COPYRIGHT 2006 Thomson SouthWestern a part of The

COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumer Behavior Roger D. Blackwell Paul W. Miniard James F. Engel Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Thomson Business and Economics 5109 Natorp Boulevard Mason, OH 45040 800– 423– 0563 COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

CHAPTER 13 Group and Personal Influence COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Group and Personal Influences on Individuals COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Group and Personal Influences on Individuals Other people, whether as individuals or groups, exert enormous influence on consumers Belonging to groups, trying to “fit in, ” and striving to please others affects every stage in the decision process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Group and Personal Influences on Individuals Reference group: any person or group of people who significantly influences an individual’s behavior May be individuals (celebrities, athletes, or political leaders) or groups of individuals with similarities (musical groups or sports teams) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Types of Personal Influences: Normative Transmission • Groups • Individuals Value Expressive Informational High Degree of Influence Lifestyles Behaviors Purchases Consumption Low Degree of Influence COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Personal Influences: • Groups • Individuals COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Reference Groups Primary Groups: a social aggregation that is sufficiently intimate to permit and facilitate unrestricted direct interaction (e. g. , family) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Reference Groups Secondary Groups: also have direct interaction, but it is more sporadic, less comprehensive, and less influential in shaping thought and behavior (e. g. , professional associations or community organizations) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Reference Groups Formal Groups: characterized by a defined structure (often written) and a known list of members and requirements for membership Informal Groups: have less structure than formal groups and are likely to be based on friendship or interests COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Reference Groups Membership: when individuals are recognized as members of a group, they have achieved formal acceptance status in the group Aspirational Groups: exhibit a desire to adopt the norms, values, and behaviors of others with whom the individuals aspire to associate COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Reference Groups Dissociative Groups: groups from which an individual tries to avoid association Virtual Groups: groups that are based on virtual communities rather than geographic ones COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Personal Influences: • Groups • Individuals COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Types of Personal Influences: Normative • Groups • Individuals Value Expressive Informational COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Group Influence Normative: when individuals alter their behaviors or beliefs to meet the expectations of a particular group COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Group Influence Normative: when individuals alter their behaviors or beliefs to meet the expectations of a particular group Value-expressive: when a need for psychological association with a group causes acceptance of its norms, values, attitudes, or behaviors COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Group Influence Normative: when individuals alter their behaviors or beliefs to meet the expectations of a particular group Value-expressive: when a need for psychological association with a group causes acceptance of its norms, values, attitudes, or behaviors Informational: when people have difficulty assessing product or brand characteristics by their own observations or contact COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Types of Personal Influences: Normative • Groups • Individuals Value Expressive Informational COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Types of Personal Influences: Normative Transmission • Groups • Individuals Value Expressive Informational COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Personal and Group Influence on Individuals Types of Personal Influences: Normative Transmission • Groups • Individuals Value Expressive Informational High Degree of Influence Lifestyles Behaviors Purchases Consumption Low Degree of Influence COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Socialization: permits an individual to know what behavior is likely to result in stability both for the individual and the group Company manual may explain the dress code in the workplace Informal groups may tell them what styles are most comfortable and easiest to maintain COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Self-concept: people protect and modify their self-concept by their interactions with group members People can maintain self-concept by conforming to learned roles Testimonial advertising is effective when the self projected in the ad is consistent with the idealized self of the target consumer COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Reference Groups Help Define Self-Concept COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Social comparison: individuals often evaluate themselves by comparing themselves to others Consumers often use reference groups as benchmarks to measure their own behaviors, opinions, abilities, and possessions Advertising or television can be sources of social comparison COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Conformity: a change in beliefs or actions based on real or perceived group pressures Compliance: when an individual conforms to the wishes of the group without accepting all its beliefs or behaviors Acceptance: when an individual actually changes his or her beliefs and values to those of the group COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Factors affecting how likely people are to conform to group norms: COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals When are people more likely to conform to norms? COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Factors affecting how likely people are to conform to group norms: Desire for social acceptance Degree of experience in situation or with decision Conspicuousness Complex product or luxury item COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Reference Group Influence on Product and Brand Purchase Decisions BRAND Weak Group Strong Group Influences (-) Influences (+) PRODUCT Weak Reference Strong Reference Group Influence PUBLIC NECESSITIES PUBLIC LUXURIES Influence: Weak product Influence: Strong & strong brand product & strong brand (watch, autos, suits) PRIVATE NECESSITIES (golf clubs, skis, boat) PRIVATE LUXURIES Influence: Weak product Influence: Strong & weak brand product & weak brand (mattress, refrigerator) (TV, icemaker) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Profits of conformity More likely to occur when the rewards of compliance exceeds its costs The degree of influence on final outcome is determined by an individual’s perception of the “profit” inherent in the transaction COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Reference Groups Influence Individuals Conspicuousness Conformity pressures are not sufficient to induce behavior unless the product or service is publicly conspicuous in its purchase and use Because other will see the product, many consumers will conform rather than risk embarrassment or ridicule Peers send clear signals about product alternatives COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Appealing to Normative Influence in Marketing Strategy Normative compliance may be less important in industrialized nations as many consumers are putting personal needs ahead of group loyalty Extended families have less face-to-face contact and people are more socially isolated than in the past Television and mass media expand people’s horizons beyond social circles COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Appealing to Normative Influence in Marketing Strategy A weakened respect for social norms (anomie) leads some consumers to desire expression of individuality more than group affiliation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

