Chapter 16 Consumer Innovation

Learning Objectives After completing this chapter, you should be able to: Distinguish characteristics of innovations that influence their rate of diffusion and help determine their market success. Distinguish diffusion and adoption processes. Describe reasons for resistance to change and for discontinuance. Describe strategies for changing attitudes and behavior. Understand how innovation and adoption processes are influenced by environmental, cultural, and social system factors.

Learning Objectives (continued) Identify and distinguish opinion leaders, market mavens, and innovative consumers important in the diffusion of innovations. Describe differences among consumers based on their time of adoption of innovations. Describe a common adoption decision.

Overview Creative Destruction Innovation and Change Capitalism encourages the creation of new markets, new technologies, and new forms of industrial organization. Innovation and Change Innovation and change are the heart of marketing. While some marketers ask consumers to be innovative, in terms of what they buy, how they buy, and where to buy, others encourage consumers to be conservative and resistant to change.

Innovation Innovation refers to new things and ideas and new ways of behaving and interacting with things. It is defined by individuals and social groups. It include ideas, business practices, behaviors. It is one component of the diffusion process.

Types of Innovations Continuous innovations require minor changes in user behaviors Dynamically continuous innovations require either a major change in an area of behavior that is relatively unimportant to the individual or a minor change in an area of behavior that is very important to the user Discontinuous innovations: entail major changes in behavior in an area of importance to individual or group

Fads, Fashions, and Trends short-lived fashions, often adopted by relatively few people, often members of a common subculture Fashions a particular combinations of desirable attributes. Trends last longest and may define an era.

Innovation Characteristics that Influence New Product Adoption Relative advantage providing clear benefits for the target market that are superior to those offered by competitive market offerings. Compatibility extent to which the innovation is consistent with present needs, motives, values, beliefs, and behaviors. Trialability customers’ ability to try out an innovation without incurring risk to valued resources.

Innovation Characteristics that Influence New Product Adoption Observability for fashion goods and other sorts of goods consumed publicly, social visibility speeds innovation. Complexity the difficulty of understanding the benefits of the product or service and the relationship between attributes or features and those benefits.

The Study of Consumer Change The Diffusion Process the spread of an innovation from its creative source across space and time Product Life Cycle (PLC) a generic PLC takes the shape of an S-curve, because it mimics the adoption pattern. PLC Stages include introduction, growth, maturity, decline. Space - diffusion takes place across geographic space. Time - diffusion takes place over time and time varies with product category, product characteristics, nature of the communications environments etc. neighborhood effect: people who are close to the source of information concerning an innovation will tend to adopt more quickly than potential adopters situated at a distance from the information source.

Exhibit 16.3 Diffusion Curves

Conservatism, Resistance, and Discontinuance Pro-innovation bias assumes people are predisposed to consume new and novel products, services, experiences, and the like. Innovation resistance a preference for existing, familiar products, and behaviors over novel ones. Psychological equilibrium reflects the human desire for balance, order, and consistency between beliefs and behaviors. Social equilibrium the symmetry within social groups about the meaning of things and the meaning of one group to another. Discontinuance the consumer stops purchasing or using the product.

The Environmental Context for Innovation Ecology, including aspects such as terrain, climate, and population density, has broad effects on innovation Economic conditions and market structures also have broad influence on innovation The rate of new product introduction is also influenced by factors such as demand density, the distribution and number of consumers who desire and can afford a product. The overall rate of introduction of new products in a marketplace is an important environmental condition.

The Cultural and Social Context for Innovation Social system values and traditions influence innovation. Cultural attitudes toward variety, newness, and values attached to ideas provide norms that affect innovative behaviors. Some cultures are more open to innovation than others. Diffusion rate and maximum penetration level of an innovation depends on the innovation’s compatibility with social system values. Interdependent-communitarian vs. individualistic traditions of a society will affect the diffusion of innovations within a culture.

Social Hierarchies Trickle down theory of innovation suggests that status rivalry between social groups acts as a kind of engine or motive force for innovation Imitation occurs when low-status groups seek to establish new status claims by adopting the products, services, and ideas of higher-status groups. Differentiation occurs when high-status groups embrace new products, services, and ideas to distinguish themselves from the low-status groups. Two-step flow model - new ideas flow from the mass media to influential consumers who, in turn, pass these ideas on to others who are more passive in information seeking.

Cultural Production System A Cultural Production System is a set of individuals and organizations responsible for creating and marketing culturally significant products. Creative subsystem attempts to anticipate tastes of the buying public and generate new symbols or products that express cultural values managerial subsystem selects and makes tangible new product ideas, produces new symbols, creates new categories of personal identity. communication subsystem spreads the word about what’s new, upcoming, and popular to various groups of adopters.

Group Communication Between- and Within- Group Communication: The Innovation and Adoption Model suggests that innovations spread through communications between groups about the meanings of goods and services. There are between-group influences on innovative behaviors due to connections to other groups, reference group attractiveness, degree of group influence, and connections within groups. The Multistep Media Flow Model of Communications shows how consumers pass along information about innovations to other consumers within a social networks

Exhibit 16.4 Innovation and Adoption Model

Exhibit 16.5 Group Influence on Innovative Behaviors

Exhibit 16.6 Multistep Media Flow Model of Communication

Adoption The adoption process focuses on the stages individual consumers or organizational buying units pass through in making a decision to accept or reject an innovation. Two approaches to classifying consumers into adoption classes: time-of-adoption technique: classification in terms of purchases that occur some number of weeks, months or years after the product launch. Cross-sectional technique: classification in terms of a prespecified list of new products a particular individual or firm has purchased.

Adopter Categories Lead Users are users whose current needs become general in a market in the future. Innovators are the first to adopt an innovation and are characterized as venturesome, less risk averse, younger, have higher incomes and are better educated. Early Adopters are opinion leaders within local reference groups. Early Majority are deliberative decision makers. Late Majority are skeptical consumers, doubtful of the benefits of adoption. Laggards are traditionalists, locally oriented in terms of networks and social horizons, and relatively dogmatic in beliefs and values

Exhibit 16.7 Diffusion and the PLC

The Adoption Process Awareness is knowledge that comes through exposure to the innovation. Interest creates awareness of a relative need. Role of Perceived Risk Trial involves evaluation of sources of innovative goods and services and product choice. Involves firsthand experience as well as the use of consumer surrogates, who are specialized expert agents retained by customers to guide, direct, or transact marketplace activities. Adoption (or rejection) often treated as an either/or alternative but is usually more complicated.

Key Terms adoption process bandwagon effects communication system compatibility complexity consumer surrogates continuous innovations innovation innovation resistance laggards lead users managerial subsystem multistep media flow model

Key Terms (continued) creative destruction creative subsystem cross-sectional technique cultural production system demand density differentiation diffusion process neighborhood effect observability perceived risk pioneering advantage positive externality product complementarity pro-innovation bias

Key Terms (continued) discontinuance discontinuous innovations dynamically continuous innovations fads fashions high-status group influence imitation influential consumers psychological equilibrium relative advantage social equilibrium time-of-adoption technique trends trialability trickle-down theory of innovation two-step flow model