L 2A Diffusion of Innovation
33
Theory of Cognative Dissonance Cognitive dissonance is a discomfort caused by holding conflicting cognitions (e.g., ideas,beliefs, value s, emotional reactions) simultaneously. In a state of dissonance, people may feel surprise, dread, guilt, anger, or embarrassment A classical illustration of cognitive dissonance is expressed in the fable The Fox and the Grapes This example follows a pattern: one desires something, finds it unattainable, and reduces one's dissonance by criticizing it. Jon Elster calls this pattern "adaptive preference formation" Copyright © 2006 Pearson Education Canada Inc. 13-1
description
Many Indians today are embracing e-retailing with enthusiasm. Popular portals such as Flipkart are spearheading the conversion of offline shoppers into online bargain hunters. Adds Naveed, as an afterthought, “I felt Flipkart was the best option as the transaction was easy, and the variety of products was a bonus.” For Flipkart, this means the unlocking of a vast audience waiting to experience the joys and comfort of shopping online. Sachin Bansal, CEO and one of the co-founders of Flipkart (the other being Binny Bansal), is an ardent believer in the merits of customer service. “A simple desire to create a tailor-made product for the Indian consumer has grown into something beyond what we imagined,” Sachin muses. A quick glance at Flipkart's timeline shows it was to start as a price comparison platform, but there weren't enough e-commerce sites to compare. So, both the Bansals, who were colleagues at IIT-Delhi, and then at Amazon.com, thought, “why not start an e-commerce site?” That was the genesis of Flipkart. From an initial investment of $8,000, this humble seed of desire has germinated into a $100 million e-retailing favourite. The founders' passion for the consumer Internet space manifests itself in the brand, which is synonymous with customer service and satisfaction. ‘Don't count your customers before they smile' is the company's operating mantra, and it's a mantra they're applying successfully alright!E-commerce: Good to go?The concept of e-commerce is downloading at a fairly rapid pace in the psyche of the Indian consumer. In the metros, shortage of time is a big driver for online shopping. On the other hand, accessibility to a variety of products makes audiences from smaller towns and cities opt for the online route. Major retailers face challenges in stocking their stores adequately. Often, customers are unable to purchase items of their choice, thus prompting them to resort to e-retailers. “For books, I usually prefer shopping from physical stores, but so far, only Flipkart has managed to supply me with Manga, Japanese literature, that's otherwise difficult to find. Plus, it's often cheaper to buy online. I'm definitely going to be a regular on their site,” enthuses Riddhima Toshniwal, a content writer from Raipur.Such experiences explain the growing popularity of Flipkart in the non-metro regions as well. “We will close 2011-2012 with over $100 million in revenue. By 2015, we want to clock in $1billion, but looking at present trends, we may be able to do it sooner,” states Binny, Flipkart's COO. This statement doesn't seem far-fetched; a quick overview of India's Internet penetration shows a user base of approximately 100 million. The Government's National Broadband Plan, pegged at $4.5 billion, proposes to connect nearly 160 million additional Internet users by 2014. The spread, and subsequent adoption of e-commerce, thus, only seems logical. With several reputed brick-and-mortar retailers also offering online services, it seems natural the trend of shopping remotely will scale up substantially. “The value proposition in either formats of retailing, physical and online, is different. It's the experience of touch-and-feel that makes physical shopping exciting. In the online context, convenience and comfort takes over. There's ample scope for both to grow,” Sachin avers.The Devil lies in the detailA robust back-end is a vital pre-requisite for an online business to survive, since once the customer completes her transaction, it's this back-end that connects the dots. Flipkart began operations on the consignment model — goods were procured from suppliers on demand, based on the orders received through the website. However, eventually, the books-to-electronics e-shop adopted the warehouse model. The company has its own warehouses, and maintains its own inventory. Sales projection determines the inventory, and the available inventory accounts for the sales made; it's a self-feeding cycle of sorts.
Transcript of L 2A Diffusion of Innovation
Theory of Cognative Dissonance
Cognitive dissonance is a discomfort caused by holding conflicting cognitions (e.g., ideas,beliefs, values, emotional reactions) simultaneously.
In a state of dissonance, people may feel surprise, dread, guilt, anger, or embarrassment
A classical illustration of cognitive dissonance is expressed in the fable The Fox and the Grapes
This example follows a pattern: one desires something, finds it unattainable, and reduces one's dissonance by criticizing it. Jon Elster calls this pattern "adaptive preference formation"
Copyright © 2006 Pearson Education Canada Inc.13-1
Copyright © 2006Pearson Education Canada Inc.
Consumer Influence and the Diffusion of Innovations
Copyright © 2006 Pearson Education Canada Inc.13-3
Opinion Leadership
The process by which one person (the opinion leader) informally influences the consumption actions or attitudes of others who may be opinion seekers or opinion recipients
Copyright © 2006 Pearson Education Canada Inc.13-4
What is Opinion Leadership?
Opinion Leader
Opinion Receiver
Opinion Seeker
Copyright © 2006 Pearson Education Canada Inc.13-6
Purchase Pals and Surrogate Buyers
Purchase Pals– Information sources who accompany a
consumer on a shopping trip
Surrogate Buyers– Professional buyers who help consumers with
their purchases
Copyright © 2006 Pearson Education Canada Inc.13-7
(continued)
Copyright © 2006 Pearson Education Canada Inc.13-8
Figure 13-1 (continued)
Copyright © 2006 Pearson Education Canada Inc.13-9
Market MavenMarket Maven
Individuals whose influence stems from a general knowledge or market expertise that leads to an early awareness of new products and services.