High Product Visibility Raises Reference Group Influence COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Self-Expression Outside of Social Norms COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Celebrity and Other Reference Group Appeals in Advertising Testimonials: celebrities tout products based on personal usage COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Celebrity and Other Reference Group Appeals in Advertising Testimonials: celebrities tout products based on personal usage Endorsements: celebrities lend their name or likeness to a product without necessarily being an expert in the area COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Celebrity and Other Reference Group Appeals in Advertising Actor or Spokesperson: someone who represents a brand or company for an extended time period COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Celebrity and Other Reference Group Appeals in Advertising Expert appeal: appeal from a person possessing unique information or skills that can help consumers make better purchase decisions than other types of spokespersons Common-man appeal: testimonials from “regular” consumers with whom most consumers can relate COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Transmission of Influence Through Dyadic Exchanges COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Transmission of Influence Through Dyadic Exchanges Exchange between two individuals that influence these individual’s behaviors or beliefs Dyadic exchange requires the exchange of resources (opinions and comments) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Dyadic Exchanges Word-of-mouth Communication Service Encounters Opinion Leadership COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Word-of-Mouth Communication Word-of-mouth communication: informal transmission of ideas, comments, opinions, and information between two people, neither one of which is a marketer The receiver gains information about behaviors and choices, which is valuable to the receiver in the decision process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Word-of-Mouth Communication The sender increases their confidence in the personal product or behavior choice by persuading others to do the same COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Benefits of Word-of-Mouth COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Opinion Leadership Opinion leadership: the sender of information is often considered an opinion leader—a person who influences the decisions of others Opinion leaders might be experts in one area but not in others The greater the perceived knowledge of a category, the more likely that person’s opinions are to influence others’ decisions COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Opinion Leadership Personal influence in the form of opinion leadership is likely to occur when: COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Opinion Leadership Personal influence in the form of opinion leadership is likely to occur when: An individual has limited knowledge of a product or brand The person lacks the ability to evaluate the product or service The consumer does not trust advertising and other sources of information Other information sources have low credibility with the consumer COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Opinion Leadership The individual has a high need for social approval Strong social ties exist between sender and receiver The product is complex The product is difficult to test against objective criterion The product is highly visible to others COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Characteristics of Opinion Leaders Opinion leaders and receivers often share similar demographic characteristics and lifestyles, yet they may have greater social status within the same group as followers The most common characteristic is that opinion leaders are involved with a particular product category COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Opinion Leadership Product innovators: similar to opinion leaders, these individuals are the first to try new products COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Overlapping Opinion Leadership Market mavens: gather much of their information from shopping experiences, openness to information and general market awareness, making them more aware of new products than other people COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Overlapping Opinion Leadership Surrogate consumers (shoppers): an individual who acts as an agent to guide, direct, and conduct activities in the marketplace COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Service Encounters Service encounters: occurs when there is personal communication between a consumer and a marketer May be a consumption experience within a store—the various transactions and services that occur during a retail purchase May be an experience consuming the specific service a consumer purchases COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Service Encounters Service providers must understand the needs of different customers and match the appropriate sales associate or sales approach to each individual customer Which customers desire a great deal of assistance and which ones prefer little interaction Salespeople foster a relationship between buyer and seller COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Service Encounters Customer intimacy: detailed understanding and focus on customers’ needs lifestyles and behaviors in an effort to create a deep cultural connections with the customers Reverse customer intimacy: how well marketers facilitate customers knowing the marketer COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Trickle-down: alleges that lower classes often emulate the behavior of their higher-class counterparts Influence is transmitted vertically through social classes, when higher classes express wealth through conspicuous consumption, and lower classes copy their behavior COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Today, trends are transmitted through mass media and there is very little direct, personal contact between social classes COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Two-step Flow Opinion leaders are the direct receivers of information from advertisements and they interpret and transmit the information to others through word-of-mouth COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Two-step Flow Information and Influence Information Mass Media Opinion Leader Opinion Seekers COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Multistep Flow Information can flow directly to different types of consumers, including opinion leaders, gatekeepers, and opinion seekers and receivers COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

