analysis of consumers behavior towards new technology using perceived characteristics of innovation...

8/9/2019 ANALYSIS OF CONSUMERS BEHAVIOR TOWARDS NEW TECHNOLOGY USING PERCEIVED CHARACTERISTICS OF INNOV…

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ANALYSIS OF CONSUMERS BEHAVIOR TOWARDS NEW TECHNOLOGY

USING PERCEIVED CHARACTERISTICS OF INNOVATION METHOD (PCI) – A

MARKET STUDY OF RESIDENTIAL LED LIGHTING

Junaidi Sinaga, ST.,MM.,MBA

1

, Grace Pramitha

2

Swiss German University, Indonesia

[email protected]

ABSTRACT (ENGLISH)

In recent years, new innovations have been invented to support the idea of energy

conservation, one of the most renowned technology is Light Emitting Diode (LED) lights to

replace the commonly used Compact Fluorescent Lamp (CFL). Comparing to CFL, LED

lights not only result in less light pollution and longer lifetime but they also consume less

electricity, and therefore in the extreme sense less fossil fuel will be taken from the earth.LED technology has been around since 1962, but it was not until recently that the technologymatured. The advancement of the technology enable LED to be applied in various

applications; aviation lightning, traffic signals, automotive lighting, laboratories, billboardsand other communication technologies.

This study is significant as it offers LED light retailers opportunity to betterunderstand the market awareness, perception and consideration. It is also expected to give

some inputs on appropriate marketing strategy that can be implemented to penetrate market.Last but not least, this study shall give a model of understanding in-which innovation-

characteristics strongest influence the intention to use the innovation.The purpose of this research is to investigate the residential-market’ awareness level

towards LED lights and to identify which innovation-characteristics (PCI) that has significant

influences over the potential adopters or intention to use (adopt). The data collection,

involved the distribution of 300 questionnaires to people with interest to purchase light bulbs

for their home; out of the 300 questionnaires, only 103 data can be processed using SPSS

ver.16 for both descriptive and statistical analysis.

The result shows that the awareness level for household LED lights innovation is very

low, comparing to the awareness level of LED light technology. All the observed PCIs

(relative advantage, compatibility, image and cost) have significant direct influence to

attitude and indirect influence towards the intention to use. Amongst the variable,

Compatibility has the strongest influence followed by Cost and latter Relative Advantages

and last Image. PCIs can be predictors for the intention to use the innovation.Keywords, Diffusion of Inovation, LED Lights, Energy Efficiency, PCI, Marketing Mix,

Lauterborn 4C’s


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ABSTRAKSI (INDONESIA)

Beberapa tahun belakangan ini, inovasi baru telah diciptakan untuk mendukung

gagasan penghematan energi , salah satu teknologi yang paling terkenal adalah Light

Emitting Diode ( LED ) yaitu, lampu yang menggantikan lampu umum digunakan saat ini,

yaitu, Compact Fluorescent Lamp ( CFL ). Secara garis besar dibandingkan dengan CFL,

lampu LED tidak hanya mengurangi tingkat polusi akan tetapi mengkonsumsi lebih sedikitenergi, dan karena itu dalam arti yang lebih luas akan lebih sedikit bahan bakar fosil yang

diambil dari bumi . Sebenarnya teknologi LED telah ada sejak tahun 1962, akan tetapiteknologi in baru saat ini mencapai kematangannya untuk dapat dimanfaatkan secara luas.

Kemajuan teknologi LED sebelumnya sudah diterapkan diterapkan dalam berbagai aplikasi, penerbangan, sinyal lalu lintas, lampu otomotif, laboratorium, billboard dan teknologi

komunikasi lainnya.Studi ini sangat penting karena memberikan pengecer lampu LED kesempatan untuk

lebih memahami tingkat kesadaran pasar, persepsi dan pertimbangan-pertimbangannya.

Dengan demikian akan dapat memberikan masukan pada strategi pemasaran yang tepat untuk

meraih pasar . Terkahir, penelitian ini akan memberikan pemahaman mengenai karakteristik

inovasi yang mana yang akan mempengaruhi keinginan pasar untuk menggunakannya.

