Consumer Influence and the Diffusion of Innovations Chapter 9, 13 &14 Consumer Influence and the Diffusion of Innovations

Opinion Leadership The process by which one person (the opinion leader) informally influences the consumption actions or attitudes of others who may be opinion seekers or opinion recipients.

What is Opinion Leadership? Opinion Receiver Opinion Seeker

Special Issues Opinion leaders are four times more likely to be asked about political issues, three times more likely to be asked about computers or investments, and twice as likely to be asked about restaurants Information seekers seek a “strong-tie” source when they know little about a topic, and “weak-tie” sources when they have some knowledge

Word of Mouth People convey a lot of product information to others on an informal basis. WOM is product information transmitted by individuals to individuals. Tend to be more reliable and trustworthy than other formal marketing communications. Consumers weigh negative WOM more heavily than they do positive communications.

Word-of-Mouth in Action respondents that used a referral to make one of these purchases over the past year

Cutting –Edge WOM Strategies Virtual Communities A collection of people whose online interest is based upon shared enthusiasm for and knowledge of a specific consumption activity. Multi-User Dungeons (MUD) Rooms, rings and lists. Boards. Blogs-Blogosphere

Chat Rooms and Opinion Leadership

Reasons for the Effectiveness of Opinion Leadership Credibility Positive and Negative Product Information Information and Advice Opinion Leadership Is Category-Specific Opinion Leadership Is a Two-way Street

Motivations Behind Opinion Leadership The Needs of Opinion Leaders The Needs of Opinion Receivers Purchase Pals Surrogate Buyers versus Opinion Leaders

The Needs of Opinion Leaders Self involvement Social involvement Product involvement Message involvement

The Needs of Opinion Receivers New-product or new usage information Reduction of perceived risk Reduction of search time Receiving the approval of the opinion leader

Table 15.3 A Comparison of Motivations (Excerpts) OPINION LEADERS OPINION RECEIVERS SELF-IMPROVEMENT MOTIVATIONS Reduce post-purchase uncertainty or dissonance Gain attention or status Assert superiority and expertise Feel like an adventurer Reduce the risk of making a purchase commitment Reduce search time PRODUCT-INVOLVEMENT MOTIVATIONS Express satisfaction or dissatisfaction with a product or service Learn what products are new in the marketplace Learn how to use or consume a product

Surrogate Buyers Person who is hired to provide input into purchase decisions.

Table 15.4 Key Differences Between Opinion Leaders and Surrogate Buyers 1. Informal relationship with end-users 2. Information exchange occurs in the context of a casual interaction 4. Does not get paid for advice 5. Usually socially more active than end-users 6. Accountability limited regarding the outcome of advice 7. As accountability limited, rigor in search and screening of alternatives low 8. Likely to have used the product personally 9. More than one can be consulted before making a final decision 10. Same person can be an opinion leader for a variety of related product categories

Table 15.4 Key Differences SURROGATE BUYER 1. Formal relationship; occupation-related status 2. Information exchange in the form of formal instructions/advice 4. Usually hired, therefore gets paid 5. Not necessarily socially more active than end-users 6. High level of accountability 7. Search and screening of alternatives more rigorous 8. May not have used the product for personal consumption 9. Second opinion taken on rare occasions 10. Usually specializes for a specific product/service category

Measurement of Opinion Leadership Self-Designating Method Sociometric Method Key Informant Method Objective Method

Table 15.5 Measuring Opinion Leadership SELF-DESIGNATING METHOD “Do you influence other people in their selection of products?” Each respondent is asked a series of questions to determine the degree to which he or she perceives himself or herself to be an opinion leader. OPINION LEADERSHIP MEASUREMENT METHOD SAMPLE QUESTIONS ASKED DESCRIPTION OF METHOD SOCIOMETRIC METHOD Members of a social system are asked to identify to whom they give advice and to whom they go for advice. “Whom do you ask?”“Who asks you for info about that product category?”

SAMPLE QUESTIONS ASKED Table 15.5 continued OPINION LEADERSHIP MEASUREMENT METHOD SAMPLE QUESTIONS ASKED DESCRIPTION OF METHOD KEY INFORMANT METHOD “Who are the most influential people in the group?” Carefully selected key informants in a social system are asked to designate opinion leaders. Artificially places individuals in a position to act as opinion leaders and measures results of their efforts. “Have you tried the product? OBJECTIVE METHOD

Profile of Opinion Leaders GENERALIZED ATTRIBUTES ACROSS PRODUCT CATEGORIES CATEGORY-SPECIFIC ATTRIBUTES Innovativeness Willingness to talk Self-confidence Gregariousness Cognitive differentiation Interest Knowledge Special-interest media exposure Same age Same social status Social exposure outside group

Market Maven Person who is actively involved in transmitting market place information of all types. Possess a wide range of information about many different type of products, retail outlets and other dimensions of markets. Like to shop and share their shopping expertise. Not necessarily the early purchaser but they are just into shopping and staying on top of what’s happening in the marketplace. Possess high brand awareness but tend to try more brands. Their influence expands beyond the realm of high-involvement products. Appear to be motivated by sense of obligation to share information.

