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Business Journal

CONSUMER MARKETING

Author: Thien Tran

December 2014 | Iss.No: 1

CONSUMER UNDERSTANDING

AND NEW PRODUCT ADOPTION

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INTRODUCTION

No one can deny that the world is better now than ever in history. Advances in technology

facilitate the invention of new products and services which have enhanced people lives. In the

past few decades, a new product’s battle has become a global encounter as there are no longer

national boundaries; and domestic markets have become the opponent’s international market.

As the twenty-first century begins, the product innovation war emerges as the most important

and crucial combat the companies of the world have ever fought. Wining the competition is vital

to success, growth and even survival of any co-operations. Recently, the global market has

witnessed the advent of new ideas, but dozens of which have fallen into oblivion. As a matter of

fact, the new product development is the riskiest, yet a core mission of every business which

does not only require an involvement of many people, but also consume time and effort.

However, there is no guarantee for the success of the new product adoption as planning and

execution always have a big gap.

To every business, the new product development is one of key missions as it helps companies

maintain growth rate, consolidates competitive advantage, and enhances value of the firms and

shareholders (Patrick, 1997). It also enables a brand to reposition through breakaway, steal or

reserve positioning strategy when the product almost reaches the maturity stage of its life cycle.

This facilitates the company to win cut-throat competitions by creating new value propositions

that lead to an increase in sale and customer loyalty (Moon, 2005). When it comes to a new

product, it can be defined as new to the market or new to the company meaning that the firm

has never made or sold this type of product before, but other firms might have. As stated by

Robert (2001), new products may be classified as one of six categories including new-to-the-

world products, new product lines, additional to existing product lines, improvements and

revisions to existing products, repositioning and cost reductions. Fundamentally, the new

product development usually goes through many steps from concept, to ideation, design, test

and release which cost the company many resources in terms of manpower and finance (John, el

al., 2003) To every business, the most preferable success of developing new products is

adoption rate which is measured by the length of time required for a certain percentage of the

members of social systems to adopt an innovation (Bourne, 1959). Nevertheless, the new

product adoption is not a simple process as it considerably takes consumer’s time and effort as

they do with purchase decision process. Ordinarily, a typical consumer must go through a four-

step process including awareness, interest, and evaluation, trial before deciding whether the

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product is adopted or rejected (Remco, et al., 2007). According to Rogers (2003), the diffusion

of innovation is notably influenced by three primary factors: Initially, it is the quality of

innovation which includes perceived relative advantage, simplicity and ease of use, trainability,

observable result, and compatibility with existing values; the next one is about the peer-peer

conversation and networks of target consumers whose behavior and opinion may impact on

others to spread adoption; and finally it is the company’s understanding towards the needs of

different user segments such as innovators, early adopters, early majority, late majority and

laggards. Each group has its own personality and social demand, so their adoption degree will be

different from others Robinson (2009). This is also the benchmark used by most marketing

practitioners to evaluate the successful rate of the adoption.

However, it is a fact that millions of dollars spent on developing and launching new products

every year, majority of them failed. As reported by a study, thirty thousand new consumer

products have launched each year, but more than 90% of them failed (Clayton, el al., 2007). In

addition to this standpoint, John (2006) stated that 47% of first movers have failed, meaning

that nearly half the firms that pioneered to introduce new product categories got out of those

businesses. There are many studies conducted to explain the reasons for the successful and

failed adoption to the new products. John (2000) explained that a poor planning; poor

management, poor product concept and poor execution are main reasons leading to unexpected

failure. Another author also indicated that poor marketing research, technical problems,

insufficient marketing effort, and bad timing will likely result in a failed adoption. This essay

will base on the marketing mix and consumer understanding perspectives to discuss barriers to

adoption how to uncover successfully.

