EXERCISE 36:
CATEGORIES OF INNOVATIONS AND PRODUCT CHARACTERISTICS THAT INFLUENCE ADOPTION
AND DIFFUSION
Objectives
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Background
Product
innovation is the driving force of business, the economy, and of societal
progress, with consumer advertising proving the fuel propelling NPs into the
marketplace. NPs have been dubbed the “lifeblood of business” since most
companies depend on them for a significant share of their sales, market share,
profits, and growth. An old adage says: “Innovate or die!”
Categories of
Innovations Based on Newness to the Company, Newness to the Market, and Behavioral
Change
The
most important product factor determining whether a product will be perceived by buyers as new is the extent
to which the innovation alters CB. NPs can accordingly be classified into three
categories of innovation based on degree
of behavioral change. They can also be classified by “newness” from the firm’s perspective as well as the consumer’s perspective.
In
this discussion, we will integrate two categorization schemes for NPs: Robertson’s threefold classification of innovations based on degree of behavioral
change and Booz, Allen, Hamilton,
Inc’s six types of NPs from the firm’s and consumer’s perspective. Both of these categorization methods range from least to most innovative, i.e., from least to most
disruptive of CB.
Booz,
Allen, Hamilton, Inc. (BAH) New Brands Classification: Newness to Firms and
Consumers
<<FIGURE 36.1 NEAR
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Figure
36.1 shows six categories of NPs according to Booz, Allen, Hamilton, Inc., (BAH), who classified innovations
according newness to the company and newness to the market.
Newness to the company concerns whether the business organization
has ever produced and marketed the product, regardless of other companies having
already done so. For example, although bottled water has been popular since
Perrier debuted in the 1970s, it was not until 1999 that Coca-Cola Corp.
launched Dasani bottled water. Such a company has a
learning process to go through, first, regarding new technology—a body of
knowledge, tools, and techniques derived from science and practical experience,
which is used in the development, design, production, and application of
products, processes, systems, and services. Second, such a firm must learn
about a new marketplace—consumers,
competitors, and channels of distribution.
Newness to the market concerns whether the target
market believes that the product is new and will entail some behavioral change
on their part. From this perspective, an innovation
can be defined as any product (good, service, or idea) perceived by the potential adopter to be new. Perceived newness
determines the extent of consumer learning and possible innovation resistance—preference for existing, familiar products
and behaviors over less familiar ones.
The
percentages next to each category label in Figure 36.1 show the approximate proportion
of NPs in each group. The more innovative products appear in the upper
right-hand corner of the figure, and the less innovative ones are found in the
lower left-hand portion.
Robertson’s
Classification of Innovations Based on Behavioral Change: Continuous,
Dynamically Continuous, and Discontinuous
Thomas
Robertson’s taxonomy is based on the consumer’s perceived degree of product novelty and the extent to which the
product changes individual CB as well as the degree to which it affects
behavior in the social structure. Robertson presents three discrete NP
categories arranged from incremental NPs
to radical innovation: continuous innovations, dynamically continuous innovations, and discontinuous innovations.
Continuous
Innovations. Least likely to encounter
consumer resistance are continuous
innovations—NPs perceived as having the least disrupting influence on
established patterns of CB. These are used in basically the same way as their
predecessor products. For example, herb-enhanced beverages do not change the
way people consume drinks. Most continuous innovations, such as angled
toothbrushes, entail little technological change. They involve modification of
the taste, appearance, performance, or reliability of an existing product
rather than establishment of a totally NP.
The majority of NPs are
continuous innovations. Consequently, they do not require as much marketing
effort and have a lower risk of failure than Robertson’s other two types of
innovations, which are more disruptive of established behavioral patterns.
However, their expected profitability is less too—recall from Finance 101 that,
“With risk goes reward.”
Booz, Allen, & Hamilton,
Inc. (BAH) continuous innovations. Continuous innovations include
the following categories of NP types according to the BAH NP classification
scheme, arrayed from least to most “new.”
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1. Cost reductions. These
NPs’ primary benefit is that they are lower-priced than most (or all)
competitors, due to lower manufacturing and/or marketing costs. For instance, Scott
towels “with ridges” require 20 percent less paper pulp, thereby reducing
production costs.
