innovation in consumer behavior

7/27/2019 Innovation in Consumer Behavior

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DIFFUSION OF INNOVATION

I-phone


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NEW PRODUCTS IN THE MARKET

Every year around 5000 new

products appear in the market.However, most fail and only a few

remain ( around 20%). Products

which are innovative.


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Why does this happen?

Macro marketing issues

Valuable resources are wasted which mighthave been deployed towards more

productive uses

Products that might have helped people dothings more productively or attain higher

levels in their quality of life, fail to be used Successful products are those that become

culturally anchored.


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Micromarketing issues

Successful new product development is animportant element in achieving long termcompetitive superiority and profitability,especially in low growth markets

New product development plays an importantrole in market leadership and profitability.Market leaders normally have three timeshigher returns than firms with lower marketshares

A successful new product can be the beginningof a whole new company


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THE VALUE CHAIN

Contemporary firms are being attacked bycompetitively on every dimension and fromevery direction.

The only way to survive this onslaught is tocreate a valuechain to serve the customer,which will serve to differentiate the

successful firm from its competitors andwill provide competitive superiority on thecritical attributes of importance to theconsumer


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WHAT IS AN INNOVATION?

It is any idea orproduct perceivedby the potentialadopter to be new.New products areideas, behaviour or

things that arequalitativelydifferent fromexisting forms

Aninvention is an idea, a

sketch or model for a new or

improved device, product,

process or system. Such

inventions may often be

patented but they do notnecessarily lead to technical

innovations. In fact the majority

do not. An innovation in the

economic sense is accomplished

only with the first commercialtransaction involving the new

product, process system or

device. Freeman &

Soete, p. 6.


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WHAT IS AN INNOVATION?

Innovation: any product that consumersperceive to be new

New manufacturing technique

New product variationNew way to deliver product

New way to package product

Diffusion of innovationSuccessful innovations spread through thepopulation at various rates


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Diffusion of innovation

A process by through which a newproduct moves from initial

introduction to regular purchase and

use A process by which an innovation

(idea) is communicated through

certain channels over time among themembers of a social system Everett

Rogers


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Diffusion variables

Diffusion is a process where:

1) an innovation

2) is communicated throughcertain channels

3) over time 4) among members of a social

system


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Types of Innovations

Continuous modification or improvement of

an existing product

Dynamically continuous may involve the

creation of either a new product or the

alteration of an existing one, but does not

generally alter established patterns of

customer buying and product use Discontinuous production of an entirely new

product that causes customers to alter their

behaviour patterns significantly


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INNOVATIONS INCLUDE BOTH A HARDWARE

AND A SOFTWARE COMPONENT

The hardware are the physical and

tangible aspects of a product.

The software is the understanding

consumers values and lifestyles


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Likelihood of innovation success

Relative Advantage over existing technologies - can be perceived,

may be measured in economic terms, social prestige, convenienceand satisfaction.

Benefits of adopting the new technology compared to the costs,

Implication: Marketers must understand customer perceptions ofbenefits vs. costs

Compatibility with existing values, past experiences, needs of

potential adopters (and their social system)

Implication: Marketers musteducate

customers if compatibility is low

Complexity - degree to which an innovation is perceived as difficult to

understand and use.

Implication: Try to simplify use; easier to learn; offer training and

education


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Likelihood of innovation success

Trialability degree to which an innovation maybe experimented with on a limited basis. A

trialable innovation represented less uncertainty

to a potential adopter.

Implication: Design products as independent

modules or offer on trial basis

Observability Degree to which the results of an

innovation are visible to others.

Implication: If benefits are elusive to both the

users and their friends, adoption will be slow


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Types of Innovators

Cognitive problem solving, cerebral, new

mental experience

Sensory fantasy, day dreaming,

hedonistic, thrill seeking

Monomorphic - consumers who are

innovators for one type of product

Polymorphic consumers who are

innovators for more than one type of

product


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Characteristics that encourage

rejection

Value barrier

Usage barrier Risk barrier


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Speed of diffusion

Competitive intensity

Reputation of the supplier

Standardised technology

Resource commitments


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Communication of new products

Mass media

WOM

Homophily degree to which pairs ofindividuals who interact are similar in

beliefs, education and social status

Heterophily inconsistent with ownbeliefs and views


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Communication Channel

The means by which messages get from

one individual to another.

The nature of the information-exchange

relation determines the conditions under

which a source will/will not transmit the

innovation to the receiver and the effect

of the transfer.


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Mass-media most efficient way to

create awareness knowledge of an

innovation

Interpersonal channels more

effective inpersuading in individual toaccept a new idea.


