Chapter 15

1. Chapter 15 Consumer Influence and the Diffusion of Innovations

2. 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.

3. What is Opinion Leadership? Opinion Leader Opinion Receiver Opinion Seeker

4. Opinion Leader A person who informally gives product information and advice to others.

5. Opinion Seeker An individual who either actively seeks product information from others or receives unsolicited information.

6. Opinion Receiver The person who receives an opinion offered by another person.

7. 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

8. Motivations Behind Opinion Leadership • The Needs of Opinion Leaders • Self involvement • Social involvement • Product involvement • Message involvement • The Needs of Opinion Receivers • New-product or new usage information • Reduction of perceived risk • Reduction of search time • Receiving the approval of the opinion leader • Purchase Pals • Surrogate Buyers Versus Opinion Leaders

9. Table 15.1 A Comparison of the Motivations of Opinion Leaders and Opinion Receivers OPINION LEADERS OPINION RECEIVERS • SELF-IMPROVEMENT MOTIVATIONS • Reduce postpurchase uncertainty or dissonance • Gain attention or status • Assert superiority and expertise • Feel like an adventurer • Experience the power of “converting” others • Reduce the risk of making a purchase commitment • Reduce search time • PRODUCT-INVOLVEMENT MOTIVATIONS • Express satisfaction or dissatisfaction with a product or service • Learn what products are new in the marketplace • Learn how to use or consume a product

10. Table 15.1 continued OPINION LEADERS OPINION RECEIVERS • SOCIAL-INVOLVEMENT MOTIVATIONS • Express neighborliness and friendship by discussing products or services that may be useful to others • Buy products that have the approval of others, thereby ensuring acceptance • MESSAGE-INVOLVEMENT MOTIVATIONS • Express one’s reaction to a stimulating advertisement by telling others about it

11. Table 15.2 Key Differences Between Opinion Leaders and Surrogate Buyers OPINION LEADER 1. Informal relationship with end-users 2. Information exchange occurs in the context of a casual interaction 3. Homophilous (to a certain extent) to end-users 4. Does not get paid for advice 5. Usually socially more active than end-users 6. Accountability limited regarding the outcome of advice 7. As accountability limited, rigor in search ad screening o alternatives low 8. Likely to have used the product personally 9. More than one can be consulted before making a final decision 10. Same person can be an opinion leader for a variety of related product categories

12. Table 15.2 Key Differences Between Opinion Leaders and Surrogate Buyers SURROGATE BUYER 1. Formal relationship; occupation-related status 2. Information exchange in the form of formal instructions/advice 3. Heterophilus to end users (that is, is the source of power) 4. Usually hired, therefore gets paid 5. Not necessarily socially more active than end-users 6. High level of accountability 7. Search and screening of alternatives more rigorous 8. May not have used the product for personal consumption 9. Second opinion taken on rare occasions 10. Usually specializes for a specific product/service category

13. Measurement of Opinion Leadership • Self-Designating Method • Sociometric Method • Key Informant Method • Objective Method

14. Figure 15.1 Self-Designating Questions for Measuring Opinion Leadership SINGLE-QUESTION APPROACH: 1. In the last 6 months have you been asked your advice or opinion about golf equipment? Yes___ No___ MULTIPLE-QUESTION APPROACH: (Measured on a 5-point bipolar “Agree/Disagree” scale) 1. Friends and neighbors frequently ask my advice about golf equipment. 2. I sometimes influence the types of golf equipment friends buy. 3. My friends come to me more often than I go to them about golf equipment. 4. I feel that I am generally regarded by my friends as a good source of advice about golf equipment. 5. I can think of at least three people whom I have spoken to about golf equipment in the past six months.

15. Table 15.3 Methods of Measuring Opinion Leadership: Advantages and Limitations OPINION LEADERSHIP MEASUREMENT METHOD DESCRIPTION OF METHOD SAMPLE QUESTIONS ASKED ADVANTAGES LIMITATIONS SELF-DESIGNATING METHOD Each respondent is asked a series of questions to determine the degree to which he or she perceives himself or herself to be an opinion leader. “Do you influence other people in their selection of products?” Measures the individual’s own perceptions of his or her opinion leadership. Depends on the objectivity with which respondents can identify and report their personal influence.