2. Repositionings.
Psychological positioning entails
differentiating a brand from competitive offerings in the buyer’s mind by
locating the brand in that customer’s memory relative to a) alternative product
uses (e.g., cola as a rust remover), b)
target market users or user imagery (Mountain Dew for young
hipsters instead of old hillbillies), or c) competitive
products and brands (raisins as “nature’s answer to candy”). Repositioning (relaunching, restaging, remarketing) means staking
out a new position for the brand due to marketplace changes such as values and
norms, demographics, competitive positioning, and technology. Thus, long ago,
Ivory soap was restaged as all-family soap rather than strictly for sensitive
baby skin. Many “recycled” products are repositioned. Ceiling fans, fountain
pens, and wood-burning stoves were all relaunched
from being purely utilitarian to fashionable items.
3. “New-and-improved”
products (next-generation products).
These modifications of existing products result in replacing a previous version of the product. This can be done by a
quality improvement (e.g., Energizer
enhances battery durability), design change (the redesigned Wall Street Journal with subdued colors
and a new layout), an improved formula (General Mills cereals converted to
whole grain), a revision or upgrade (software versions X.1), and a functional
enhancement (Dutch Boy paint’s easier-to-open-and-pour Twist & Pour
container).
4. Additions to existing
product lines. These supplement or
round out a current product line rather than replace it, as do “new-and-improved” products. Additions to
existing product lines are derivatives of or variations on a firm’s existing
product, usually the core (anchor,
flagship) product—a firm’s mainstream product, such as Coca-Cola launching
Cherry Coke or Tide detergent introducing Tide Free. They include new forms
(e.g., “lite” food and beverage products) and more
variety (styles, scents, colors, flavors, sizes, shapes, packaging options,
etc.).
When
additions to a product line carry a new
brand name, they are known as flankers
e.g., Proctor and Gamble introduced Cheer detergent as an alternative to Tide,
and PepsiCo added Mountain Dew). When firms use one of their existing names on an addition to a
product line, the NP is dubbed a product
line extension (line extension) (e.g.,
Oreo Big Stuff, Mini Oreos, Single Serve Oreo Packs to Go, and Chocolate
Crème Oreos).
5. New product lines
(new category entries). Such
products are already established in the marketplace but are new to the firm
launching them. Because consumers do not associate the particular product with
the individual company, they might view the products as “new.” Examples:
Microsoft’s Xbox videogame console; Tom’s of Maine herbal remedies; and energy
drinks from major soft drink companies competing with Red Bull.
When
a firm’s new line includes their well-known and trusted brand or corporate
name, they are known as brand franchise
extensions (brand expansions) (e.g.,
Starbuck’s ice cream; Nike sportswear; Creamsicle
candy twists). Like product line extensions, brand franchise extensions
capitalize on brand equity—the value
of the brand name to consumers. Mr. Clean traded on its tough dirt-fighter
image in launching Mr. Clean Magic Eraser cleaner-sponge combo and Mr. Clean AutoDry for washing cars without water.
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Dynamically Continuous Innovations. Second among Robertson’s
three innovation types are dynamically
continuous innovations. Consumers view such NPs as somewhat new since they are
more disruptive of their lives than continuous innovations, although the degree
of change in customer buying and product use is modest. This was so for FluMist nasal flu vaccine, for the needle-shy who dread
traditional flu shots. Likewise for TiVo, the first digital video recorder, which, like its predecessor, the VCR, made it fairly simple to
record TV shows so you can watch them whenever you wish and resulted in less
channel surfing and more time shifting. “Bucketless
mops,” such as the battery-powered Swiffer WetJet, which eliminate mess, elbow grease, and heavy
lifting of floor cleaning materials, also fill the dynamically continuous bill.
BAH
dynamically continuous innovations. These
generally are of the following two kinds, the sixth and seventh product types
in the BAH, Inc. classification taxonomy.
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6. Major additions to
existing product lines and significant NP
lines are both key modifications of existing product classes. Examples of major changes to existing product lines
include instant pudding, electric carving knives and toothbrushes, disposable
extended contact lenses, instant cameras, registerless
supermarket checkouts, and on-line banking.
