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

2. 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. What is Opinion Leadership? Opinion Leader Opinion Receiver Opinion Seeker

4. 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

5. 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.

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

7. 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

8. Chat Rooms and Opinion Leadership

9. 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

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

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

12. 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

13. Table 15.3 A Comparison of Motivations (Excerpts) OPINION LEADERSOPINION 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

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

15. Table 15.4 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 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

16. 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

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

18. 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?”

19. 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

20. 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

21. 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.

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

23. 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

24. Two-Step Flow of Communication Theory Mass Media Opinion Leaders Opinion Receivers (the masses) Step 1Step 2

25. Multistep Flow of Communication Theory Mass Media Information Receivers Opinion Receivers/ Seekers Opinion Leaders Step 1a Step 1b Step 2 Step 3

26. 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

28. 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.

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

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

31. Product-Oriented Definitions Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation

32. Telephone Innovations Telephone 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 Innovations Continuous Innovations

33. Product Characteristics That Influence Diffusion Relative Advantage Compatibility Complexity Trialability Observability

34. Ad Stressing Ease of Use and Convenience

35. Characteristics That Influence Diffusion CHARACTERISTICSEXAMPLES 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

36. continued CHARACTERISTICSEXAMPLES 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

37. Time and Diffusion Purchase Time Adopter Categories Rate of Adoption

38. 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.

39. 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.

40. 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

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

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

43. 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

44. 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

45. 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

46. 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

47. 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

48. Ad Appeals to Fashion Innovators