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After completing this chapter, you should be able to:

1. Distinguish characteristics of innovations that influence their rate of diffusion and help determine their market success.
2. Distinguish diffusion and adoption processes.
3. Describe reasons for resistence to change and for discontinuance.
4. Describe strategies for changing attitudes and behavior.
5. Understand how innovation and adoption processes are influenced by environmental, cultural, and social system factors.
6. Identify and distinguish opinion leaders, market mavens, and innovative consumers important in the diffusion of innovations.
7. Describe differences among consumers based on their time and adoption of innovations.
8. Describe a common adoption decision.

• As described by the economist Joseph Schumpeter, product choices (really choices between technologies) drive capitalist economies and shape them into engines of creative destruction. That is, capitalism encourages the creation of new markets, new technologies, and new forms of industrial organization.
• These innovations have the potential to increase the standard of living of the populace and are quickly adopted (within a capitalist economic system). At the same time, however, these innovations drive out old forms of doing business. For example, the creation of the transistor makes the vacuum tube obsolete, and vacuum tube manufacturers go out of business. In time, computer chips replace the transistor. Old industries, old technologies are destroyed. New industries rise up in their place, but there is upheaval and disruption and displacement. Some companies go out of business. Workers find themselves to be ill suited for jobs in emerging industries, and they may be laid off. Consumers become dizzy with the wide array of new products and services that are introduced. Products may get more and more sophisticated over time, but consumers have less time to enjoy life, due partly to the large amount of time and energy it takes to be a consumer in the current period.
• To some extent, Schumpeter's account of the triumph of technology may sound overly deterministic. In fact, it is not the technologies themselves that determine the future; rather, consumers and the individual choices they make determine how technologies are used in society. Almost all technologies evolve and adapt to the ways in which consumers use them. For instance, the radio was originally designed as a means for ships to communicate with one another and to communicate with those on land. The early pioneers of radio never imagined that they were perfecting an entertainment medium that would transform the world.
• Whatever the merits of Schumpeter's arguments, this chapter focuses on innovation and change, which are at the heart of marketing. Marketers face the challenge of persuading people to change their attitudes and behaviors. Marketers ask consumers to be innovative: to buy new products. Sometimes marketers even ask consumers to learn a new way of life.
• For every market asking the consumer to believe or do something innovative, another marketer is asking that same consumer to resist change-to be loyal to the existing product or solution. Hence, it is important to understand how innovation and change and resistance to change act together.
• Marketers win awards, draw accolades, and create customer value by working with other parts of their organizations to introduce successful new ideas, products, and services. In addition to receiving praise, marketers' attempt to persuade people to change is also the basis for much criticism of marketing practices.
• In this chapter, we introduce some of the most important theories and tools in marketing and the social sciences for understanding the important topic of change.

• There is vast literature on the topic of innovation, diffusion, and adoption. Innovation refers to new things and ideas and new ways of behaving andinteracting with things. Innovations are defined by individuals and by social groups. What one individual or one social group perceives may be old-fashioned for other individuals and social groups. Innovations include ideas in business practices such as total quality management or the vertical auction in business-to-business marketing; products such as plastic buckets in rural Ethiopia or personal computers in the most developed nations; or services such as consumer credit in Turkish banking practice. Innovations may also refer to behaviors, as when production teams develop new, more efficient, cost effective, and resource conserving manufacturing processes, or engage in new applications for existing technologies when organizations computerize their operations, or when individual consumers adopt any product, service, or idea that is new for them. Thus, an innovation can involve a new way of thinking about the world, but it also involves new behaviors (e.g., buying and using a new product).
• Innovation is one key component of the diffusion process. Innovations come from many sources. Users are an important source of information for many innovations in both industrial and consumer markets. A key challenge for business organizations is to identify and manage the production and diffusion of innovations.
• As marketers strive for competitive advantage in the global marketplace, they are driven to seek sales and market share through the introduction of new goods and services. The rate of new consumer product introductions has accelerated from 9,000 in 1987 to over 15,000 in 1991 in the U.S. alone. Fewer than 100 new products may top $1 million in sales in the first year after introduction. This flood of innovations is potentially wasteful and expensive for organizations and confusing and disruptive for consumers. Hence, finding ways to better manage innovations is critical for organizations of all kinds.

1. Types of Innovations
• Three types of innovations are discussed here: continuous innovations, dynamically continuous innovations, and discontinuous innovations. Theses represent a continuum, where the first term represents relatively minor innovations and the last term represents radically new innovations.
• To improve the management of innovations, it makes sense to distinguish between types of innovations in terms of the behavioral consequences of innovation users. At one end of this continuum of innovation types lie continuous innovations. Continuous innovations are those that require minor changes in user behaviors. In other words, they have a minimally disruptive effect, while still representing a change in past behavior. One industrial example is the Miller-cycle internal combustion engine, which differs from the conventional Otto-cycle engine in producing more torque by shortening the compression stroke.
• Fads, fashion, and trends are all examples of continuos innovations. They may be distinguished partly in terms of time of diffusion. Fashions refer to particular combinations of desirable attributes. For example, brightly colored and patterned Kente cloth, woven in thin strips in Ghana, has become popular among African-Americans as a statement of ethnic pride www.kente.net

Ministers wear it on their vestments; high school and college graduates add it to their graduation gowns. Fads are very short-lived fashions, often adopted by relatively few people, often members of a common subculture. Fads diffuse most rapidly and disappear most quickly. For example, body branding has joined body piercing as a fad among the avant-garde in the U.S. Trends, or styles last longest and may define an era. Thus, the Victorian era emanating from Great Britain in the mid-19^th century was associated with certain trends in architecture, dress, and interior design. A similar phenomenon is the Maoist period in China.

