1. Chapter 15 Consumer Influence and the Diffusion of Innovations

2. ©2000 Prentice Hall 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.

3. ©2000 Prentice Hall What is Opinion Leadership? Opinion Leader Opinion Receiver Opinion Seeker

4. ©2000 Prentice Hall Opinion Leader A person who informally gives product information and advice to others.

5. ©2000 Prentice Hall Opinion Seeker An individual who either actively seeks product information from others or receives unsolicited information.

6. ©2000 Prentice Hall Opinion Receiver The person who receives an opinion offered by another person.

7. ©2000 Prentice Hall 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

8. ©2000 Prentice Hall Motivations Behind Opinion Leadership 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 Purchase Pals Surrogate Buyers Versus Opinion Leaders

9. ©2000 Prentice Hall Table 15.1 A Comparison of the Motivations of Opinion Leaders and Opinion Receivers OPINION LEADERSOPINION RECEIVERS SELF-IMPROVEMENT MOTIVATIONS Reduce postpurchase uncertainty or dissonance Gain attention or status Assert superiority and expertise Feel like an adventurer Experience the power of “converting” others 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

10. ©2000 Prentice Hall Table 15.1 continued OPINION LEADERSOPINION RECEIVERS SOCIAL-INVOLVEMENT MOTIVATIONS Express neighborliness and friendship by discussing products or services that may be useful to others Buy products that have the approval of others, thereby ensuring acceptance MESSAGE-INVOLVEMENT MOTIVATIONS Express one’s reaction to a stimulating advertisement by telling others about it

11. ©2000 Prentice Hall Table 15.2 Key Differences Between Opinion Leaders and Surrogate Buyers OPINION LEADER 1. Informal relationship with end-users 2. Information exchange occurs in the context of a casual interaction 3. Homophilous (to a certain extent) to end-users 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 ad screening o 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

12. ©2000 Prentice Hall Table 15.2 Key Differences Between Opinion Leaders and Surrogate Buyers SURROGATE BUYER 1. Formal relationship; occupation-related status 2. Information exchange in the form of formal instructions/advice 3. Heterophilus to end users (that is, is the source of power) 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

13. ©2000 Prentice Hall Measurement of Opinion Leadership Self-Designating Method Sociometric Method Key Informant Method Objective Method

14. ©2000 Prentice Hall Figure 15.1 Self-Designating Questions for Measuring Opinion Leadership SINGLE-QUESTION APPROACH: 1. In the last 6 months have you been asked your advice or opinion about golf equipment? Yes___ No___ MULTIPLE-QUESTION APPROACH: (Measured on a 5-point bipolar “Agree/Disagree” scale) 1. Friends and neighbors frequently ask my advice about golf equipment. 2. I sometimes influence the types of golf equipment friends buy. 3. My friends come to me more often than I go to them about golf equipment. 4. I feel that I am generally regarded by my friends as a good source of advice about golf equipment. 5. I can think of at least three people whom I have spoken to about golf equipment in the past six months.

15. ©2000 Prentice Hall Table 15.3 Methods of Measuring Opinion Leadership: Advantages and Limitations 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 Measures the individual’s own perceptions of his or her opinion leadership. ADVANTAGES Depends on the objectivity with which respondents can identify and report their personal influence. LIMITATIONS

16. ©2000 Prentice Hall Table 15.3 continued SOCIOMETRIC METHOD “Whom do you ask?” “Who asks you for information about that product category?” Members of a social system are asked to identify to whom they give advice and to whom they go for advice and information about a product category. OPINION LEADERSHIP MEASUREMENT METHOD SAMPLE QUESTIONS ASKED DESCRIPTION OF METHOD Sociometric questions have the greatest degree of validity and are easy to administer. ADVANTAGES It is very costly and analysis often is very complex. Requires a large number of respondents. Not suitable for sample design where only a portion of the social system is interviewed. LIMITATIONS

17. ©2000 Prentice Hall Table 15.3 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. ADVANTAGES Relatively inexpensive and less time consuming than the sociometric method. LIMITATIONS Informants who are not thoroughly familiar with the social system are likely to provide invalid information.

18. ©2000 Prentice Hall Table 15.3 continued OPINION LEADERSHIP MEASUREMENT METHOD SAMPLE QUESTIONS ASKED DESCRIPTION OF METHOD OBJECTIVE METHOD “Have you tried the product? Artificially places individuals in a position to act as opinion leaders and measures results of their efforts. ADVANTAGES Measures individual’s ability to influence others under controlled circumstances. LIMITATIONS Requires the establishment of an experimental design and the tracking of the resulting impact on the participants.