Tujuan dari penelitian ini adalah untuk mengetahui tingkat kesadaran pasar lampuLED untuk pangsa pasar dan untuk mengidentifikasi karakteristik inovasi (PCI) yang

memiliki pengaruh signifikan atas potensi adopsi atau niat untuk menggunakan (mengadopsi)

produk inovasi tersebut . Pengumpulan data, meliputi pembagian kuesioner kepada 300 orang

dengan minat untuk membeli bola lampu untuk rumah mereka, dari 300 kuesioner , hanya

103 data dapat diolah menggunakan program SPSS ver.16 untuk analisis deskriptif dan

statistik

Hasilnya menunjukkan bahwa tingkat kesadaran pasar rumah tangga akan inovasi

lampu LED sangat rendah , dibandingkan dengan tingkat kesadaran teknologi lampu LED.Semua PCI diamati (keuntungan relatif, kompatibilitas, kesan dan biaya ) mempunyai

pengaruh langsung yang signifikan terhadap sikap dan mempunyai pengaruh tidak langsungterhadap niat untuk menggunakan . Di antara variabel-variabel tersebut di atas, kompatibilitas

memiliki pengaruh terkuat diikuti oleh biaya dan keuntungan relatif, dan kesan memiliki pengaruh yang terkecil. PCI dapat juga menjadi prediktor untuk niat untuk mengadopsi suatu

inovasi.

Kata Kunci , Difusi Inovasi , Lampu LED , Efisiensi Energi , PCI , Bauran Pemasaran ,

Lauterborn 4C


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INTRODUCTION

Electricity crisis is no longer a threat, but has become a valid issue for Indonesia. In

November 2009, the president of Indonesia confirmed this with an explicit expression,

“ Indonesia is facing a major electricity crisis” (Vivanews.com). The impact of this electrical

crisis has been obvious over the years by the endless increment of TDL (tariff dasarlistrik)

that makes electricity quite costly. Many believe that there is a smart solution for this

troublesome issue; conservation.

Electricity Conservation – LED Lights Innovation.

Electricity conservation is an attitude of efficient electricity consumption. More

efficient usage of electricity will minimize the environment damage, and people may benefit

from less electricity charges. The main idea of electricity conservation is to still enjoy the

privilege of lights and other electrical devices, but with a more responsible and efficient

usage. In recent years, new innovations have been invented to support the idea of electricity

conservation; one of the most renowned technologies is Light Emitting Diode (LED). LEDs

are solid light bulbs which are extremely energy-efficient;retrofitting the commonly used

Incandescent and Compact Fluorescent Lamp (CFL). In comparison of LED to Incandescent

and CFL, not only it contains no harming mercury usage, and a much longer lifetime it also

consumes significantly less electricity.

The electrical usage of typical household, and lightning is accounted for the second

largest electricity consuming appliances for home, and Energy Efficiency and Conservation

Clearing House Indonesia (EECCHI) believes that Indonesian households are accounted for

approximately 11% of the total Indonesia energy consumption.Moreover, Indonesian

households are claimed to be the primary light consumer;


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Research Purpose

The main purpose of this study is to investigate the residential-market’s awareness

level towards LED lights. The second purpose is to identify which innovation-characteristics

(PCI) that strongly influences the potential adopters’ intention to use (adopt).

Significance of Study

This study is significant for four reasons: (1) the study offers an opportunity for the

LED retailers to have a greater understanding in regards to its market awareness, perception

and considerations (2) it is expected that this study offers some applicable inputs and

recommendations regarding the appropriate strategy for marketing LED lights into residential

market (3) provide a model of understanding in which innovation-characteristics strongest

influence the intention to use the innovation (adopt).

LITERATURE REVIEW

LED Technology Background

In 1950s, the firstLED was producedby British scientists who discovered that when

semiconductor gallium arsenide is subjected into a current, it emits low-level infrared light.

“The first LED had properties similar to those of a transistor: high tolerance for shock and

vibration, and a long operating life”(U.S. office of Energy Efficiency and Renewable

Energy, 2011). Though, the first LED has a low efficiency level of approximately only 1

lumen/watt; for four decades after the first LED generation the researchers have significantly

improved this technology. Today’s LED commercial packaged efficiency level has

significantly awed the world by reaching as high as 124 lumen/ watt2, “which exceeds the

efficacies of most incumbent technologies” (DOE (c), 2010).