How Personal Influences Are Transmitted Multistep Flow Mass Media Opinion Leader Opinion Seekers Gatekeepers COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

WOM and Opinion Leaders in Advertising and Marketing Strategy COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

WOM and Opinion Leaders in Advertising and Marketing Strategy WOM and personal communication can have a more decisive role in influencing behavior than advertising and other marketerdominated sources Viewed as a more trustworthy and credible source of information than salespeople or paid advertising COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

WOM and Opinion Leaders in Advertising and Marketing Strategy Advertising can provide information to consumers about products they might seek from other sources and which may be discussed in WOM However, consumers don’t always trust that the advertiser has their best interests in mind COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

WOM and Opinion Leaders in Advertising and Marketing Strategy Advertising influences the effectiveness of WOM and vice versa Advertising can provide information about products consumers might not seek from other sources Advertising can create WOM among consumers and peer groups COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Primary Reliance on Word-Of-Mouth For some occasions, companies rely on WOM as a substitute for advertising COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Primary Reliance on Word-Of-Mouth For some occasions, companies rely on WOM as a substitute for advertising Retailers such as Wal*Mart and Victoria’s Secret have demonstrated that advertising can be sharply reduced when word-of-mouth is strong COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Targeting Opinion Leaders Firms can market to opinion leaders as a distinct segment (once they can be identified) Mass media can be used to target leadership roles and responsibilities with other options such as association memberships, direct mail, and trade or special interest magazines COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Stimulating Word-Of-Mouth Firms may stimulate WOM by giving away or loaning products to opinion leaders to display and use Organizations may induce opinion leaders to influence consumers COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Creating Opinion Leaders Firms can create opinion leaders by providing incentives for new customers to attract others to the store Companies can activate search through advertising that encourages consumers to “ask a person who owns one” or “share the experience with a friend” COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Creating Opinion Leaders COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Managing Negative WOM Just as positive word-of-mouth can be a great asset to marketers, the opposite can be true when the content in negative Negative WOM is usually given high priority and weighs heavily in decision making The dissatisfied buyer is more motivated to share information COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Monitoring the Content of WOM Firms can monitor the presence and impact of WOM—what dissatisfied consumers are saying about the product or company Monitoring rumors which do not always appear in customer complaint reports Creating a strategy to respond to rumors and negative WOM COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Curbing Negative WOM When something goes terribly wrong, denying the problem is not the answer The best strategy is immediate acknowledgement by a credible company spokesperson as negative WOM rarely goes away by itself Make sure you have all your facts straight and tell the truth COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Diffusion of Innovations COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Diffusion of Innovations Innovation: any idea or product perceived by the potential adopter to be new Product innovation: any new product recently introduced to the market or perceived to be new when compared to existing products Consumers can view innovations subjectively or objectively COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Diffusion of Innovations Subjective Innovation: a definition derived from the thought structure of a particular individual or entity Objective innovation: based on external criteria; innovations are ideas, behaviors, or things that are qualitatively different from existing forms COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Innovations and New Products Marketers often use the word “new” to call attention to products recently introduced to the marketplace The use of the word “new” in advertising is limited to products available for less than six months New products can change the way consumers live and how society is organized COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Innovations COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Innovations Classified based on the impact of the innovation on behavior in the social structure COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Innovations