19. ©2000 Prentice Hall Table 15.4 Profile of Opinion Leaders GENERALIZED ATTRIBTES ACROSS PRODUCT CATEGORIES CATEGORY-SPECIFIC ATTRIUTES Innovativeness Willingness to talk Self-confidence Gregariousness Cognitive differentiation Interest Knowledge Special-interest media exposure Same age Same social status Social exposure outside group

20. ©2000 Prentice Hall Table 15.5 Car and Driver Research Supporting Subscribers Are Opinion Leaders Gave advice in past year 69% Passenger car 7.853% AREA OF OPINION LEADERSHIP AVERAGE NO. OF PEOPLE ADVISED* GIVEN ADVICE PAST 12 MONTHS Pickups, SUVs, Vans 4.531% Automotive parts 20.524% 2.7 AVERAGE NO. WHO FOLLOWED SUBSCRIBERS’ ADVICE 1.2 17.2 3.2 AVERAGE NO. WHO SUBSEQUENTLY BOUGHT* 1.5 18.3

21. ©2000 Prentice Hall Table 15.5 continued Maintenance/ appearance products 18.228% Tires8.332% AREA OF OPINION LEADERSHIP AVERAGE NO. OF PEOPLE ADVISED* GIVEN ADVICE PAST 12 MONTHS Auto sound equipment 8.217% Other electronic accessories 6.224% 14.8 6.7 AVERAGE NO. WHO FOLLOWED SUBSCRIBERS’ ADVICE 3.7 3.1 15.8 70 AVERAGE NO. WHO SUBSEQUENTLY BOUGHT* 4.0 3.4 *Among those who gave advice (i.e., 69%). Base: Total subscribers (multiple responses).

22. ©2000 Prentice Hall Market Maven Individuals whose influence stems from a general knowledge or market expertise that leads to an early awareness of new products and services.

23. ©2000 Prentice Hall The Interpersonal Flow of Communication Two-Step Flow –Views opinion leader as a middleman between the impersonal mass media and the majority of society Multistep Flow –Takes into account the fact that information and influence often are two-way processes

24. ©2000 Prentice Hall Two-Step Flow of Communication Theory A communication model that portrays opinion leaders as direct receivers of information from mass media sources who, in turn, interpret and transmit this information.

25. ©2000 Prentice Hall Figure 15.2 Two-Step Flow of Communication Theory Mass Media Opinion Leaders Opinion Receivers (the masses) Step 1 Step 2

26. ©2000 Prentice Hall Multistep Flow of Communication Theory A revision of the traditional two-step theory that shows multiple communication flows: from the mass media simultaneously to opinion leaders, opinion receivers, and information receivers; from opinion leaders to opinion receivers; and from opinion receivers to opinion leaders.

27. ©2000 Prentice Hall Figure 15.3 Multistep Flow of Communication Theory Mass Media Information Receivers Opinion Receiver/ Seekers Opinion Leaders Step 1a Step 1b Step 2 Step 3

28. ©2000 Prentice Hall Issues In Opinion Leadership and Marketing Strategy Programs Designed to Stimulate Opinion Leadership Advertisements Simulating Opinion Leadership Word of Mouth May Be Uncontrollable Creation of Opinion Leaders

29. ©2000 Prentice Hall 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.

30. ©2000 Prentice Hall 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. The five stags of the traditional adoption process are awareness, interest, evaluation, trial, and adoption.

31. ©2000 Prentice Hall Elements of the Diffusion Process The Innovation The Channels of Communication The Social System Time

32. ©2000 Prentice Hall Defining Innovations Firm-oriented definitions Product-oriented definitions Market-oriented definitions Consumer-oriented definitions

33. ©2000 Prentice Hall Product-Oriented Definitions Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation

34. ©2000 Prentice Hall Continuous Innovation A new product entry that is an improved or modified version of an existing product rather than a totally new product. A continuous innovation has the least disruptive influence on established consumption patterns.

35. ©2000 Prentice Hall Dynamically Continuous Innovation A new product entry that is sufficiently innovative to have some disruptive effects on established consumption practices.

36. ©2000 Prentice Hall Discontinuous Innovation A dramatically new product entry that requires the establishment of new consumption practices.

37. ©2000 Prentice Hall Figure 15.5 The Telephone Has Led to Related Innovations Telephone Pager 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 Nationwide paging service Stock market quotation devices Sports scores delivery Two-way paging Pager watch Silent alert Message displays Build-in alarm clock Interchangeable fashion color cases 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 Innovations Continuous Innovations

38. ©2000 Prentice Hall Product Characteristics That Influence Diffusion Relative Advantage Compatibility Complexity Trialability Observability

39. ©2000 Prentice Hall Table 15.6 Product Characteristics That Influence Diffusion CHARACTERISTICSEXAMPLESDEFINITION Relative Advantage Air travel over train travel, cordless phones over corded telephones The degree to which potential consumers perceive a new product as superior to existing substitutes Compatibility Gillette MACH3 over disposable razors, digital telephone answering machines over machines using tape to make recordings The degree to which potential consumers feel a new product is consistent with their present needs, values, and practices Complexity Products low in complexity include frozen TV dinners, electric shavers, instant puddings The degree to which a new product is difficult to understand or use

