1. Consumer Influence Word-of-Mouth Communication Opinion Leadership Diffusion of Innovations

2. Word-of-Mouth Communication n Discussions among consumers regarding marketplace issues. n A pattern of social communication. n Referral networks. n Spontaneous. n Negative WOM weighted more heavily by consumers than positive WOM.

3. Marketing Implications of WOM n Discourage negative WOM. n Refute rumors. n Stimulate additional direct sales through WOM. n Simulate WOM in advertising.

4. Opinion Leadership n WOM communication involves consumers who seek and who give information.

5. How Does Opinion Leadership Work? Multistep Flow of Communication Theory Mass Media Information Receivers Opinion Receivers/ Seekers Opinion Leaders Step 1a Step 1b Step 2 Step 3

6. Opinion Leaders are... n Technically competent--expert power. n Credible--unbiased opinions. n Socially active and interconnected in their communities. n Similar to other consumers--referent power. n Among the first to buy new products. n Highly involved with certain products.

7. n Highly involved with messages about certain products. n Self-confident. n Differentiated from others and choose to act differently--public individuation.

8. Opinion Leaders share information because they need... n To reduce perceived risks associated with their purchases. n To talk about products with which they’re highly involved. n To share what they know.

9. Profile of Opinion Leaders

10. Methods of Measuring Opinion Leadership n Self-designating method < Respondents’ perceptions < Most commonly used method < Subjective method

11. n Sociometric method < Members of a social system identify opinion leaders and seekers for a product category. < Great degree of validity < Very costly and complex--better with self-contained group.

12. n Key informant method < Carefully selected informants in a social system are asked to designate opinion leaders. < Relatively inexpensive and less time-consuming < Requires informants who are thoroughly familiar with the social system.

13. n Objective method < Artificially places individuals in a position to act as opinion leaders and measures results of their efforts. < Controlled experiments

14. Marketing Implications n Design programs using WOM. n Simulate opinion leadership/WOM in advertising. n Design products with WOM appeal. n Use opinion leaders to trial new products. n Directly market to opinion leaders.

15. Diffusion of Innovations n A framework examining how consumers accept new products. n Two related processes: < Adoption < Diffusion

16. What is an Innovation? n An idea, process, or invention that is new or different. Continuous Innovation Discontinuous Innovation Dynamically Continuous Innovation Product-Oriented Definition of Innovation

17. Continuous Innovation n A modified or improved product. n Minor change in product benefits but no disruption of consumer behavior. n Weak category of innovation.

18. Dynamically Continuous Innovation n Creation of new product or modification of an existing product. n Consumers have to alter their behaviors somewhat to use this innovation. n Moderately strong category of innovation.

19. Discontinuous Innovation n Usually technological new products offering major new benefits. n Consumers must discontinue past patterns of product usage to fit the new product into their lives. n Strong category of innovation.

20. Telephone Answering machines Call forwarding Call waiting Caller ID Banking by telephone Call-prompting services Hold button Line-in-use indicator Redial button Auto dialing Touch-tone phones 800 numbers 900 numbers Discontinuous Innovation Dynamically Continuous Innovations Continuous Innovations

21. Adoption Process n 5-step decision process: < Awareness < Interest < Evaluation < Trial < Adoption (rejection)

22. Adoption Process Model Pre-existing problem or need AwarenessInterestEvaluationTrial Adoption or Rejection Evaluation Rejection Discontinuation or rejection Postadoption or postpurchase evaluation Adoption or rejection Discontinuation

23. Adopter Categories

24. Innovators n 2.5% of population n Adventuresome n Open to change and the unfamiliar n Rely on their own standards or values n Seek variety; change brands frequently n Opinion leaders n Product-specific n Younger, higher incomes, higher education, higher occupational status

25. Early Adopters n 13.5% of population n Interested in change and willing to take risks n More involved in social groups than innovators n Guided by group norms n Opinion leaders n Role models

26. Early Majority n 34% of population n Less willing to take risks, but interested in new products n Adopt products just prior to the average adoption time n Seldom hold leadership positions n Want best possible alternative, so deliberate for some time before adopting

27. Late Majority n 34% of population n Skeptical n Adopt new ideas just after the average adoption time n Innovations approached cautiously n Influenced more by advertising and other mass media information than by social groups

28. Laggards n 16% of population n Traditional n Suspicious of anything new n Oriented to past n By the time they adopt, innovators may be adopting the next version of the product n Tend to be older, lower incomes

29. Diffusion Process n Research shows that diffusion tends to follow an S-shape % of U.S. households using a product Year 0 50 100 1990 199520002005

30. What Influences Diffusion? Social system –Generally uncontrollable by marketers n Diffusion more rapid when social system has: –Positive view of change –Positive view of education and science –Members who interact frequently with other social systems

31. Price –Controllable by marketing n Penetration policy n Skimming policy

32. Product Characteristics –Controllable by marketing n Relative advantage n Complexity n Observability n Compatibility n Trialability n Perceived risk