2 A Lumileds cool white LED (LXML-PWC1-0120) reached 124 lm/W in 2010.


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Advantages of LED lights

Despite the facts that incandescent and fluorescent lamps still dominate the light

sources, LEDs have offered several potential advantages over the light-source dominators,

such as:

1.

Lumens-Efficacy

2.

Long Life-span

3.

Environmentally friendly and safety

4.

Durability

Diffusion of Innovation

Roger’s diffusion of innovation theory is the most appropriate and relevant concept to

investigate technology adoption, indeed “much diffusion research involves technological

innovations so Rogers (2003) usually used the word ‘technology’ and ‘innovation’ as

synonyms” (Sahin, 2006). The main challenge in innovation is how the market embrace the

change and accept the innovation; adoption. Rogers (2003) defines adoption as the decision

of any individual or organization to make “ full use of an innovation as the best course of

action available” (p. 177), and he refers diffusion as the process in which an innovation is

“communicated through certain channels over time among the member of a social system”

(p. 5). Roger’s Diffusion of Innovation has four key elements: innovation, communication

channel, time and social system.Of these elements, diffusion theory’s main focus is on the

means by which the information of the innovation is being spread within the social system

through mass media or interpersonal communication and resulted in the speed and shape of

the diffusion curve (Rogers, 2003; Gatignon& Robertson, 1985; Mahajan, Muller & Bass,

1990).


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Innovat ion

Innovation is described as an “idea, practice, or project that is perceived as new by an

individual or other unit of adoption” (Roger, 2003, p. 12). One type of new product

innovation is dynamically continuous innovations; it involves changes in technology but is

being use in the same way as the predecessor, the buyers can easily understand the product

idea (Cowan, 2011). LED lightning adopts a totally new technology (LED) but is being apply

into the old concept of light bulb, thus LED lightning is under dynamically continuous

category of innovation. Rogers believed that innovation adoption consequences obstacle of

uncertainty creation; “consequences are the changes that occur in an individual or social

system as the result of adoption or rejection of an innovation” (Rogers, 2003, p. 436).

Innovation-diffusion process is described by Roger (2003) as “uncertainty reduction process”

(p. 232), and he suggests five attributes of innovation (relative advantage, compatibility,

complexity, trialability, observability) that he believe to reduce innovation uncertainty.

Relative advantage is defined by Rogers (2003) as “the degree to which an innovation

is perceived as being better than the idea it supersedes” (p. 229). This refers to the potential

adopters’ perception regarding the innovation to perform better and is superior to the

alternative products, concept and services.

Compatibilityand relative advantage are the only two attributes of innovation that

refer to the innovation itself (the product). Compatibility is “the degree to which an

innovation is perceived as consistent with the perceiving values, past experiences and need of

the potential adopters” (Rogers, 2003, p. 15).

Complexity is defined by Rogers (2003) as “ the degree to which the innovation is

perceived as relatively difficult to understand and use” (p. 16). Complexity is the only

attributes that have negative relation with adoption rate of innovation, the higher degree of

complexity in an innovation the slower adoption rate of the innovation is.


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Resear ch Fr amewor k

The research model in this study is an illustration of the original concept by Rogers

(1995) concerning the Adoption of Technology. The model suggests that Perceived-

characteristics of Innovation (PCI) ought to affect the attitude of the potential adopters

towards a particular innovation which in case is LED lights. Furthermore, attitude should

then affect the intention to use or adopt the innovation.

Research Questions

Question #1 : What is the current market awareness level towards LED house lightning

innovation?

Question #2 : Does PCI (relative advantage, compatibility, image and cost) have influence

over the potential market’s attitude for LED household lights innovation?

Question #3 : Does attitude have any influence towardsthe intention to use (adopt)

LED lights in residential market?

Research Hypotheses

Awareness

Hypothesis 1 Residential market has low awareness towards LED house lightning

innovation (descriptive hypothesis).

Relati ve Advant ages

Hypothesis #2 The relative advantage of using LED light at home does significantly

affect users’ attitude towards household LED light.

Hypothesis #3 The relative advantage of using LED light at home does positively

affect users’ attitude towards household LED light.