• Distinguishing between fads and trends at an early stage can make a business career. The first company to identify and act on a trend gains a powerful competitive advantage. Japanese firms capitalized on the trend toward smaller, higher quality more fuel-efficient cars as well as the fascination with electronic gadgetry. Starbucks coffee has capitalized on a consumer desire for higher quality and greater variety in coffee. By correctly identifying fads, such as licensed characters (e.g., Dilbert as a company spokesperson), aggressive marketers can maximize short-term sales. But, they must be careful not to invest too much in a trend or fad. As the trend loses momentum, demand can collapse rather quickly.
• When managers are considering the introduction of continuous innovations, a major challenge is demonstrating to end users that the innovation provides a differential advantage over existing products or solutions. The biggest reason that "new" products, especially me-too products and brand extensions, fail in the consumer markets of the Triad countries is that they fail to offer a differential advantage.
• At the mid-point in the continuum of innovation types we can distinguish dynamically continuousinnovations. Dynamically continuous innovations require either major change in the 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. Hybrid corn seed for use in particular microclimates and hydroponically grown vegetables are two examples of such dynamically continuous innovations typical of commercial agriculture in the Triad countries. Consumer examples include such things as cellular telephones, network computer workstations, shopping over the Internet, "aseptic" beverage control pills. The adoption of hybrid mango trees and the addition of irrigation pumps by farmers familiar with hand irrigation technique in West Africa might be considered dynamically continuous innovations in a Third World context.
• At the other end of our innovation continuum is what is called discontinuous innovations. Discontinuous innovations entail major changes in behavior in an area of importance to individual or group. The adoption of Green Revolution rice in Asia with its complement of fertilizers, insecticides, and changes in farming technique is one dramatic commercial example. In the Triad countries, the Internet, in vitro human fertilization, CD-Rom computer technologies, and the use of electronic pagers by busy family members, are all recent examples. In the developing nations, such things as television fax machines and airplane travel may be thought of as discontinuous innovations. For example, relatively inexpensive airfares have brought the cost of making the pilgrimage to Mecca within the reach of many peasant farmers in Africa and the Near East. Even common consumer non-durables may be thought of as discontinuous innovations if their introduction creates dramatic changes in individual and social behavior. In Sri Lanka, for example, the introduction of Western cosmetics has fueled a crisis in the role of women, and altered gender dynamics.
• A discussion of the microwave provides a good example of the dramatic impacts discontinuous innovations can have on behavior. Microwaves became available to consumers in the 1960's, but by 1980 only fifteen percent of North American households had microwaves. During the decade of the 1980's, the re-entry of women in the workforce and the emergence of professional women created new time pressures. As a result, by 1989, 80% of North American households had microwave ovens. A Wall Street Journal survey found that microwaves were the respondents' favorite household product. But the widespread use of the microwave has wrought tremendous cultural changes. First, it has transformed North Americans' sense of time. The amount of time many cooks are willing to devote to meal preparation has declined from about an hour in the 1970's to a little more than 10 minutes today. Second, it has transformed the division of labor within the household. The conventional association between mothers, nurturance and food preparation is undermined as the introduction of microwavable Kid's Kitchen, Kid Cuisine, and My Own Meals product lines turns children into food preparers.
2. Innovation characteristics that Influence Adoption
• When introducing new products, an organization is asking customers to change their behavior in some way. Implicitly, the organization is asking customers to take a risk by doing something new. As a result, success is more likely when marketers can optimize the benefits associated with new behavior, while also minimizing the risks or disadvantages. From the standpoint of a marketer, successful new product introduction plays an important role in profitability. Being the first firm to market a productsuccessfully in an emerging market often leads to what is called the pioneering advantage. For example, Jeep defined in many consumers' minds what is now termed the sport-utility vehicle. The fact that Jeep helped define the ideal point for this category meant that later entrants were inevitability compared with the pioneer, and most often suffered in such comparisons. Pioneering advantage, in turn, leads to market leadership as measured by market share and return on investment. Successful new product development is an important element in achieving long-term competitive superiority and profitability. For these reasons, identification of product characteristics that influence speed and success of diffusion and influence adoption decisions has been a focus of research not only in marketing but also across the applied social sciences.
• Probably the most important factor to the success of an innovation is its perceived relative advantage, that is the extent to which it is viewed as providing clear benefits for the target market that are superior to thoseoffered by competitive market offerings. Many market failures and slow adoption rates can be traced to the absence of a relative advantage. The Coca-Cola Company's New Coke, introduced in the 1980's, was a classic flop because consumers saw no advantage in the new formula and clamored immediately for the old one. Marketing researchers at Coca-Cola believed that there was a relative advantage because they had conducted a large number of blind taste tastes, which revealed that most consumers preferred the taste of New Coke (which had more sugar) to the classic formula. However, these blind taste tests were flawed because they did not take into account the power of the Coke brand. Coca-Cola is a cultural symbol that is much beloved both in America and around the world.
• The nature of the relative advantage varies. In the early 1970's, Japanese automakers captured a large share of the world auto market by providing smaller, more fuel-efficient automobiles during a period of energy scarcity. In the mid-1980's, Chrysler Corporation captured a significant share of the U.S. auto market by introducing a mini-van that met the transportation needs of an emerging market segment of young professional families.
• In the industrial sector, containerized freight was first used commercially in 1956 and began to be used in 1958 for freight shipped between the U.S. mainland and Hawaii. In 1968, 13% of North Atlantic Sea freight was containerized. This figure had increased to 60% by 1970, and by 1990 it was 90%. The benefits to shippers in the form of ease of tracking, re-use, security, simplification of sea-land transshipment, and reduced costs explain the speed with which this innovation has transformed the shipping industry.
• Most of the examples given above illustrate functional benefits of innovative products. Symbolism is another important source of relative advantage that works to speed the diffusion of innovations. For example, many newly professional, young French couples have adopted the freezer because freezers are a symbol of the link between young couples' and their farm-dwelling parents. The couple introduced their parents to frozen foods brought from the city. In turn, the parents provide the young couples with home prepared pork, fowl, vegetables and berries.
• Relative advantage must always be assessed for the target market and within the context of the consumer's current situation. For example, successful diffusion of cellular telephones depends on a number of contextual variables. Such phones have been successful in large, spread-out metropolitan areas where people commute over long distances, and in Eastern Europe where phone lines are inadequate.
• The compatibility of an innovation refers to the extent to which the innovation is consistent with present needs, motives, values, beliefs, andbehaviors. Another perspective might be that the more an innovation option tangibly resembles the traditional solution to a problem, the more likely it is to be adopted, regardless of its actual ability to perform the requisite task. Many products we consider necessities were often incompatible innovations.
• Numerous examples of compatibility can be cited. In the U.S., baby boomers (those born between 1946 and 1964) sometimes have a hard time coming to grips with aging. This group provides a strong market for sunscreens, wrinkle reduction cremes, and anti-aging formula vitamins. When American women entered the workforce en mass in the late 1970's and 1980's, the microwave oven really took off. Also, Americans began to realize that the microwave oven didn't require a whole new set of cooking skills; microwaves were just another way to heat food.
• Incompatibility, like relative advantage, may be based on either functional or symbolic properties, or both. For example, electric cars have been slow to achieve popularity in part because of the appearance of the early concept cars and, in part, because of the incompatibility between electric fueling options and gas-driven options. In short, tangible attributes may inhibit adoption regardless of performance. Other examples might include cream hair removers that have been successful with women, but not with men. incurring risk
• Trialability is the ability of customers to try out an innovation without incurring risk to valued resources (financial, esteem, status, time, and information). It is another factor critical to successful diffusion of innovations. All sorts of strategies may be used to improve the chances of product trial. Consumer-oriented publications are often encouraged to try out new consumer durables and report their findings to their readers. Many products fail because of the difficulties of trials, especially products that affect the consumer's body or sense of self. Thus, radial kerotomy, a surgical procedure to correct near-sightedness has been relatively slow to catch on in the U.S., at least in part because of the perceived inability to reverse the procedure in case of error.
• Observability plays an important role in the diffusion of innovations. For fashion goods and other sorts of goods consumed publicity, social visibility speeds innovation. Examples include Swatch watches and high-fashion athletic shoes. Conversely, the nonobservability of privately consumed goods may impede diffusion. In the latter case, the evaluations of relevant opinion leaders or reference groups are less accessible to consumers.
• Complexityis a factor that may impede the diffusion of innovations and hinder adoption. By complexity we refer to the difficulty of understanding the benefits of the product or service and the relationshipbetween attributes or features and those benefits. Almost by definition, discontinuous innovations are complex because they ask a consumer to envision a new way of life that includes the new product or service.
• One problem for marketers is that as innovations become more complex, people may use shortcuts to evaluate them. Consumers may evaluate complex innovations based upon a small set of familiar characteristics that may or may not be appropriate for judging the innovation.