BARRIERS TO ADOPTION OF INNOVATIONS

Adoption is the key of successful any product or service development. When developing new

products, marketers usually segment the market by conventional methods which include

geographic, demographic, behavior and psychographic (Kotler, et al., 2006). However,

consumers’ purchase behavior changes more constantly than their demographics,

psychographics or attitudes do (Clayton, 2007). It is a fact that most customers do not bond

their purchase to these factors rather they simply want to hire products that solve their

problems. It means that only if the product’s core value and function are well-perceived by

consumers it is easily adopted. Conversely, if new products do not have favorable points of

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difference and solve relevant issues they will surely fail. In other words, new products may

actually have compelling benefits and competitive advantages, but they are not likely to achieve

significant adoption if the consumers do not perceive and understand. Therefore, perceived

value seems to be the main reason of most adoption failures. However, value does not only mean

the product’s functions, but it is also the product’s position that places in the consumer’s mind

as opposed to the position of other brands in the category. A poor position may lead to a

disassociation between the brand and consumers from which the consumer sees no reasons to

adopt the product (John, 2000). For example, in 1998 Kellogg’s launched a new product that the

company believed would change the breakfast on-the-go market, called ‘Breakfast Mates’. The

whole package was a container of cereal, shelf-stable milk and a plastic spoon which put in a

single serve box. However, when the company realized that pouring a bowl of cereal with fresh

milk was not time-consuming for most consumers, they discontinued the product one year after

its launch. Another example is the case of McDonald. In an effort to class up the McDonald's

brand, the company introduced the Arch Deluxe in 1996, the product targeted adults with more

sophisticated palates. However, this new product was fallen into oblivion as customers did not

go to McDonald's for sophistication. They knew what they wanted to buy and what they wanted

was simply a classic and convenient burger.

Besides the product, another factor influencing the new product adoption is relevant to place or

accessibility. A new product could potentially offer a great value to consumers, but it is

completely irrelevant if it is inaccessible to consumers. The accessibility usually consists of three

components including convenience, usability and availability. According to Joan and Julie

(2011), most products failed as they are insufficient support by distribution pipeline including

salespeople and intermediaries. No one can deny that the product availability is becoming an

increasingly important issue as it directly affects sales, inventory and consumer responsiveness

to the product and brand. Nevertheless, most failed cases revealed a low coverage index or

wrong channels as opposed to competitors meaning that the distribution pipeline did not work

efficiently to attract consumers at point of sale. If new products are not sold in a right channel,

they will not only facilitate the accessibility of target consumers, but also break down the

adoption process. Additionally, it is obvious that the innovative product can be completely new

or an upgrade from the old version, so it considerably has some advantages rather than the

existing one. Typically, consumers may require an interpretation to new product’s features, so

they can absorb and perceive the value of innovation. However, if the intermediaries are not

well-educated enough to present and convince consumers to the product’s value proposition, the

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adoption cannot get started. As regards usability, Rogers (2003) stated that the adoption degree

radically depends on the simplicity and user-friendliness of the innovation product. New ideas

that are simpler to understand are adopted more rapidly than innovations that require the

adapter to develop skills and understanding. Take Aqualisa shower for an example, in May

2001, the brand had launched the Quartz shower which is the first significant product

innovation in the UK shower market. The product was a breakthrough in shower technology as

it was designed to facilitate users experience with a compact design and completely solved

relevant problems of individual and plumber segments. However, selling the product in a wrong

channel where sellers were not knowledgeable about product features and not willing to stock

up resulted in a failed adoption in the early stage.

In relation to barriers, pricing also plays a key role led to a failed adoption. According to Irefin

(2013), an inaccurate pricing could potentially have hugely damaging effects on business failure.

Pricing existing products is tough, but it would be more difficult to set up the price for new

products as there is no reference point for comparison. As a matter of fact, pricing is always

sensitive to most consumers regardless of what social classes they are. Thereby, charging too

much or too little considerably affects their adoption to new products. When the customers hire

a product or service, they do not often judge values and costs accurately or objectively, rather

they act based upon the perceived value of the product. It is asserted that the company’s

perception towards a product’s value is different from consumers. The company occasionally

overvalues the benefits of its innovation, so it may make up an inappropriate pricing strategy for

the new product penetration (Gourville, 2006). However, when it comes to new products or

services, consumers habitually consider whether or not the product value is worth their

payment. The adoption will be occurred only if the customer is well-perceived the difference

between the benefits and the costs of new products. Therefore, it can be concluded that products

that are mispriced or have a poor price value relationship, as perceived by target consumers, will

likely fail. A typical example of pricing impact on the new product adoption is Sony PlayStation

3 (PS3). The product was evaluated as a cutting edge technology with an innovative combination

of Cell and Blu-ray, and exceptional storage ability up to 50GB of high definition content. In

despite of outstanding features against Xbox and Wii, SP3 was not adopted successfully as its

price exceeded the consumer’s expectation when they compared with incumbents products of

other competitors.