7. New-to-the-world
products (NP categories). These NPs
either revolutionize existing product
categories (electric cars) or define wholly new categories (air conditioning, frozen vegetables, pre-moistened towelettes, and satellite TV and radio). Dynamically
continuous new-to the-world products, while very new in form and perhaps
technology, nonetheless only somewhat alter CB.
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Discontinuous Innovations. Discontinuous innovations are NPs perceived by customers to be radically new, causing buyers to significantly alter their behavioral patterns, and also usually entailing extensive technological breakthrough. Digital movie downloads are purchased and consumed much differently than DVDs that are bought or rented. Electric cars, requiring recharging the battery, are discontinuous innovations, while hybrid autos, whose batteries recharge while driving, are dynamically continuous.
BAH discontinuous innovations. In the BAH scheme,
discontinuous innovations include new-to-the-world
products (NP categories). Unlike dynamically continuous new-to-the-world
products, these have a major impact on CB and lifestyles. Examples of such
revolutionary, life-altering products include wheels, tools, and weapons in
prehistoric times; the steam engine, electricity, and spinning jenny during the
Industrial Revolution; and automobiles, telephones, radio and TV, xerography,
personal computers, fax machines, and e-mail, in the 20th century.
Marketing
Implications for Categorizing Innovation by Behavioral Change
General
strategy implications for the BAH and Robertson NP classification schemes are
as follows.
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• Moving from incremental to radical innovations, the
marketing job of educating and persuading consumers looms larger because more
innovative products are more likely to meet innovation resistance because they
tend to be higher in perceived risk.
• Proceeding from evolutionary to revolutionary innovations,
the adoption cycle becomes longer since there is more innovation resistance due
to consumer skepticism and uncertainty.
• The probability of large-scale adoption within the target
market, and hence of ultimate marketing success, is inversely proportional to
the degree of product innovativeness. But, when innovative products succeed,
they tend to succeed big (high risk, high expected return).
• The extent of immediate competition is inversely related to
the degree to which a product is “really new” since more groundbreaking
products are tougher to imitate technologically.
• Incremental
innovations require selective (secondary)
demand stimulation, especially
among current customers, while “really new” products mandate primary demand creation, often among new
target markets, such as technophiles.
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Innovation
Attributes: Product Characteristics Influencing Likelihood of Adoption and
Diffusion
The
probability of individuals’ adoption and subsequent diffusion of an innovation
throughout a social system depend not only on perceived newness and the degree
of behavioral change required, but also on certain innovation attributes (product characteristics) influencing
adoption. If a marketer is aware of which innovation characteristics are likely
to either help or hinder adoption, s/he can plan appropriate marketing
strategies to overcome resistance barriers.
The
following are the five key product factors affecting the rate of NP adoption
and diffusion as well as the likelihood of marketplace success, along with
strategy recommendations for each.
Relative
Advantage
Relative advantage is the degree to which consumers
perceive the innovation as superior to existing products in satisfying their
needs and solving their problems. A NP must have a discernible, meaningful (vs.
merely gimmicky) difference along one or more determinant buying criteria. It
should be unique and competitively superior. E-mail is much more convenient and
less expensive than fax machines which had time and money advantages over snail
mail.
Relative
advantage is the key success/failure
factor for new products because new product success boils down to effectively
satisfying customer needs and wants better than do competitors. Therefore,
creating products based on knowledge of unsolved consumer problems and
unsatisfied needs via problem-based
ideation is essential, as discussed in Exercise 14. Unfortunately, too many
inventions lack a “reason for being.” How many varieties of microwave popcorn
or salad dressing can make the cut on the supermarket shelf?
Advertising
and selling should educate buyers on the product’s relative advantage.
Alternatively, they can create a psychological point of difference such as a
unique brand image
Compatibility
Compatibility is the extent to which consumers
believe that a NP is consistent with their current ways of thinking and
behaving. Continuous innovations in
Robertson’s classification are high in compatibility and therefore meet little
innovation resistance, while discontinuous
innovations are low in compatibility and do meet consumer hesitation. The
first automobiles met fierce resistance—car drivers were exhorted to “hire a
horse!” So, marketers positioned the first cars as a “horseless carriage” in an
attempt to minimize the psychological newness.