1. Diffusion and Adoption

Diffusion

• The diffusion process refers to the spread of an innovation from itscreative sourceacross space and time. The process may take a variety of forms. An S-shaped curve has been observed in a number of marketing studies of consumer durables. In such cases, few buyers are initially convinced of the merits of adoption. Later, larger, more reticent groups of buyers adopt, and later still, a smaller laggard group adopts the innovation. This pattern gives the adoption curve its familiar S-Shape. However, diffusion may also follow an exponential adoption pattern, especially if buyers who face low cost of adoption are confident of their abilities to evaluate its benefits, or are relatively uninvolved with the innovation. Diffusion curve patterns are shown in Exhibit 16.3.

Diffusion Curves (50.0K)

Product Life Cycle

• Products, just like people, undergo a life cycle. They are born, grow and mature, grow old, and eventually die. This life cycle takes the shape of an S-curve, because it mimics that adoption pattern discussed in the previous section. A life cycle can be constructed for a product category, such as the automobile. Or, it can be constructed for a specific brand; the life cycle of the Plymouth brand, for example, that Daimler Chrysler is now deleting from its product line. The PLC varies by product category and across world market regions. The speed of the PLC also varies by category and world arena. The Internet seems to speed up PLCs.
• The first phase is labeled as introduction. At this stage, consumers have relatively little knowledge about the new products, so promotional expenses are high. Profits are expected to be negative in the initial years of introduction. During the growth phase of the product life cycle, sales start to increase dramatically. Many new customers come into the market. Attracted by this growth in sales and profits, new competitors also enter the market. At the maturity phase, sales begin to flatten out, and industry profits also decline. At this stage, brand loyalty is likely to be quite high, so it is difficult to get customers to switch to new brands. In the decline phase, the industry sales begin to decline, as customers lose interest in the product category. It may be that new products are spawned to satisfy the needs tht were previously served by the declining industry. For instance, the automobile replaces other transportation alternatives (e.g., the horse and buggy). Eventually, the product category may cease to exist altogether. In the U.S., the automatic washing machine has replaced the old-fashioned wash board.