The next factor influencing diffusion of innovation is promotion which seems to be the most

important as it can hasten or prolong the adoption process. As mentioned previously,

consumers usually go through a five-step process including awareness, interest, and evaluation,

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trial before deciding whether they adopt or reject innovation (Remco, et al., 2007). It is obvious

that various group of consumers reacted differently to the new product and service adoption.

For instance, According to John (2006), innovators and early adapters seemingly love talking

about innovation and getting an advantage over their peers whilst other groups are often

skeptical about innovation. Nevertheless, they have a same demand on gathering relevant

information for their trialability, so communicating a right message to reach those segments

becomes extremely important. Advertising that is inconsistent, unclear and insufficient weight

to build brand awareness, to communicate new product’s benefits and to increase trial will lead

to a failed adoption. Take JCPenney for an example, the company had traditionally followed a

high-low pricing strategy that had positioned in consumer’s mind. Yet, due to a decrease in

market share, losses of loyal consumers and highly competitive market, JCPenny had decided to

reposition the brand by ‘Fair and Square’ strategy in 2012. One of the considerable changes was

the new pricing strategy that consisted of ‘everyday low price’, ‘month long values event’ and

‘best price Fridays’. However, inefficient marketing communication led to a misunderstanding

among target consumers meaning that they did not perceive the innovation value. Consequently,

they stopped shopping at JCPenny.

From consumer perspective, new products usually require consumers to change their behavior.

Most companies have long assumed that people will adopt new products that offer more value or

utility than incumbent ones (Gourville, 2006). However, rarely have the companies considered

the psychological cost related to consumer behavior change which consumes their time and

effort to get familiar with the new product function, especially technical products. Gourville

(2006) indicated that psychologically consumers always concern about gains and losses of

adopting new products. They often evaluate innovation relative to a reference point and

consider every deficiency as losses. As mentioned previously, majority of consumers are usually

skeptical about new products or services, and consider what they already have as the status quo.

Thus, they always overvalue the existing product’s benefits while companies often overweight

the new benefits of their innovation (Gourville, 2006). This consumer’s psychology obstructs the

successful rate of new product adoption. JCPenny is one of a typical example for this failure.

With ‘Faire and Square’ strategy, the company made an entire radical makeover including new

logo, new spokesperson, new store design, new sales structure and communication which they

thought the consumers would benefit and adopt. Unfortunately, the reality was completely

different when consumers turned their back on JCPenny and switched to competitors that

resulted in a heavy loss in sale, market share and stock index. JCPenny did not realize that the

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company’s “Four and Square” strategy unintentionally forced consumers to change their

shopping behavior from checking email for sales promotion and coupons to “everyday low

price”. Conventionally, JCPenney’s target consumers were price sensitive so they often took

gains and losses into account when comparing previous price with discounted price. Therefore,

eliminating these factors made the company’s new strategy unacceptable by loyal consumers.

THE KEYS OF SUCCESSFUL ADOPTION

The journey from developing to getting an innovation adopted by consumers is not very easy. It

does not only require marketers to understand the current market, competitors, and consumers

but also know how to seize the opportunities from market trends to make different products and

services. Based on successful stories, creating perceived values which facilitate consumer’s life

and help them solve problems is the origin of a successful adoption. Developing perceived value

begins with defining and selling a clear and compelling product’s value proposition as opposed

to incumbent competitors or products. That value proposition should stem from identifying

customer benefits and understanding their problems, and then linking these benefits to

mechanism for delivering value of difference (Rebecca, 2013). It is argued that a product could

be new to the company, yet old to consumers. Therefore, to understand these problems

marketers should not apply their former experiences and personal observation to innovative

products, but they should make a marketing research to savvy the necessity and importance of

their innovation towards consumer’s life. Furthermore, there is no denying that creating point of

difference is vital to the product’s survival. Nonetheless, difference does not mean making the

product become complicated as it will limit user’s adoption. As stated previously, a new product

often requires consumer to change their behavior so they always consider between gains and

losses. In addition to this standpoint, Robinson (2009) advocated the view that one of qualities

making an innovation spread is the simplicity and ease of use. Thereby, new ideas that are

simpler to understand are adopted more rapidly than innovations that require adopters to

develop news skills and understanding. To sum up, marketers should take usability attribute

into account and create more benefits to cover consumer’s losses when developing new products

to facilitate trailability, and increases prospect of successful adoption.