Research
finds that compatibility ranks second in importance to relative advantage among
these five factors in influencing adoption. Consequently, it behooves marketers
to, first, know the values, norms, and other characteristics of the targeted consumer’s
culture, subculture, social class, and social groups, and, second, to develop
and market the product to be consistent with these societal components. Whenever
possible, they should not “go against the grain” but rather “go with the flow.”
Additionally, consumer education might be required to change misperceptions of
compatibility, as the first refrigerator manufacturers had to do for people who
thought the only way to keep lettuce fresh is to keep it on ice.
Complexity
Complexity (converse is simplicity) concerns the innovation’s perceived usability (ease of use). (It does not
concern complexity of technology). Personal video recorders by TiVo and ReplayTV took time to catch on because they were difficult
to deploy. On the other hand, television was a rapid hit in part because the
first TVs were easy to use (unlike today’s sophisticated sets with remote
controls having more buttons than there are channels!). Sales of digital
cameras spiked when “point-and-shoot:” versions were launched. In short, products should be designed to be
“user friendly.”
Trialability
Trialability
(divisibility)
entails the extent to which the NP can be sampled or evaluated on a limited
basis prior to adoption. For nondurables, trial can be accelerated via sales promotions like samples and
coupons or through offering small “trial” sizes. For durable goods, a surrogate trial experience without
commitment can be provided, such as showroom demonstrations, trial runs (e.g., an
automobile test drive), or even loaning or leasing the product. Many Maytag
stores allow shoppers to do a load of laundry to test out their washers and
dryers, to bake a sheet of cookies in a range, or listen to a dishwasher to see
if it is really quiet.
Communicability
Communicability (observability) concerns
how readily visible the product and its benefits are to potential adopters, as
well as how easy it is for users and marketers alike to explain the nature and
relative advantages of the product to prospects. Products high in visibility,
such as new model cars, hairstyles, and clothing styles, are more communicable
than private items like a new medicated shampoo, garbage disposal system, or
icemaker.
Marketers
should find ways to make a NP more visible, such as by pushing for adoption in
public places (service establishments, social organizations, etc. as with the
first TVs, which were first adopted by taverns, where patrons could experience
them). Sellers can also raise consumer interest via publicity and massive doses
of advertising so that users are willing to discuss the product with others.
Review
Questions
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In-Class
Applications
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a. Develop three ideas for NPs that could be branded with this
name (they need not all be technologically feasible). You should have one NP
for each of Robertson’s three
innovation types. Briefly describe each product in terms of features and
benefits as well as reasons why using the existing brand name would be a good
idea.
Also,
classify each of these NP concepts according to the BAH taxonomy.
b. Describe how each of these innovations will affect the
behavior and lifestyles of existing users of that brand.
Which
of these products will attract a new target market? Describe that market and
identify the innovation attributes that attract them to each of these products.
• General Mill’s Milk ‘n Cereal Bars: convenient breakfast
bars made with real milk and cereal.
• StarKist Premium Tuna in a Pouch:
fresh, easy-open packaged tuna with no liquid.
• Saran QuickCover Food Storage
Lids: varied size elastic lids that ensure a snug fit and freshness.
• Crest Whitestrips Dental
Whitening System: innovative plastic strips that guarantee whiter teeth in less
than two weeks.
For the
year 2001, the Top Innovations included:
• P.J. Squares Peanut Butter and Jelly Slices: combined
peanut butter and jelly slices packaged like American cheese slices.
•
• Parkay Fun Squeeze Colored
Margarine: doodle-friendly margarine to make any meal fun for kids.
• American Woman Tri-Color 3-in-1 Nail Color: nail polish
that changes color with the user’s mood swings and sunlight exposure.
a. Have you purchased or used this product since its release? If
so, describe your level of satisfaction or dissatisfaction and why. If not, how
do you think you would like this product?
b. Which innovation
attributes of this product have probably influenced the success or failure
of its adoption and diffusion? Have any of those characteristics possibly
hindered its success or failure?
c. Considering these innovation attributes, what suggestions for
marketing strategy can you offer for causing a quicker adoption of this
innovation?
4. The following ads feature NP
innovations. Briefly explain which of Robertson’s degrees of innovativeness
each product displays and why. Also,
classify each NP according to the BAH scheme. Discuss any implications of your
classifications of innovativeness for each product’s marketing program.
Written
Applications
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