Space

• Diffusion takes place across geographic space. For example, a dance style may diffuse from the streets to a modern dance studio, and from urban areas to rural ones, and from urban areas in one country to urban areas in another country. Product innovations that present a low financial challenge may undergo more rapid diffusion.

Time

• Diffusion also takes place over time. Diffusion time varies with product category, product characteristics, the nature of communications environment, and other factors, whether it involves fads or more enduring styles. For example, the neighborhood effect say that 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 theinformational source.
• The first experimental U.S. television broadcast took place in 1933, but by 1950 only a million U.S. households owned T.V. sets. In this instance, diffusion rates were slowed by the lingering effects of the Great Depression and the resource drain of World War II. Today, 98% of U.S. homes contain at least one T.V. set.
2. Conservatism, Resistance and Discontinuance
• Western marketers often assume that people are predisposed to consume new and novel products, services, experiences, and the like. We call this a pro-innovation bias. Prior to the consumer revolution in the West in the mid-eighteenth century, material desires for the majority of people often focused on a relatively limited set of conventionally agreed-on goods.
• Consumer conservatism and resistance is widespread in the world. By innovation resistance, we mean a preference for existing, familiar goodsover novel ones. That is, resistance to change refers to any conduct that serves to maintain the status quo in the face of pressure to alter it. Some authors explain innovation resistance in terms of an intrinsic desire for psychological equilibrium. The notion of psychological equilibrium reflects the human desire for balance, order, and consistency betweenbeliefs and behaviors. New ideas have the potential to disrupt existing patterns of attitude and behavior. Because changes imposed on behavior can disrupt psychological equilibrium and, in turn, require adjustment, many consumers resist innovations.
• Some authors discuss innovation resistance in terms of social equilibrium, the symmetry within social groups about the meaning ofthings and the meaning of one group to another. Where society is stable, innovation may be viewed as undesirable because it has the potential to disrupt the social equilibrium. Periods of social upheaval are likely to be accompanied by a breakdown of innovation resistance and an influx of new ideas, products and services.
• Discontinuance is another aspect of the diffusion process that is important to marketers. By discontinuance we mean that the consumer stopspurchasing and/or stops using the product. Marketing researchers have generally not focused on this aspect of the diffusion process. Often, discontinuance is on the other side of innovation and the consumer discontinues use of one product or service in order to adopt use of another product or service. However, discontinuance occurs for other reasons as well.
• From the perspective of marketers, one interesting reason for discontinuance is that consumers perceive that the product or service has become too popular with other consumers or has diffused into other groups or consumers, and the adoption of the product by other consumers changes the benefits offered by the product.
• Changing consumer need or competition may also lead to discontinuance. When VCR technologies were first introduced, several competitive technologies were offered. Although many feel it was technically superior, use of Betamax technology was discontinued by most users. The VHS format was perceived to have superior product complementarity, a fuller array of other market offerings. More video titles were available with the VHS technology.

• Diffusion and discontinuance processes are influenced by environmental, cultural, and social system factors. In this section we describe the environmental, cultural, and social contexts for innovation. In addition, we discuss how social groups influence innovation and adoption decisions.

1. The Environmental Context for Innovation
• The environment for change is often neglected in marketing studies of innovation, but it is a crucial component. In this section, we discuss the environment in terms of the effect of the ecology on innovation and the effect of the economy and market structure on innovation. Although economic market structures are, in one sense, outcomes of social systems, they also have broad impacts across cultures and social systems, so we describe them here as creating innovation environments.
• Ecology, including aspects such as terrain, climate, and population density, has broad impacts on innovation processes. The homily "necessity is the mother of invention" is not without foundation. The development and diffusion of many innovations is based, at least in part, on changing environmental conditions that mandate adaptive responses.
• Good Practice 16.1 provides an example of an exciting innovation in water-harvesting technology designed to cope with arid environments.

Consumer Resistance and the Show Cities Movement (50.0K)