Social Hub Individuals who direct social traffic- have relationships with many people. Frequently bring this people together. Do this for personal pleasure.

The Interpersonal Flow of Communication Two-Step Flow A communication model that portrays opinion leaders as direct receivers of information from mass media sources who, in turn, interpret and transmit this information. Multistep Flow A revision of the traditional two-step theory that shows multiple communication flows

Two-Step Flow of Communication Theory Opinion Receivers (the masses) Mass Media Opinion Leaders Opinion Receivers (the masses)

Multistep Flow of Communication Theory Mass Media Opinion Leaders Opinion Receivers/ Seekers Step 1a Step 3 Step 1b Information Receivers

Issues In Opinion Leadership and Marketing Strategy Programs Designed to Stimulate Opinion Leadership Advertisements Stimulating Opinion Leadership Word of Mouth May Be Uncontrollable Creation of Opinion Leaders

Diffusion Process The process by which the acceptance of an innovation is spread by communication to members of social system over a period of time.

Elements of the Diffusion Process The Innovation The Channels of Communication The Social System Time

Defining Innovations Firm-oriented definitions Product-oriented definitions Market-oriented definitions Consumer-oriented definitions

Product-Oriented Definitions Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation

Telephone Innovations Cell Phone Fax Machine Telephone answering machines Call forwarding Call waiting Caller ID Banking by telephone Call-prompting systems Hold button Line-in-use indicator Redial button Auto dialing feature Touch-tone service 800 Numbers 900 Numbers Ability to send/receive email Incorporate PDA functions Calendar/Phonebook Voice-activated dialing Switch from analog to digital Include camera Ringer styles Play games Fax modem Mobile fax machines Home office systems (combined fax, copier, computer printer) Plain paper fax Speed dial buttons Delayed send Copy function Paper cutter Discontinuous Innovations Dynamically Continuous Continuous

Product Characteristics That Influence Diffusion Relative Advantage Compatibility Complexity Trialability Observability

Ad Stressing Ease of Use and Convenience

Characteristics That Influence Diffusion EXAMPLES Relative Advantage Air travel over train travel, cordless phones over corded telephones Compatibility Gillette MACH3 over disposable razors, digital telephone answering machines over machines using tape Complexity Electric shavers, instant puddings

continued CHARACTERISTICS EXAMPLES Trialability Trial size jars and bottles of new products, free trials of software, free samples, cents-off coupons Observability Clothing, such as a new Tommy Hilfiger jacket, a car, wristwatches, eyeglasses

Time and Diffusion Purchase Time Adopter Categories Rate of Adoption

Adoption Process The stages through which an individual consumer passes in arriving at a decision to try (or not to try), to continue using (or discontinue using) a new product.

Stages in Adoption Process NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE Awareness Consumer is first exposed to the product innovation. Janet sees an ad for a new MP3 player in the magazine she is reading. Interest Consumer is interested in the product and searches for additional information. Janet reads about the MP3 player on the manufacturer’s Web site and then goes to an electronics store near her apartment and has a salesperson show her a unit. Evaluation Consumer decides whether or not to believe that this product or service will satisfy the need--a kind of “mental trial.” After talking to a knowledgeable friend, Janet decides that this MP3 player will allow her to easily download the MP3 files that she has on her computer. She also feels that the unit’s size is small enough to easily fit into her beltpack.

Stages in Adoption Process Trial Consumer uses the product on a limited basis Since an MP3 player cannot be “tried” like a small tube of toothpaste, Janet buys the MP3 player online from Amazon.com, which offers a 30-day full refund policy. Adoption (Rejection) If trial is favorable, consumer decides to use the product on a full, rather than a limited basis--if unfavorable, the consumer decides to reject it. Janet finds that the MP3 player is easy to use and that the sound quality is excellent. She keeps the MP3 player. NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE

Adopter Categories A sequence of categories that describes how early (or late) a consumer adopts a new product in relation to other adopters.

Percentage of Adopters by Category Sequence Adopter Categories Early Adopters 13.5% Laggards 16% Early Majority 34% Late Majority 34% Innovators 2.5% Percentage of Adopters by Category Sequence

Innovators: Description 2.5% of population Venturesome Very eager to try new ideas Acceptable if risk is daring More cosmopolite social relationships Communicates with other innovators

Early Adopters: Description 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

Early Majority: Description 34% of population Deliberate Adopt new ideas just prior to the average time Seldom hold leadership positions Deliberate for some time before adopting

Late Majority: Description 34% of population Skeptical Adopt new ideas just after the average time Adopting may be both an economic necessity and a reaction to peer pressures Innovations approached cautiously

Laggards: Description 16% of population Traditional The last people to adopt an innovation Most “localite” in outlook Oriented to the past Suspicious of the new

Ad Appeals to Fashion Innovators

Consumer Decision Making and Beyond Consumer Behavior, 9th Edition SCHIFFMAN & KANUK Chapter 16 Consumer Decision Making and Beyond

Decision The selection of option from two or more alternative choices. Hobson’s choice- no-choice decision.