Classified based on the impact of the innovation on behavior in the social structure Continuous innovation Dynamically continuous innovation Discontinuous innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Continuous Innovation The modification of an existing product rather than the establishment of a totally new product Modification may be in the taste, appearance, performance, or reliability of the existing product COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Continuous Innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Dynamically Continuous Innovation May involve either the creation of a new product or a significant alteration of an existing one Does not generally alter established purchase or usage patterns COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Dynamically Continuous Innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Discontinuous Innovation Involves the introduction of an entirely new product that significantly alters consumers’ behavior patterns and lifestyles Examples include automobiles, televisions, videocassette recorders, and computers COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Types of Innovations While innovations are usually considered in terms of new products, they might also be usage based—finding new uses for old products COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Why Some Innovations Succeed and Others Don’t Successful products are those that become culturally anchored—so inextricably a part of a consumer’s life and sociocultural surroundings that the person-product interface is an important part of the individual’s self-concept Imagine being without personal computers or microwave ovens COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Why Some Innovations Succeed and Others Don’t Relative Advantage Compatibility Complexity Trialability Observability COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Relative Advantage The degree to which consumers may perceive the innovation to offer substantially greater benefits than the product they currently use COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Relative Advantage The degree to which consumers may perceive the innovation to offer substantially greater benefits than the product they currently use To what degree will the new product be a substitute for existing ones or complement those already in consumers’ inventories? New products most likely to succeed appeal strongly to felt consumer needs COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Compatibility The degree to which a new product is consistent with an individual’s existing practices, values, needs, and past experiences of the potential adopters COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Compatibility The degree to which a new product is consistent with an individual’s existing practices, values, needs, and past experiences of the potential adopters How does the innovation blend with products consumers might own? Will it replace other products or will it become a part of an existing system? How does the innovation fit current purchase or consumption behaviors? COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Complexity The degree to which an innovation is perceived as difficult to understand use The more complex, the more difficult it will be to gain acceptance Complexity is a deterrent of trying new technology COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Complexity How difficult is the innovation to understand? How easy is it to explain to consumers in written form and oral communication? How frustrating will it be to consumers when evaluating products or learning how to use new innovation? How much time will consumers have to devote to learning how to use and care for the product? COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Trialability New products are more apt to succeed when consumers can experiment with or try the idea on a limited basis, with limited financial risk How can a company encourage consumers to try a new product? Where will consumers be able to try the innovation and how will they receive answers to their questions? COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Observability The degree to which results from using a new product are visible to friends and neighbors If consumers can see others benefiting from the use of a new product, that innovation is more likely to be successful and diffuse faster COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

The Diffusion Process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

The Diffusion Process Diffusion: the process by which an innovation (new idea) is communicated through certain channels over time among the members of a social system COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

The Diffusion Process Diffusion: the process by which an innovation (new idea) is communicated through certain channels over time among the members of a social system Includes: Diffusion of information and communication Consumer decision process Diffusion or demise of innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