• Economic conditions and market structures also have broad influence on innovation processes. Diffusion of innovations is embedded within a particular market context. Developed market economies, the developing world, and transitional economies have radically different economic conditions and market structures that in turn drive different rates and types of innovative processes. True to Shumpeter's ideas, businesses in Triad economies invest heavily in innovation; this investment creates a rapid rate of introduction of new products. A factor that drives receptivity to innovation on the national level is purchasing power. The rate of new-product introduction in 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. In a quickly changing environment, consumers are generally aware of the need for change, the pace of technology, and the costs of choosing the wrong technology. In such environments, many consumers are active participants in the change process. On the other hand, in volatile and uncertain market environments such as some transitional and developing economies, consumers' reliance on informal exchange relationships for vital consumer goods may make them resistant to formal market system innovations. Marketplace variables influence the rate of introduction of new products. Such things as channel structure and efficiency affect the rate of new-product introduction because they affect the availability both of information and products. The rate of new-product introduction is also influenced by industry competitiveness and productivity.
2. The Cultural and Social Contexts for Innovation
• The diffusion of an innovation is embedded within a particular culture and social system, although it may pass between cultures and societies. Focusing on macro-level culture and social system factors can help us understand and predict the diffusion of innovations. The cultural environment and communication system are important to the diffusion process because they determine the unique social values of a particular country and they are pervasive to all marketing activities such as packaging, pricing, promotion, and distribution. How marketing efforts interact with a culture determines the degree of success or failure of those efforts in a foreign country.
1. Social System and Traditions
• To understand the adoption and diffusion of new products, services and ideas we need to consider the values related to innovation and the extent to which those values are shared across members of a culture. Important cultural values include varying degrees of pressure to engage in innovative behavior and values associated with newness, innovative behaviors, and change. Cultural attitudes toward variety, newness, and values attached to the present, and ideas of past and the future provide norms that affect individual innovative behaviors. For example, one study found Irish women have both a lesser need to engage in innovative variety seeking behaviors than their U.S. counterparts and also achieve their optimum level of consumption variety at a lower level than their counterparts in the U.S. Of course, behaviors considered innovative for Irish women, such as wine drinking and movie theater patronage, have no such connotations for American women.
• In general, the diffusion rate and maximum penetration level of an innovation depends on the innovation's compatibility with social system values.
• One value that is likely to affect the diffusion of innovations within a culture is whether the traditions of a society are more interdependent communitarian or more individualistic. The more interdependent communitarian the traditions of a society, the greater the importance of group goals and the more likely individual goals are prioritized lower than the larger interests of the group. In such societies, values of integration or fitting in take precedence over values of standing out or distinction. Thus, individualism may promote individual innovativeness, whereas a more interdependent orientation can speed adoption rates.
• Interdependence, or valuing integration over differentiation, often favors conservatism over change. For instance, the social and religious life of the Muira is conducted as a series of large-scale eating and drinking occasions, and this establishes the standards by which Muira evaluate the world of goods. Objects are desirable if they have meaning within the context of public feasting; otherwise, they have no consumer value.
• Innovations that threaten core values are subject to resistance. An example of how core values may evoke resistance to particular innovation is provided by resistance to consumption of white bread among some Ecuadorian Indians, for whom consumption of home-prepared barley-based gruels is fundamental to the values of hearth, home, women's labor, and ethnic identity. Symbolic obstacles to diffusion have no simple technical or marketing solution.
2. Social Hierarchies
• Social hierarchies within and between social systems have a crucial impact on diffusion. However, the impact of social hierarchies on the processes of diffusion is complex and varied. This is partly because the nature of social hierarchies and mobility of people between levels of a social hierarchy varies so much from culture to culture.
• Early researchers proposed a trickle down theory of innovation. According to this theory, status rivalry between social groups acts as a kind of engine or motive force for innovation. Low status (lower status) social groups follow the principle of imitation and seek to establish new status claims by adopting the products, services and ideas of high status (higher status) groups. High status social groups follow the principle of differentiation and embrace new products, services and ideas to distinguish themselves from the low status social groups. These activities of imitation and differentiation account for the direction, tempo, and dynamics of innovation. The model of two-step flow is a description of communication that is closely related to the trickle-down theory.
• According to the two-step flow, new ideas flow from the mass media to influentials that, in turn, pass these ideas on to others that are more passive in terms of information seeking. The two steps imply that there is one group of influentials who are very attuned to the media and very quick to adopt new ideas presented there. Then, there is a second larger group that is more passive in terms of its media use. This second group relies upon the first to learn new developments.
• Tickle down theory has been revised to include "trickle across" and "trickle up" models of diffusion. These models recognize that media exposure allows simultaneous adoption of new styles at all levels of society. The definition of high status and low status groups may vary from situation to situation.
• Looking at the diffusion of innovations within and between social systems, we can see many illustrations of the effects of social hierarchies. For example, in countries with developed market systems, fashions tend to flow outward from larger, more complex market centers such as Paris, Moscow, New York, or Sao Paulo, to smaller, simpler market centers such as Nancy, France; Kirov, Russia; Laramie, Wyoming; or Curitiba, Brazil.
• The stability of the social system, including the stability of social hierarchies and the composition of membership, is another aspect of social hierarchies that influences diffusion. The impact of opportunities for social mobility on the diffusion process can be seen in research on the adoption of technological innovations in developing countries. This research suggests that wealth, social security, and desires for social mobility are related to innovative behaviors.
3. Cultural Production System
• A cultural production system (CPS) is a set of individuals and organizations responsible for creating and marketing culturally significant products. A CPS helps determine the types of products that emerge as "fashion trends." It draws on a limited pool of symbols, myths, images, and rituals to create products that are anchored in a cultural context. A good example is the CPS for popular music that turn out "new" hits that regularly recycle old themes, melodies, and rhythms. Country music in the U.S. is a particularly highly developed example.
• The CPS consists of three subsystems: creative, managerial, and communications. The creative subsystem attempts to anticipate tastes of the buying public and generate new symbols/products that express cultural values. Examples include art, fashion, and architecture schools, and the California entertainment industry.
• The managerial subsystem selects and makes tangible new product ideas, produces new symbols, going so far as to create new categories of personal identity such as Euroconsumers, Blackstone rangers, yuppies, buppies, valley girls, GQ (magazine) warriors, Self (magazine) Women, and so on. The managerial subsystem serves the needs of an economic system, which depends on growth, obsolescence, and realization of profit for its existence.
• Finally, the communication subsystem spreads the word about what's new, upcoming, and popular to various groups of adopters. Communication subsystems vary substantially around the world based on a myriad of factors. The communication subsystem includes ad agencies, popularizing fashion and style magazines, fan clubs, international consumer television networks like MTV and CNN, national ones like the Home Shopping Channel, and international radio stations such as France Inter or Africa's No. 1 radio station in Gabon. The communication subsystem also includes lots of tastemakers and gatekeepers such as agents, disk jockeys, retail buyers, magazine editors, interior designers, real estate agents, and the like. Their job is to make the new seem familiar and desirable to target markets, and, of course, their services are for hire by manufacturers. Effective elements of the communication subsystem earn enormous fees.
3. Social Group Influence on Innovation and Adoption
• In Chapter 1, we introduced the idea that within societies there are two opposing motivational tendencies that nonetheless are found together. We might call them the motive toward imitation or integration and affiliation with the familiar and the motive toward differentiation or distinction from others. These twin motives can be thought of as social motives that underlie an individual consumer's innovation resistance and innovativeness. Consumers look both within and outside their social groups and make comparisons and judgments about taste. Comparative judgments, in turn, lead to recurring innovative (or conservative) purchase and use decisions. The consumer behaviors triggered by such comparisons also reconfirm the existence of groups in society and the individuals affiliated with them as distinct, although not necessarily as superior or inferior.
• Innovation and conservatism in consumer behaviors serve to integrate individuals with some groups and distinguish them from others of which they are not members. They also provide the basis for drawing distinctions within groups. Marketers are often faced with the challenge of identifying those groups and individuals to which others turn when making social comparisons or seeking integration. Successful adoption by these opinion leaders speeds the diffusion process.
• The key to understanding innovation in consumer behavior cross-culturally lies in understanding these fundamental processes of differentiation, comparison, and integration as reflected in the goods that people value.
1. Between and Within Group Communication
• Exhibit 16.4 outlines a model of innovation and adoption processes. The model suggests innovations spread through communications between groups about the meanings of goods and services.

