product from this perspective helps to prevent this outcome. In addition, many of the techniques established in marketing to ensure customers perceive and receive relevant product benefits can be directly applied to the technical product. However, managers of technical products must place their products in a wider context than often considered in non-technical markets. With on-going technological change, for example, managers must recognize that the benefits customers perceive from current product offerings may be affected by multiple forces beyond the immediate product. Moreover, the scientific knowledge that forms the basis of technical products, the knowledge that firms that develop such products easily understand, may be quite tacit to customers and therefore require very keen marketing skills.