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Compatibi l i ty

Hypothesis #4 The compatibility of using LED lights at home with the adopter’s

values does significantly affect users’ attitude towards household

LED light.

Hypothesis #5 The compatibility of using LED lights at home with the adopter’s

values does positively affect users’ attitude towards household LED

light.

Image

Hypothesis #6 The image of using LED light in household does significantly affect

users’ attitude towards household LED light

Hypothesis #7 Theimage of using LED light in household does positively affect

users’ attitude towards household LED light.

Cost

Hypothesis #8 The cost of using LED light in household does significantly affect


Hypothesis #9 Thecost of using LED light in household does negatively affect


Att i tude

Hypothesis #10 The attitude towards household LED light does significantly affects

the intention to use (adopt) LED light at home.

Hypothesis #11 The attitudetowards household LED lightdoes positively affects the

intention to use (adopt) LED light at home.

RESULT

This study relies on questionnaires to collect data, and there are two phase in the distribution

of questionnaires; (1) pre-test to test the validity and reliability and (2) post-test. For pre-test,

30 questionnaires were distributed to potential respondents to test the validity and reliability,

as for the post-test 300 questionnaires were being spread. For the descriptive analyzing, all

300 respondents’ data is processed and analyzed, but in the later more complex analysis, only

103 data are processed due to the “awareness” qualification. While 30 samples of the pre-test

were further processed using SPSS ver.16, only 103 samples are being further processed for

the. Following are the result


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Variables Indicators

(Correlation

Coefficient)

r

(Cronbach's Alpha)

α N of Items

RA1 0.727

RA2 0.708

RA3 0.585

RA4 0.464

CP1 0.416

CP2 0.430

CP3 0.705

CP4 0.518

IM1 0.729

IM2 0.765

IM3 0.545

CS1 0.660

CS2 0.660

AT1 0.521

AT2 0.558

AT3 0.440

AT4 0.647AT5 0.645

AT6 0.699

IU1 0.619

IU2 0.433

IU3 0.529

Attitude

(A) 0.806 6

Intention to

Use

(IU)

30.704

Relative

Advantage(RA)

Compatibility

(CP)0.723 4

0.799 4

Image

(IM)0.813 3

Cost

(CS)20.794

DISCUSSION & ANALYSIS

The respondents are female and male ranging age from 60 years old

that have the interest and need to purchase lights for home. The descriptive analysis questions

cover the general respondent profile, decision maker in home light purchasing, budgets for

lights at home, preference factors in purchasing lights for home, awareness of LED lights and

innovation perception towards LED lights and LED lights for home, and the usage of LED

lights at home.

Awareness

The low awareness level of LED lights for household is an indication that there is not

enough information spread in regards to LED lights for household. The reason for such low

awareness level may be caused by the limited stores that provide the product, and even when

they manage to supply the product, not enough information is transferred to the potential

buyers. Since LED lights for home usage is a new product, it takes time before the market

comes to respond, the transition time is what may be faced by LED lights for household.

Summary of Validity and Reliability test for 6 variables and indicatorsSource: Author ,SPSS ver.16 (2012) –Pre-test Questionnaires


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Compatibility towards Attitude

The result shows that compatibility has significant relationship with attitude, and it is a

positive relationship. In fact, according to the study result shows that compatibility is the

most significant factors that affect the attitude ( r=0.518) The result implies that people’s

attitude towards an innovation (LED lights for home) will elevated whenever they believe

that the innovation is in accordance to their current values, habits, beliefs and habits

Cost towards Attitude

The result shows that cost has significant relationship with attitude, and it the

relationship takes form as a negative relationship. The study result shows that cost is the

second most significant factors that affect the attitude ( r=0.283). The result implies that when

people perceived a higher cost for the innovation, the less likely they will regard the

innovation with a good attitude. Cost being the second most influencing factor to the attitude

is an illustration of the market characteristic that have strong cost-consciousness towards

product.

Relative Advantage towards Attitude

The result shows that relative advantages do have significant relationship with

attitude, and it is a positive relationship. Relative advantage is indeed the third strongest

correlated factor that affects the attitude of the market towards ( r=0.232) LED lights for

home. The result shows that when people believe that LED lights for home gives them more

benefits such as, longer life-span, more durable, and better energy efficiency, they will have

better Attitude towards the LED lights for home.