Innovation and Adoption Model (50.0K)

• In many marketing situations there are inducements to innovate flow between different kinds of groups, between channel members in business-to-business contexts, from firms to consumers, or from nonprofits to stakeholder groups. The fact that the groups are different (heterophilous) may impede diffusion. This is why marketers strive to stimulate observational learning from valued role models, employ an adaptive sales force, and stimulate word-of-mouth through reference groups. These techniques shift the focus of communications from between groups to within similar (homophilous) groups.
• When groups agree on the value and meanings of goods and services, consumption serves to define and defend boundaries between groups and identify members within groups. Groups are differentiated from one another, and individuals achieve group integration by consuming agreed upon goods and services. For example, consumption of snow skis might serve to distinguish skiing from non-skiing groups, athletic from non-athletic groups, richer from poorer groups, and so forth. Some innovations will be consistent with the overall pattern of prior beliefs and values and will, through processes of assimilation and modification, be absorbed into the common repertoire of goods and services and contribute to the status quo.
• In competitive, market driven societies, discrepancies often arise about the meaning and value of goods and services. For example, non-skiers may want to be viewed as skiers, while skiers continue to want to distinguish themselves from non-skiers or novices. These kinds of discrepancies about consumption meanings create pressures for innovations. Some innovations will be dramatically new and will trigger new behavior patterns for at least some segments of the population.
• Through communication between and within groups, changes triggered by innovations are absorbed into society, and people agree about the nature and meaning of new products, behaviors, or market segments. Without effective communication innovations do not diffuse are not adopted. Studies of effective diffusion emphasize the role of reinforcing communications.
2. Between-Group Influences on Innovative, Individual Behavior
• Exhibit 16.5 outlines factors related to communication between groups and high-status group influence on individual innovative behavior.

Group Influence on Innovative Behaviors (50.0K)

• As illustrated in the exhibit, high status group influence has an impact on innovative behavior. To constitute a high status group for innovation, a group must be viewed as attractive and as having ties to the innovation or consumption object, including special knowledge or expertise. The more that the high status group is viewed as attractive and having an essential similarity to the consumption object, the more influential it is likely to be in purchase and possession of that product class.
• Consistent with trickle-down theory, the endorsement of consumption objects by high status groups encourages innovative behavior by increasing expectations of social approval. This explains why top management endorsement consistently helps explain the adoption of innovations within organizations.
• Another factor that positively influences individual innovative behavior is connections to high-status reference groups. Traditionally, this was thought of as face-to-face connections. In the case of cross-cultural diffusions we must consider connections that occur through travel, work, and social occasions. In many First World countries various media offer a direct channel for learning about new products via celebrity endorsement.
• As suggested in Exhibit 16.5, explorations of innovative behavior must also consider the spread of novel goods and meanings within a social system, that is, the social communication networks for receiving information about the innovation. Exhibit 16.6 illustrates possible social communication networks receiving information about an innovation. It depicts a multistep media flow model of communications.

Multistep Media Flow Model of Communications (50.0K)

• Three important types of consumers who pass along information about innovations to other consumers in their social networks are opinion leaders, innovators, and market mavens.
• Opinion Leaders are individuals who act as information brokers, intervening between mass media sources and the opinions and choices of the population.
• Early adopters desire to look like a pioneer in having purchased the new product and value the involvement and expertise that come from the actual experience with the new product. Research has indicated that early adopters like to talk about the product to confirm their assessment of it and because of the product's novelty. As with opinion leaders, research suggests there is no general early adopter.
• Market mavens are characterized by general marketplace expertise and influence. Consumers rely on market mavens for information, across a range of topics. An online maven can be found at the Business Week website.

www.businessweek.com

• Innovativeness turns on independence of judgment. Not surprisingly, opinion leaders, early adopters, and market mavens are all better connected to general and specialized media that provide them with more information than other consumers. Reliance on interpersonal information is also characteristic of opinion leaders and market mavens. To take advantage of interpersonal influence networks, marketers need to locate the influential consumers for their particular product or service and find a way of getting them talking about it.
• Industry Insights 16.5 illustrates how Coca-Cola and Chrysler have targeted youthful and more mature opinion leaders, respectively.