Levels of Consumer Decision Making Extensive Problem Solving Limited Problem Solving Routine Response Behavior

Figure 16.2 A Simple Model of Consumer Decision Making External Influences Firm’s Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture Input Consumer Decision Making Need Recognition Prepurchase Search Evaluation of Alternatives Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Process Experience Postdecision Behavior Purchase 1. Trial 2. Repeat purchase Postpurchase Evaluation Output

Three Stages of Consumer Decision Making Need Recognition Prepurchase Search Evaluation of Alternatives

Table 16.2 Factors that are Likely to Increase Prepurchase Search Product Factors Long interpurchase time (e.g., Fridge, TV, etc) Frequent changes in product styling (e.g., Mobile phone sets) Volume purchasing (large number of units) (e.g., dinner for wedding guests) High price (e.g., cars) Many alternative brands (e.g., restraurants) Much variation in features (e.g., foreign education)

Table 16.2 continued Situational factors Experience First-time purchase (PDA) No past experience because the product is new (IPOD) Unsatisfactory past experience within the product category Social Acceptability The purchase is for a gift The product is socially visible Value-Related Considerations Purchase is discretionary rather than necessary (Vase) All alternatives have both desirable and undesirable consequences Family members disagree on product requirements or evaluation of alternatives (Cars) Product usage deviates from important reference group The purchase involves ecological considerations Many sources of conflicting information

Table 16.2 continued Product Factors Demographic Characteristics of Consumer Well-educated High-income White-collar occupation Under 35 years of age Personality Low dogmatic Low-risk perceiver (broad categorizer) Other personal factors, such as high product involvement and enjoyment of shopping and search

Table 16.3 Alternative Prepurchase Information Sources for an Ultralight Laptop PERSONAL Friends Neighbors Relatives Co-workers Computer salespeople IMPERSONAL Newspaper articles Magazine articles Consumer Reports Direct-mail brochures Information from product advertisements Internal web site

Figure 16.3 The Evoked Set as a Subset of All Brands in a Product Class Known Brands Unknown Brands (1) Evoked Set Inept Set Inert Set Acceptable Brands Unacceptable Brands Indifferent Brands Overlooked Brands (2) (3) (4) Purchased Brands Not Purchased Brands (5)

Evoked Set Specific brands a consumer considers in making a purchase with in a particular product category.

Brands that a consumer excludes from purchase consideration. Inept Set Brands that a consumer excludes from purchase consideration.

Inert Set Brands that a consumer is indifferent toward because they are perceived as having no particular advantage.

Consumer Decision Rules Compensatory Noncompensatory Conjunctive Decision Rule Disjunctive Decision Rule Lexicographic Rule

Compensatory Decision Rules A type of decision rule in which a consumer evaluates each brand in terms of each relevant attribute and then selects the brand with the highest weighted score.

Non-compensatory Decision Rules A type of consumer decision rule by which positive evaluation of a brand attribute does not compensate for a negative evaluation of the same brand on some other attribute.

Conjunctive Decision Rule A noncompensatory decision rule in which consumers establish a minimally acceptable cutoff point for each attribute evaluated. Brands that fall below the cutoff point on any one attribute are eliminated from further consideration.

Disjunctive Rule A noncompensatory decision rule in which consumers establish a minimally acceptable cutoff point for each relevant product attribute.

Lexicographic Rule A noncompensatory decision rule - consumers first rank product attributes in terms of importance, then compare brands in terms of the attribute considered most important.

Affect Referral Decision Rule A simplified decision rule by which consumers make a product choice on the basis of their previously established overall ratings of the brands considered, rather than on specific attributes.

Table 16.7 Hypothetical Use of Popular Decision Rules in Making a Decision to Purchase an Ultralight Laptop DECISION RULE MENTAL STATEMENT Compensatory rule “I selected the computer that came out best when I balanced the good ratings against the bad ratings.” Conjunctive rule “I selected the computer that had no bad features.” Disjunctive rule “I picked the computer that excelled in at least one attribute.” Lexicographic rule “I looked at the feature that was most important to me and chose the computer that ranked highest on that attribute.” Affect referral rule “I bought the brand with the highest overall rating.”

Types of Purchases Trial Repeat Purchase Purchases 100ml bottle Shampoo Sachets Repeat Purchases 100ml bottle Long-Term Commitment Purchases Family pack

Outcomes of Postpurchase Evaluation Actual Performance Matches Expectations Neutral Feeling Actual Performance Exceeds Expectations Positive Disconfirmation of Expectations Performance is Below Expectations Negative Disconfirmation of Expectations