40. ©2000 Prentice Hall Table 15.6 continued CHARACTERISTICSEXAMPLESDEFINITION Trialability Trial size jars and bottles of new products, free trials of software, free samples, cents-off coupons The degree to which a new product is capable of being tried on a limited basis Observability Clothing, such as a new Tommy Hilfiger jacket, a car, wristwatches, eyeglasses The degree to which a product’s benefits or attributes can be observed, imagined, or described to potential customers

41. ©2000 Prentice Hall Table 15.7 Barriers to Diffusion of an Innovation--On-Line Banking FUNCTIONAL BARRIERS UsageInitial use requires a great deal of consumer learning Continuing use requires total commitment of system Partial or inconsistent use results in incorrect account balances Value barriersRequires purchase of software and supplies Generally has additional monthly fee TYPES OF BARRIERS DEFINTIONS AND EXAMPLES Risk barriersPerformance risk is high Economic risk is moderate Social risk is low PSYCHOLOGICAL BARRIERS Traditional barriersNot the way the consumer is accustomed to paying bills, etc. Image barriersNegative (“hard to use”) image of personal computers in general and on-line banking in particular

42. ©2000 Prentice Hall Time and Diffusion Purchase Time Adopter Categories Rate of Adoption

43. ©2000 Prentice Hall Table 15.8 Time Line for Selecting a New Large-Screen TV Set WEEKPRECIPITATING SITUATIONS/FACTORS 0Current family room 19-inch TV set works fine but is 10 years old and cannot access a number of the cable channels. The wife has recently purchased a new sofa and new carpeting for the family room, and she and her husband have spoken about possibly having a cabinet built for the wall opposite the sofa that would contain the TV, stereo, tape deck, CD player, and VCR. Several friends have purchased large-screen TVs and have turned their family rooms into home entertainment centers. Couple decides, therefore, to also look at projection TVs. 1-4Consumer senses a need to learn more about the features and availability of large-screen TVs, both those with conventional tubes and projection TVs. DECISION PROCESS BEGINS

44. ©2000 Prentice Hall Table 15.8 continued WEEKTHE TV IS OUT OF MIND 5-8The transmission in the older of the couple’s two cars, a 1987 Honda, begins to shift erratically. Because of the expense of this repair (the transmission had to be replaced), the hunt for a new TV is put on the back burner. 9The wife reads a article in one of the magazines hat she periodically buys at the supermarket about a family that purchased a Zenith 52-inch projection TV for their family room and created a home entertainment center. She shows the article to her husband. INTEREST IS RETRIGGERED CONSUMER ACQUIRES A MENTOR (OPINION LEADER) The husband asks a neighbor to serve as a mentor (opinion leader) with regard to home entertainment centers. He agrees.

45. ©2000 Prentice Hall Table 15.8 continued WEEKFEATURES AND BRAND OPTIONS ARE REVIEWED 10With the advice of the mentor, the decision is made to use a projection TV in the 46- to 50-inch range as the nucleus of the home entertainment center. The couple visits several department store and appliance store TV departments and narrows down the choices to projection units from Pioneer, Sony, and Zenith. 11-12The toll-free 800 numbers of the three TV manufacturers (which were featured in ads) are called to request additional detailed information (brochures and booklets). OBTAINING MORE FOCUSED INFO ABOUT OPTIONS

46. ©2000 Prentice Hall Table 15.8 continued WEEKPERIOD OF SELF-STUDY 13-14After reading the brochures and discussing the pros and cons of the alternatives with their mentor (comparing models with regard to features such as picture-in-picture and surround sound capability), a decision is made. The 46-inch Sony is selected because of a magazine review that give it very high marks in terms of its screen brightness and sharpness, and because it offered colored picture-in-picture. Sunday’s newspaper contains an advertisement from a local appliance store chain stating that any projection TV purchased within the next week can be paid for with 6 monthly payments, at no interest charge-- the first payment beginning 6 months after the TV is installed. The couple decides to drive to the store and talk to a salesperson about the deal. When the salesperson agrees to lower the price of the Sony 46- inch set to match the lowest price the couple had been quoted, they decide to make the purchase. The TV arrives in the appliance dealer’s truck and is installed in the couple’s family room. ORDERING THE TV

47. ©2000 Prentice Hall Adopter Categories A sequence of categories that describes how early (or late) a consumer adopts a new product in relation to other adopters. The five typical adopter categories are innovators, early adopters, early majority, late majority, and laggards.