Targeting Specific Markets (50.0K)

• Consumers are especially likely to rely on personal sources when the innovation has symbolic or communicative value and in times of social change when consumers take on new roles with unfamiliar demands.
• Parenting leaders are early adopters of products and habits such as environmental conservation and recycling, and they provide a lot of other parents with advice.
• When consumers are able to identify opinion leaders, a link has been found between adoption of innovations and the views of opinion leaders about the innovation.
• Considering how individuals are connected with a social system is important to understanding change.
3. The Effect of Other Users on the Value of Adoption
• Frequently, other users influence the value of adoption to prospective users. A good example of what economists term a positiveexternality is provided by Internet price-search services. Their value is related to the number of other adopters. Their use should diffuse rapidly across the hundreds of millions of Internet consumers because the cost of using and producing a search agent is largely a fixed cost: developing and updating the software and learning to use it.

www.botspot.com

• There is a more subtle way in which the number of other adopters affects the value of the innovation. The number of other adopters can influence the perception of the quality of the innovation.

• So far, we have focused almost exclusively on the dynamics of diffusion. Certainly, the diffusion of innovations is a social process, so it is appropriate to focus on cultural and group variables that influence the relative time of adoption over geographic space. However, the diffusion of innovations is also an individual process and some individuals decide to adopt innovations before others do. In this section, we turn our attention to the adoption process, that is, the decision by an individual to adopt an innovation.
• The adoption process focuses on the stage individual consumers or organizational buying units pass through in making a decision to accept or reject an innovation. Marketers are very interested in the adoption process because knowing the profile of adopters, the numbers of adopters, and the timing of their adoption are critical to the success or failure of an innovation.
• The decision to adopt or reject an innovation takes place over time. Adoption is not just and either-or decision; rather, due to the effects of the five adoption factors mentioned earlier, it involves varying degrees of acceptance or rejection. An innovation may be purchased but not really integrated into an individual's or household's life.

1. Adopter Categories
• In general those promoting innovations are interested in identifying consumers who are most likely to change behavior or try the new products or services first. Such knowledge is helpful in targeting marketing communications to reach these people. Therefore, research has sought to classify consumers into adoption classes. Several different approaches have been used. For example, the time of adoptiontechnique of classification defines adopter categories in terms of purchases that occursome number of weeks, months, or years after product launch. The cross-sectional technique of classification determines how many of a pre-specified lists of new products a particular individual or firm haspurchased.

Lead Users

• Lead usersplay an important role in the development and spread of technological innovations. Lead users are users whose current needsbecome general in a market in the future. In general, lead users develop or support the development of innovations because of an industry-based need; that is, they simply can't do what they need to without an innovation. Lead users exist because important new technologies, products, tastes and other factors do not affect all members simultaneously. The innovation may subsequently diffuse to other members within the industry and to other industries. Hence, some lead users of these innovations could be found far in advance of the general market.
• In consumer markets, some research has identified a similar group, a small segment of consumers who exhibit a great desire for unique consumer products (DUCP). This research has also produced a scale to measure DUCP.
• Exhibit 16.7 shows how the five main adopter categories map into the product life cycle. For instance, those who buy immediately after the innovation is introduced into the market are the lead users. They purchase at the early part of the introductory phase of the life cycle. Often, these lead users may have a difficult time actually finding the new product for sale, since distribution outlets are extremely limited. As such, lead users may rely on their superior marketplace and technical knowledge to ferret out sellers who carry the new product.

Relationship of the Diffusion Process to the Product Life Cylcle (50.0K)

Innovators

• Innovators represent less than 3% of adopters of a given innovation. Research shows that no generic innovators across product/service offerings can be identified. However, across studies, innovators often exemplify a number of shared personal characteristics. They are often venturesome, less risk averse, younger, have higher incomes, and are better educated than latter adopters. Active information seeking also characterizes their behavior. Innovators often have radial inter-personal networks. In other words, they are linked personally to many other people. Of course, these characteristics vary across products and cross-culturally. Innovators purchase in the later half of the product introduction phase. These innovators play a key role in the success of the innovation by spreading the word to other consumers who might be interested in the product's benefits. When enough new users become adopters, sales start to take off, and the life cycle enters the growth phase of the life cycle.

Early Adopters

• Early adopters typically constitute between 10 and 20 percent of adopters. They have been characterized as opinion leaders within local reference groups. This makes them important to identify since they influence others in their network. They are sometimes highly involved with trends within particular product categories. When the early adopters begin to purchase, this is a sign that the innovation has entered the growth phase.

Early Majority

• The early majority is often characterized as deliberative decision-makers. They adopt innovations sooner than most of their social group, but rely more heavily on interpersonal information sources than impersonal media in making their decisions. They often have interlocking personal networks that can be mobilized to facilitate the spread of innovations.