Image towards Attitude

The result shows that image has significant relationship with attitude, and it is a

positive relationship. Nevertheless, image has the weakest correlation with attitude ( r=0.207),

an indication that though image has significant positive relationship; it has the least impact


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towards attitude comparing to other PCIs. The result implies that when an innovation

manages to create a good image for the people, the innovation will be regarded with better

attitude.

Attitude towards Intention to Use

From the first regression we understand that all the observed PCI (relative advantages,

compatibility, image, and cost) have significant relationship with the attitude. Through the

second regression, the result shows an apparent significant positive relationship of attitude

with intention to use. Approximately 53.7% ( r=0.537) of the changes in Intention to Use can

be explained by attitude, when PCI affects attitude and attitude affects the intention to use

LED lights for home, the relations can be simplified as the PCI indirectly affect the intention

to use LED lights for home. The result implies that when people have positive attitude

towards the innovation, is likely to have higher intention to use the innovation.

CONCLUSION AND RECOMMENDATION

Variables’ Relationship

1.

All observed variables in Perceived-Characteristics of Innovation (PCI) which are:

relative advantage, compatibility, image, and cost, are significantly influential on the

respondents’ attitude towards household LED lights. All PCI variables except cost have

positive relationship with attitude.

2.

Attitude has significant positive affect towards intention to use household LED lights.

To maximize the market intention to use household LED lights, one must enhanced the

markets’ attitude through the PCI. In conclusion, observed PCI variables directly

influence attitude and indirectly influenced the intention to use (adopt) household LED

lights.


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Recommendations

There are two forms of recommendations given in this study: (1) Marketing

Recommendations, and (2) Academic Recommendations

Mark etin g Recomm enda tions

It is widely known that the consumer mostly value energy efficiency as the main

feature in purchasing lights, followed by durability and price. The marketing campaign of

LED lights should really highlight how this new innovation has more significant efficiency

comparing to other traditional light-source.

Cost (Pri ce)

The main reason for those who aware of household LED lights’ existence but decides

not to use the innovation is the exceeding cost of the innovation. In fact, LED lights do have

higher price comparing to traditional light source. The main reason for its exceedingly high

price is due to the new technology application and imported parts of the production.

The significant demand of LED lights may result in mass production of the lights and

give the advantages in economies of scale that lessen the production cost per unit of LED

light. With mass production of LED lights the cost may fall and the price gap between LED

lights with other traditional light source will likely to close in. .

Conveni ence (Place)

Another issue faced by household LED lights as is mentioned in chapter 4, is the

scarcity of the product. There is a certain degree of difficulty in locating the stores that sell

LED lights, only a limited number of stores supply this new innovation. It is recommended

that LED lights should be supplied in more convenient places in which people commonly

purchase light-source for their homes. Hypermarkets such as Giant, Carrefour, Hypermart,

and Lotte-mart should supply LED lights in their stores to ease the buying process of the

lights.


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Communi cati on (Promot ion)

Communication plays the main role in this recommendation to increase the awareness

level of the market towards LED lights for home. As is discussed in chapter 2, to boost the

awareness in the early phase of the innovation infusion, mass media communication works

best. The current situation is that people are not aware of the very existence of LED lights for

home; to encounter the situation there should be more campaign in mass media regarding of

LED lights existence and benefits. Mass media communication channels being recommended

are printed media (magazine and newspapers), television broadcast, outdoor media, and

internets.

Academi c Recomm endat ion s

For future research with similar topic, there are several recommendations to be noted:

1. The scope of this particular research is limited to only South –Tangerang, for

future research perhaps the scope can be widened into larger area to gain a more

thorough understanding of the subject.

2. This study does not emphasize on the marketing mix strategy needed for

household LED lights , future study might be able to focus the subject into the

appropriate marketing strategy to enhance the diffusion of LED lights innovation.

3.

This study only sees from the consumer perception point-of view, future studies

may be able to explore the subject from a certain (LED light) company point of

view to gain a more comprehensive data and understanding of the subject.

4.

Due to limited time and resources, this study only rely on questionnaires as the

main data to be processed, future study may need to explore different data

collection method to gain more qualitative value of the data; focus group

discussion.


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