In relation to communication of innovation, it is asserted that each product will fit certain

groups of consumers and each of which has its own personality, demand and attitude towards

innovations. Theoretically, marketing tools like advertising, media or events may convey the

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information or brand message about new innovations, but conversation is the factor that

spreads adoption. It is because the adoption of new products or behavior usually involves risk

taking and uncertainty. Psychologically, consumers are often skeptical about innovations and

inclined to seek for support from those who have successfully adopted the innovation to give

them a credible reassurance (Rogers, 2003). This makes the peer-peer conversations and

relationship become important to the success of adoption. For this reason, marketers should

understand profiles of each group and make proper marketing strategies to send right messages

to the right target consumers in the right stage of adoption process and in a right environment

in which the conversation of adoption is occurred. Taking early majority group for an example,

according to Robinson (2009) they are pragmatists, comfortable with fairly progress ideas, yet

will not respond without solid testimony of benefits; they are price sensitive, unwilling to take

risk and influenced by mainstream fashion leaders; they enjoy hearing endorsed stories by

normal or high-profile people; they also prefer simplicity, minimum time commitment and

learning. To persuade this group, marketer should use mainstream advertising and media

featuring endorsements from respectable people. Simultaneously, they should lower the entry

cost, ensure ease and simplicity and offer give-away or competitions to stimulate adoption.

Consumers who buy new products or services expect that the benefit they receive will exceed the

cost they have to pay. When evaluating any new products or services for possible adoption,

consumers usually weigh the benefit as opposed to the cost of adoption, and if the perceived

benefit overweighs the perceived cost, consumers are more likely to adopt. Understanding this

purchase psychology, marketers should think thoroughly about pricing new products. Charging

too much it will not sell and charging too little is far more dangerous as it does not only affect

the company’s revenue, but also fix the product’s market value position at a low level. Thus,

exploring a full range of pricing options is necessary before setting an official price. Marketer

should start with exploring customer preferences, and market size to establish the feasibility of

the product for further expansion. Subsequently, they should limit acceptable prices that make

the product economically attract to buyers in terms of gains and losses. For this stage, they

should consider carefully between penetration/skimming strategy and product’s value perceived

by consumers to make up an attractive price that will not be a barrier to purchaser’s adoption.

Last but not least, new products will likely increase the prospect of adoption if it is available and

accessible when consumers need them. It means that marketers should take distribution

channel and timing into account to increase the possibility of consumers’ trialability. Timing a

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product introduction can make all the difference as launching a product too early or too late can

impact how well it gains attention among consumers, and media. If a product is launched too

late the market segment may lose interest or have already adopted competitor’s products,

especially for technology products. Therefore, marketers should make sure the products ready

for the market and its features can benefit consumers at least at the time of launching. To select

the right time, marketers may look at the force of supply and demand to see how many percent

of consumer really needs and interests in product, and whether or not supplying alternatives is

surplus or insufficient at the time of launching. Additionally, they can base on stage of the

product/category life cycles to determine the right time for launching. Over and above, however,

the product should not be launched when distribution channels are not ready yet. In other

words, intermediaries should adopt new product before it is adopted by end users. Thereby,

marketers should make a strong place in advance to ensure that relevant people precisely

understand new product features to persuade consumers get involved in a trail and then the

adoption. However, it is noticed that selecting distribution channels should be considered

carefully as it will not only affect the positioning of incumbent products, but also determine the

prospect of product expansion in the future.

CONCLUSION

Adoption is essential to the long-term success of any brands and products. When an innovative

product creates high adoption rate, successor products naturally follows, building upon the

success of its precursor. To achieve significant adoption, marketers should understand the entire

value proposition of the products to create products that are innovative, easy to use, possessing

unique features, meeting customers’ needs/wants, delivering higher quality, solving customer

problems and reducing their total costs. To grasp these ideas, it requires marketing practitioners

an understanding consumer through conducting marketing research on consumers, market and

competitors. As a matter of fact, price is always sensitive to both existing and new consumers;

thereby pricing a new product should begin long before its birth and be viewed through the eyes

of the buyers. Additionally, the adoption process is slow or fast depending on the impact of

marketing communication on different groups of consumer. Finally, selecting distribution

channels and timing is extremely important to diffusion of innovation. Therefore, an understand

market challenges and opportunities will be the key to decide the success or failure of a new

product adoption.

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