Late Majority

• The late majority represents another third of the adopting population. They may be thought of as skeptical consumers, doubtful of the benefits of adoption. Late majority consumers may be inclined to adopt in response to social pressures rather than as a result of the perceived benefits of adoption. That is, they are vulnerable to bandwagon effects. They conform in their adoption behavior because "everyone is doing it," and the failure to adopt might provoke a loss of status or self-esteem. Both individual consumers and organizations are vulnerable to bandwagon effects. For example, most airlines have adopted frequent flyer programs that reward repeat customers with reduced fares and free tickets in part because it has become expected practice by key publics. Offering such programs gives an airline legitimacy.
• The bandwagon effect refers to the fact tht exposure to novel information can lead to rapid shifts in mass consumption behavior, including adoption of innovations when people follow the behavior of others irrespective of what they believe or value themselves. Bandwagon effects seem to involve adoption when beliefs are not strongly held about alternatives. Bandwagon effects in politics, surgery, business, fashion, and sales of initial public stock offerings have been described. Bandwagon effects can be triggered by chance, but evidence suggests that adoption of innovations by opinion or fashion leaders can speed adoption rates.
• Later majority consumers often exhibit characteristics opposite those of early adopters. By the time later majority begins to make purchases, the new product enters the maturity phase. Distribution is now at the maximum. The innovation is not really "new" anymore, and it is widely available. Automobile manufacturing is an example of an industry in the mature stage of life cycle in the U.S.

Laggards

• The final adopter segment is laggards, typically accounting for less than 20% of the adopting population. Laggards tend to be traditionalists, locally oriented in terms of networks and social horizons, and relatively dogmatic in beliefs and values. They also tend to be less educated. More older households and older consumers fall into the laggard category. Amazingly, 40 to 60 percent of customers at savings banks in New York City might be considered laggards. They still use passive savings accounts that earn uncompetitive interest. Laggards may not begin to purchase until the product enters the decline phase. In this period, organizations may begin to minimize their promotional efforts and expenses. Competition may be reduced, as some firms choose to exit as sales and profitability levels decline. However, the firms that do remain in the decline phase may still prove to be profitable, as long as they continue to satisfy customer demand. In some instances, a declining product may be restimulated.
• It is also worth distinguishing nonadopters segments. In addition to simple rejecters of a particular innovation, one may also encounter evangelical rejectionists, like those in the Slow Cities movement, whom actively and publicly oppose some marketer-driven innovations, fast food in this case. We've mentioned Adbusters and adherents of the voluntary simplicity movement in other chapters. These examples represent rejecter movements. In Japan, some oppose the importation of foreign rice. In the United States and Europe, many oppose proposals to irradiate vegetables or to alter food plants genetically.
2. The Adoption Process
• Marketers and others interested in changing consumer behavior have devoted considerable efforts to understanding the adoption process. The nature and scope of marketers' interventions in the process should be tailored to the sequence and timing of stage's adopters go through before adoption. Various models of adoption have been proposed, but the classical model of stages describes an extended decision-making process typical of a high-involvement decision.

Awareness

• Awareness or knowledge of an innovation comes about through exposure to the innovation. Consumer inertia or lack of search may be a barrier to awareness. In media rich Triad countries, the mass media often promotes awareness through privately sponsored communication campaigns or through publicity in news reports. In the transitional economies of Eastern Europe, foreign travel or contact with people how had traveled abroad was an important source of awareness of new products prior to the collapse of Communist governments.

Interest

• Interest followed by evaluation and persuasion is a situation that creates awareness of relative need. Once a need or want is stimulated, information search begins. Acquisition of a mentor, access to an opinion leader, or exposure to a market maven can affect the potential adopters' perceptions of available alternatives. At this point, a number of innovation characteristics such as perceived risk of adoption and trialability affect the adoption process. Perceived risk may relate to product performance or to the social, personal, or financial costs of poor product performance. Lack of knowledge and inability to appreciate the relevance of benefits of an innovation causes consumers not to seek out information related to innovative products. Marketers should take pains to address potential sources of perceived risk. Adaptive salespeople and consumer-rating services are important players in this process.

Trial

• In product trial, the adopter is moved into action. Sources of innovative goods and services are evaluated and a product is chosen. Trial often involves first-hand experience, but consumers may also "try" an innovation through the experiences of a trusted friend or acquaintances or consumer surrogates, specialized expert agents retained by customers toguide, direct, or transport marketplace activities.
• Trial may mean trying out the product category or may mean trying out a new brand. Finding ways to try and evaluate certain new products is problematic for consumers. Often innovative products possess new and complex features (e.g., hybrid-energy vehicles, DVD disks, online books, or MP3 minidisks) that do not necessarily communicate obvious benefits over existing products. Adaptive selling, guarantees, warrantees, price promotions, employment of surrogate consumers, and similar tactics facilitate trial and reduce perceived risks of trial.

Adoption

• Adoption or rejection of the innovation follows trial. Although adoption is often treated as a dichotomous variable, adoption is usually more complicated than simply whether to purchase the new product or not. To understand adoption, it is important to look at the ways an innovation is integrated into a consumer's lifestyle. In the case of many technologically oriented products such as home computers, the decision to purchase a technology is not as important to adoption as decisions that govern the use of the technology after adoption.
• To understand adoption it is also important to consider overall adoption rates and consumption situations. For instance, studies of hospitals and retail clothing stores have found relationships between organizational adoption of innovations and overall adoption rates in competitive, urban environments.
• A final point to emphasize is that marketing tactics can influence the adoption process. For example, a penetration strategy uses low prices, extensive distribution, and extensive communications to speed innovation. The signals conveyed by these elements of the marketing mix and induce broad consumer trial without extensive search and evaluation. By contrast, a skimming strategy makes use of high prices and selective distribution and communications to induce adoption within a narrow market, thereby limiting the scope of adoption.