The Diffusion Process Diffusion of Innovation Accept Organization Influencer C o n s u m e r (X number of people) Reject Demise of Innovation Diffusion of Information and Communication Consumer decision process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Factors Affecting Diffusion Communication (how consumers learn about new products) Time (how long it takes for a person to move from product awareness to product purchase or rejection) Social system (groups or segments to which individuals belong affect adoption or rejection) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Speed of Diffusion will be faster if: COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Speed of Diffusion will be faster if: Supplier is intensely competitive Supplier’s reputation is good Standardized technology is used Vertical coordination among channel members exists Resource commitments are significant COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumer Decision Process for Innovations COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge: begins when the consumer receives physical or social stimuli that gives exposure and attention to the new product and how it works How a person receives and interprets the knowledge is affected by their personal characteristics COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge Characteristics of the Decision Making Unit COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Persuasion: refers to the formation of favorable or unfavorable attitudes towards the innovation Persuasiveness is related to the perceived risks and consequences of adopting and using the new product COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge Persuasion Perceived Characteristics of the Innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Decision: involves a choice between adopting and rejecting the innovation Adoptors are people who have made a decision to use a new product whereas other are nonadoptors Rejection may be active or passive COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge Persuasion Decision Adoption Rejection Continued adoption Later adoption Discontinuance Continued Rejection COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Implementation: occurs when the consumer puts an innovation to use The process has been a mental exercise until this point where it requires a behavioral change The strength of the marketing plan may be the critical determinant in a sale resulting COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge Persuasion Decision Implementation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Confirmation: during this stage, consumer seek reinforcement for their innovation decision Consumer may reverse previous decision due to conflicting messages resulting in dissonance Discontinuance is a serious concern to marketers who strive for continued acceptance COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Knowledge Persuasion Decision Implemen. Confirmation tation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Rogers Model of Innovation Decision Process Communication Channels Knowledge Persuasion Decision Implemen. Confirmation tation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumer Most Likely to Buy New Products COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumer Most Likely to Buy New Products Marketers need to determine who is most likely to buy the new product while in the development process Determinants include individual’s personalities, social status, education level, and aversion to or acceptance of risk Different adoptor classifications behave differently during the decision process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Adopter Classes A B C D E A= Innovators (2. 5%) B= Early Adopters (13. 5%) C= Early Majority (34%) D= Late Majority (34%) E= Laggards (16%) COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumers Likely to Buy New Products Innovators: the first consumer group to adopt products Early adopters: opinion leaders and role models for others, with good social skills and respect within larger social systems Early majority: consumers who deliberate extensively before buying new products, yet adopt them just before the average time it takes the target population as a whole COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumers Likely to Buy New Products Late majority: tends to be cautious when evaluating innovations, taking more time than average to adopt them, and often at the pressure of peers Laggards: the last groups that tend to be anchored in the past, are suspicious of the new, and exhibit the lowest level of innovativeness among adopters COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Consumers Likely to Buy New Products Innovativeness: the degree to which an individual adopts an innovation earlier than other members of a social system Cognitive innovators: have a strong preference for new mental experiences Sensory innovators: have a strong preference for new sensory experiences Advertising and other communications can be targeted accordingly COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Managerial Perspectives on Adoption and Diffusion of Innovation COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Managerial Perspectives on Adoption and Diffusion of Innovation New products for the profitability and long-term financial success of firms While development groups are producing line and brand extensions, breakthroughs are needed to fuel growth and profits New product development requires the coordination of marketing, engineering, research and other parts of the firm COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Managerial Perspectives on Adoption and Diffusion of Innovation Consumer insight helps create products that consumers are likely to adopt Intuition and information (often gained from consumers through research) leads to the formation of an insight Insights drive the creation of a new or adaptation of an existing product Research is important to the innovation development process COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

Positioning New Products on Insight COPYRIGHT © 2006 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.