48. ©2000 Prentice Hall Figure 15.10 Adopter Categories Innovators 2.5% Early Adopters 13.5% Laggards 16% Percentage of Adopters by Category Sequence Early Majority 34% Late Majority 34%

49. ©2000 Prentice Hall 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

50. ©2000 Prentice Hall 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

51. ©2000 Prentice Hall Early Majority: Description 34.0% of population Deliberate Adopt new ideas just prior to the average time Seldom hold leadership positions Deliberate for some time before adopting

52. ©2000 Prentice Hall 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

53. ©2000 Prentice Hall 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

54. ©2000 Prentice Hall Table 15.10 The Importance of Time in the Diffusion Process TYPE OF TIME MEANINGEXAMPLES Purchase time Time between awareness and purchase I you look at your car’s gas gauge and it reads “empty,” you stop at the next gas station you come to. If you’re shopping or an additional VCR for your home, you may take quite a while to make a purchase, as long as your present VCR is working properly. Adopter categories A classification scheme that indicates where a consumer stands, in relation to others, when adopting a new product. Innovators are the first to adopt a new product, and laggards are the last.

55. ©2000 Prentice Hall Table 15.10 continued TYPE OF TIME MEANINGEXAMPLES Rate of adoption How long it takes a new product or service to be adopted by members of a social system Black-and-white TVs were adopted by consumers much more quickly than their manufacturers had envisioned; in contrast, trash compactors have never been widely adopted

56. ©2000 Prentice Hall Table 15.11 The Stages in the Adoption Process NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE Awareness Consumer is first exposed to the product innovation. David sees an ad for a new digital camera in the newspaper. Interest Consumer is interested in the product and searches for additional information. David reads about the camera on the manufacturer’s Web site, ad then goes to a camera store near his office and has a salesman show him the camera. Evaluation Consumer decides whether or not to believe that this product or service will satisfy the need--a kind of “mental trial.” After talking with a knowledgeable friend, David decides that his camera should be able to provide him with the photos he needs to use in PowerPoint presentations. He also likes the fact that it uses “standard” floppy disks for storage.

57. ©2000 Prentice Hall Table 15.11 The Stages in the Adoption Process Trial Consumer uses the product on a limited basis Since camera cannot be “tried” like a small bottle of a new shampoo, David buys the camera from a dealer offering 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 o reject it. David finds that the camera is easy to use and the results are excellent; consequently, he keeps the digital camera. NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE

58. ©2000 Prentice Hall Figure 15.11 An Enhanced Adoption Process Model Pre-existing problem or Need AwarenessInterestEvaluationTrial Adoption or Rejection Postadoption or Postpurchase Evaluation Evaluation Adoption or Rejection Discontinuation Discontinuation or Rejection Rejection

59. ©2000 Prentice Hall Figure 15.12 The Relative Importance of Different Types of Information Sources in the Adoption Process Importance High Low Awareness Adoption Trial Evaluation Interest Personal and interpersonal sources Impersonal mass-media sources

60. ©2000 Prentice Hall Issues in Profiling Consumer Innovators Defining the Consumer Innovator Interest in the Product Category The Innovator Is an Opinion Leader Personality Traits Media Habits Social Characteristics Demographic Characteristics Are There Generalized Consumer Innovators?

61. ©2000 Prentice Hall EMBRACING INNOVATIONS Chasing the Advances Innovation Fascination Figure 15.13 The Innovator Buying Cycle INNOVATION SATIATION Product Accumulation in the Closet Cumulative Innovation Disappointment Pace of Innovation Slows Down INNOVATOR NO MORE What I’ve Got is Good Enough Now Innovator Becomes Extremely Cautious, Careful Buyer Moving On

62. ©2000 Prentice Hall Table 15.12 Comparative Profiles of the Consumer Innovator and the Noninnovator or Later Adopter Product interestMoreLess Opinion LeadershipMoreLess Personality DogmatismOpen-mindedClosed-minded Need for uniquenessHigherLower Social characterInner-directedOther-directed Optimum stimulation levelHigherLower Variety seekingHigherLower Perceived riskLessMore VenturesomenessMoreLess CHARACTERISTICINNOVATOR NONINNOVATOR (OR LATE ADOPTER)

63. ©2000 Prentice Hall Table 15.12 continued CHARACTERISTICINNOVATOR NONINNOVATOR (OR LATE ADOPTER) Purchase & Consumption Traits Brand LoyaltyLessMore Deal pronenessMoreLess UsageMoreLess Media Habits Total magazine exposureMoreLess Special-interest magazinesMoreLess TelevisionLessMore

64. ©2000 Prentice Hall Table 15.12 continued Social Characteristics Social integrationMoreLess Social strivingMoreLess Group MembershipsMoreLess Demographic Characteristics AgeYoungerOlder IncomeHigherLower EducationMoreLess Occupational statusHigherLower CHARACTERISTICINNOVATOR NONINNOVATOR (OR LATE ADOPTER)