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Individuals do not evaluate

innovations on the basis of a scientific

assessment of its consequences

rather depend on subjective

assessment conveyed to them from

peers. Thus diffusion is a social

process.


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The closer (more

homophilious) two individualsare, the more frequently and

more successful the transfer of

ideas between them.


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Problem - in the diffusion of innovation:is participants are usually quite

heterophilious thus ineffective

communication likely to occur.

Yet two exactly similar individuals

cannot, by definition pass on

information. Therefore diffusion

demands some heterophiliousness.


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Time - third element in the diffusion

process. Involved in:

the innovation-decision process

the innovativeness of an individual

aninnovations

rate of adoption in asystem


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THE INNOVATION-DECISION

PROCESS - the process through

which an individual passes from

first knowledge of an innovation to

forming an attitude toward the

innovation, to a decision to adopt or

reject it.


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Innovation Decision Process

Five stages in the innovation-decision

process:

(1) knowledge,

(2) persuasion,

(3) decision, (4) implementation, and

(5) confirmation.

Th Ad ti D i i P


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The Adoption Decision ProcessEverett Rogers

Confirmation

Knowledge

Persuasion

Decision

Implementation


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The Adoption Decision Process


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Knowledge occurs when an individual (or other

decision-making unit) learns of the innovations

existence and gains some understanding of how it

functions.

Persuasion occurs when an individual (or other

decision-making unit) forms a favourable or

unfavourable attitude toward the innovation.

Decision occurs when an individual (or other

decision-making unit) engages in activities that lead

to a choice to adopt or reject the innovation.


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Implementation occurs when an individual (orother decision-making unit) puts an innovation

into use. Re-invention is especially likely to

occur at the implementation stage.

Confirmation occurs when an individual (or other

decision-making unit) seeks reinforcement of an

innovation-decision that has already been made,but the individual may reverse this previous

decision if exposed to conflicting innovation.


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Ultimately, the innovation-

decision process leads to eitheradoption or to rejection.


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Adopter classes

Innovators - 2.5%

Early adopters 13.5%

Early majority

34% Late majority 34%

Laggards 16%


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Adopter classes


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Innovator

2.5% of population

Venturesome

Very eager to try new ideas Acceptable if risk is daring

More cosmopolite social

relationships Communicates with other innovators


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Early Adoptors

13.5% of population Respected

More integrated into the local social

system

The persons to check with before

adopting a new idea

Category contains greatest number of

opinion leaders

Are role models


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Early Majority

34% of population

Deliberate

Adopt new ideas just prior to the

average time

Seldom hold leadership positions Deliberate for some time before

adopting


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Late Majority

34% of population

Skeptical

Adopt new ideas just after the averagetime

Adopting may be both an economic

necessity and a reaction to peerpressures

Innovations approached cautiously


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Laggards

16% of population

Traditional

The last people to adopt an innovation Most localite in outlook

Oriented to the past

Suspicious of the new


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Rate of Adoption

Rate of adoption - the relative speed with

which an innovation is adopted by

members of a social system.

When the number of individuals adopting a

new idea is plotted on a cumulative

frequency basis over time, the resultingdistribution is an S-shaped curve.


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Rate of Adoption


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Rate of Adoption

Most innovations have an S-shaped rate ofadoption.

But there is variation in the slope of the S from

innovation to innovation;

some new ideas diffuse relatively rapidly and the

S-curve is quite steep.

Other innovations have a slower rate of adoption,

and the S-curve is more gradual, with a slope that

is relatively lazy.


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Parameters for innovativeness

Socio-economic variables

Personality and attitude

Communication variables


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Socio economic variables

Education

Literacy

Higher social status

Upward social mobility

Larger-sized units

Commercial orientation

Favourable attitude towards credit

Specialized operations


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Personality and attitude

Empathy

Ability to deal in

abstraction

Rationality

Intelligence

Favourable attitude

towards change

Ability to cope with

uncertainty

Favourable attitude

towards education

Favourable attitude

towards science

High aspirations


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Communication variables

Social participation

Interconnectedness withthe social system

Cosmopoliteness Change agent contact

Mass media exposure

Exposure to interpersonalcommunication channels

Knowledge of innovations

Opinion leadership Belonging to highly

interconnected systems


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POLYMORPHISM

The degree to which innovatorsand early adopters for one

product are likely to be

innovators for other products.Consumers who are innovatorsfor one product are

monomorphic. Consumers whoare innovators for more than oneproduct are polymorphic.


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DIFFUSION PROCESS AND

MARKETING STRATEGY

Identify diffusion inhibitors and findways to compensate for these

Identify innovators and early adoptersand cater to themMove consumers from awareness to

adoptionMake effective use of word-of-mouthcommunications

innovation in consumer behavior

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