Consumers and the Diffusion of Innovations CHAPTER FOURTEEN

Learning Objectives 1.To Understand the Twofold Process of the Spread and Acceptance of Innovative Products and Services Within a Social System. 2.To Understand How Innovative Products and Services Spread (or Fail to Spread) Within a Social System. 3.To Understand How Individual Consumers Decide Whether or Not to Try and Adopt a Particularly Innovative Product or Service. 4.To Understand the Personal Characteristics of Innovators. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall2Chapter Fourteen Slide

What Is Shown or Stated in This Ad That Is Designed to Attract Consumers to This New Product? 33Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

New Flavor 44Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Diffusions of Innovation How are new products and services accepted? 55Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Diffusion Process The process by which the acceptance of an innovation is spread by communication to members of a social system over a period of time. 6Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Elements of the Diffusion Process The InnovationThe Channels of CommunicationThe Social SystemTime 7Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Innovation Firm-oriented definitions – Product is “new” to the company Product-oriented definitions – Continuous – Dynamically continuous – Discontinuous 8Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

What Kind of Innovation Is Shown Here, and Why? 99Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Continuous Innovation – The Product is Modified 10 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Innovation Market-oriented definitions – Based on consumer exposure Consumer-oriented definitions – Consumer judges it as “new” 11Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Innovation Product Characteristics Degree to which consumers consider it superior to existing substitutes Relative Advantage Degree to which consumers feel it is consistent with their present needs, values, and practices Compatibility The degree to which it is difficult to understand or use Complexity The degree to which it can be tried on a limited basis Trialability The degree to which its benefits can be observed, imagined, or described Observability 12Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Developing a Marketing Strategy for Diffusing Innovations - Figure Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Channels of Communication Channels of communication – Marketer to consumer – Consumer to consumer – Influential impersonal sources 14 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Social System Modern social systems accept more innovation due to their: – Positive attitude toward change – Advanced technology and skilled labor force – Respect for education and science – Emphasis on rational and ordered social relationships – An outreach perspective where members interact with outsiders – A system where members can see themselves in different roles 15 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Time Purchase Time Adopter Categories Rate of Adoption 16Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Adopter Categories Category 1 - Innovators First to buy the mini netbook Category 2 – Early adopters Will buy mini netbook shortly after its introducti on Category 3 – Early Majority Members of the 1 st ½ of the “mass market” who would purchase the mini netbook Category 4 – Late Majority Second half of the “mass market” who would purchase the mature mini netbook Category 5 – Laggards Very last to purchase the mini netbook, if at all 17 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Diffusion Curves for Adopter Categories - Figure Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Discussion Question Which adopter category are you? Does it differ with different product categories? How about your parents, what category are they? Is age a factor in innovation behavior? 19Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Rate of Adoption How long does it take a new product to be adopted by the members of a social system? 20 ProductNumber of years Pager41 Telephone38 Cable television25 Fax machine22 VCR9 Cell pone9 PC7 Time Required for Electronic Products to Penetrate 10 percent of UK market Table Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

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. 21Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

NAME OF STAGEWHAT HAPPENS DURING THIS STAGE EXAMPLE AwarenessConsumer is first exposed to the product innovation. Eric sees an ad for a 23-inch thin LCD HDTV in a magazine he is reading. InterestConsumer is interested in the product and searches for additional information. Eric reads about the HDTV set on the manufacturer’s Web site and then goes to an electronics store near his apartment and has a sales person show him the unit. EvaluationConsumer 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, Eric decides that his TV will fit nicely on top of the chest in his bedroom. He also calls his cable company and finds out that he can exchange his “standard” cable box at no cost for an HDTV cable box. Stages in Adoption Process Table Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

NAME OF STAGEWHAT HAPPENS DURING THIS STAGE EXAMPLE TrialConsumer uses the product on a limited basis Since the HDTV set cannot be “tried” like a small tube of toothpaste, Eric buys the TV at this local electronics store on his way home from work. The store offers a 14-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. Eric loves his new HDTV set and expects many year of service from it. Stages in Adoption Process Table 14.4 (continued) 23Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Importance of Information Sources Figure Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Consumer Innovator The earliest purchasers of a new product Tend to have higher level of: – Education – Social interaction – Opinion leadership – Venturesomeness – Social Status 25 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Discussion Questions Who do you know, personally, that you would consider an innovator? What is it about that person that makes them an innovator? What personality traits might they have which prompt their status? 26Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Cosmopolitan and Non Cosmopolitan Types - Figure Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Consumer Innovator Interest in product category Opinion leader 28 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Discussion Questions Who are the most influential opinion leaders for college-aged people? Why are they influential? 29Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Consumer Innovator Personality traits – Perceived risk and venturesomeness – Purchase and consumption characteristics – Media habits 30 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

The Consumer Innovator Social characteristics Demographic characteristics 31 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Comparative Profiles of the Consumer Innovator and Noninnovator - Table 14.5 (excerpt) 32 CharacteristicInnovatorNoninnovator Social Characteristics Social integrationMoreLess Social strivingMoreLess Group membershipsMoreLess Demographic Characteristics AgeYoungerOlder IncomeHigherLower EducationMoreLess Occupational statusHigherLower 32Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

Are There Generalized Consumer Innovators? Domain-specific vs. global innovativeness Technology and innovators 33 Copyright 2010 Pearson Education, Inc. Publishing as Prentice HallChapter Fourteen Slide

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