Copyright © 2006 Pearson Education Canada Inc.13-10
Motivations Behind Opinion Leadership
The Needs of Opinion Leaders– To reduce their own post-purchase dissonance– For tangential personal benefits– Because of high levels of product involvement– Because of message involvement
» continued
Copyright © 2006 Pearson Education Canada Inc.13-11
Motivations Behind Opinion Leadership
Motivations of Opinion Seekers– To obtain new product or new usage
information– To reduce their risk by getting knowledge – To reduce search time– To receive the approval of the opinion leader
Copyright © 2006 Pearson Education Canada Inc.13-12
Reasons for the Effectiveness of Opinion Leadership
Credibility Positive and Negative Product Information Information and Advice Opinion Leadership Is Category-Specific Opinion Leadership Is a Two-way Street
Copyright © 2006 Pearson Education Canada Inc.13-13
Copyright © 2006 Pearson Education Canada Inc.13-14
Copyright © 2006 Pearson Education Canada Inc.13-16
The Interpersonal Flow of Communication
Two-Step Flow– A communication model that portrays opinion
leaders as direct receivers of information from mass media sources who, in turn, interpret and transmit this information.
Multi-step Flow– A revision of the traditional two-step theory
that shows multiple communication flows
Copyright © 2006 Pearson Education Canada Inc.13-17
Copyright © 2006 Pearson Education Canada Inc.13-18
Copyright © 2006 Pearson Education Canada Inc.13-21
Opinion Leadership and Marketing Strategy
Identify and provide samples to opinion leaders
Design programs to stimulate opinion leadership
Develop ads simulating opinion leadership Create opinion leaders Control negative word-of-mouth
communication
Copyright © 2006 Pearson Education Canada Inc.13-22
Diffusion ProcessDiffusion Process The process by which the acceptance of an
innovation is spread by communication to members of social system over a period of time.
Copyright © 2006 Pearson Education Canada Inc.13-23
Adoption ProcessAdoption Process
The stages through which an individual consumer passes in arriving at a decision to try (or not to try), to continue using (or discontinue using) a new product.
Copyright © 2006 Pearson Education Canada Inc.13-24
Defining Innovations
Firm-oriented definitions Product-oriented definitions Market-oriented definitions Consumer-oriented definitions
Copyright © 2006 Pearson Education Canada Inc.13-26
Factors That Affect the Diffusion of Innovations
The Innovation The Channels of Communication The Social System Time
Copyright © 2006 Pearson Education Canada Inc.13-27
Product Characteristics That Influence Diffusion
Relative Advantage Compatibility Complexity Trialability Observability Felt Need Risk
Copyright © 2006 Pearson Education Canada Inc.13-28
Social System and Diffusion Does the target market have:
– A positive attitude towards change?– Technological skill?– A general respect for education and science?– A focus on rational and ordered social
relationship?– An outreach perspective?– The ability to accept different roles?
Copyright © 2006 Pearson Education Canada Inc.13-29
Time and Diffusion
Purchase Time Adopter Categories Rate of Adoption
Copyright © 2006 Pearson Education Canada Inc.13-30
Adopter CategoriesAdopter Categories
A sequence of categories that describes how early (or late) a consumer adopts a new product in relation to other adopters.
Copyright © 2006 Pearson Education Canada Inc.13-31
Copyright © 2006 Pearson Education Canada Inc.13-32
Innovators: Description
• 2.5% of population• Venturesome• Very eager to try new ideas• Acceptable if risk is daring• More cosmopolite social relationships• Communicates with other innovators
Copyright © 2006 Pearson Education Canada Inc.13-33
Early Adopters: Description
• 13.5% of population• Respected• More integrated into the local social system• The persons to check with before adopting a new
idea• Category contains greatest number of opinion
leaders• Are role models
Copyright © 2006 Pearson Education Canada Inc.13-34
Early Majority: Description
• 34% of population• Deliberate• Adopt new ideas just prior to the average time• Seldom hold leadership positions• Deliberate for some time before adopting
Copyright © 2006 Pearson Education Canada Inc.13-35
Late Majority: Description
• 34% of population• Skeptical• Adopt new ideas just after the average time• Adopting may be both an economic necessity and
a reaction to peer pressures• Innovations approached cautiously
Copyright © 2006 Pearson Education Canada Inc.13-36
Laggards: Description
• 16% of population• Traditional• The last people to adopt an innovation• Most “localite” in outlook• Oriented to the past• Suspicious of the new
Copyright © 2006 Pearson Education Canada Inc.13-40
The Profile of a Consumer Innovator
Interest in the Product Category The Innovator Is an Opinion Leader Personality Traits Purchase and consumption characteristics Media Habits Social Characteristics Demographic Characteristics Are There Generalized Consumer Innovators?
Copyright © 2006 Pearson Education Canada Inc.13-41
Diffusion Process and Marketing Strategy
Identify diffusion inhibitors and find ways to compensate for these
Identify innovators and early adopters and cater to them
Move consumers from awareness to adoption
Make effective use of word-of-mouth communications