16. Table 15.3 continued OPINION LEADERSHIP MEASUREMENT METHOD DESCRIPTION OF METHOD SAMPLE QUESTIONS ASKED ADVANTAGES LIMITATIONS SOCIOMETRIC METHOD Members of a social system are asked to identify to whom they give advice and to whom they go for advice and information about a product category. “Whom do you ask?” “Who asks you for information about that product category?” Sociometric questions have the greatest degree of validity and are easy to administer. It is very costly and analysis often is very complex. Requires a large number of respondents. Not suitable for sample design where only a portion of the social system is interviewed.

17. Table 15.3 continued OPINION LEADERSHIP MEASUREMENT METHOD DESCRIPTION OF METHOD SAMPLE QUESTIONS ASKED ADVANTAGES LIMITATIONS KEY INFORMANT METHOD Carefully selected key informants in a social system are asked to designate opinion leaders. “Who are the most influential people in the group?” Relatively inexpensive and less time consuming than the sociometric method. Informants who are not thoroughly familiar with the social system are likely to provide invalid information.

18. Table 15.3 continued OPINION LEADERSHIP MEASUREMENT METHOD DESCRIPTION OF METHOD SAMPLE QUESTIONS ASKED ADVANTAGES LIMITATIONS OBJECTIVE METHOD Artificially places individuals in a position to act as opinion leaders and measures results of their efforts. “Have you tried the product? Measures individual’s ability to influence others under controlled circumstances. Requires the establishment of an experimental design and the tracking of the resulting impact on the participants.

19. Table 15.4 Profile of Opinion Leaders GENERALIZED ATTRIBTES ACROSS PRODUCT CATEGORIES CATEGORY-SPECIFIC ATTRIUTES Innovativeness Willingness to talk Self-confidence Gregariousness Cognitive differentiation Interest Knowledge Special-interest media exposure Same age Same social status Social exposure outside group

20. Table 15.5 Car and Driver Research Supporting Subscribers Are Opinion Leaders AREA OF OPINION LEADERSHIP GIVEN ADVICE PAST 12 MONTHS AVERAGE NO. OF PEOPLE ADVISED* AVERAGE NO. WHO FOLLOWED SUBSCRIBERS’ ADVICE AVERAGE NO. WHO SUBSEQUENTLY BOUGHT* Gave advice in past year 69% Passenger car 53% 7.8 2.7 3.2 Pickups, SUVs, Vans 31% 4.5 1.2 1.5 Automotive parts 24% 20.5 17.2 18.3

21. Table 15.5 continued AREA OF OPINION LEADERSHIP GIVEN ADVICE PAST 12 MONTHS AVERAGE NO. OF PEOPLE ADVISED* AVERAGE NO. WHO FOLLOWED SUBSCRIBERS’ ADVICE AVERAGE NO. WHO SUBSEQUENTLY BOUGHT* Maintenance/appearance products 28% 18.2 14.8 15.8 Tires 32% 8.3 6.7 70 Auto sound equipment 17% 8.2 3.7 4.0 Other electronic accessories 24% 6.2 3.1 3.4 *Among those who gave advice (i.e., 69%). Base: Total subscribers (multiple responses).

22. Market Maven Individuals whose influence stems from a general knowledge or market expertise that leads to an early awareness of new products and services.

23. The Interpersonal Flow of Communication • Two-Step Flow • Views opinion leader as a middleman between the impersonal mass media and the majority of society • Multistep Flow • Takes into account the fact that information and influence often are two-way processes

24. Two-Step Flow of Communication Theory A communication model that portrays opinion leaders as direct receivers of information from mass media sources who, in turn, interpret and transmit this information.

25. Figure 15.2 Two-Step Flow of Communication Theory Mass Media Opinion Leaders Opinion Receivers (the masses) Step 1 Step 2

26. Multistep Flow of Communication Theory A revision of the traditional two-step theory that shows multiple communication flows: from the mass media simultaneously to opinion leaders, opinion receivers, and information receivers; from opinion leaders to opinion receivers; and from opinion receivers to opinion leaders.

27. Figure 15.3 Multistep Flow of Communication Theory Step 2 Mass Media Opinion Leaders Opinion Receiver/ Seekers Step 1a Step 3 Step 1b Information Receivers

28. Issues In Opinion Leadership and Marketing Strategy • Programs Designed to Stimulate Opinion Leadership • Advertisements Simulating Opinion Leadership • Word of Mouth May Be Uncontrollable • Creation of Opinion Leaders

29. Diffusion Process The process by which the acceptance of an innovation is spread by communication to members of social system over a period of time.

30. Adoption 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. The five stags of the traditional adoption process are awareness, interest, evaluation, trial, and adoption.

31. Elements of the Diffusion Process • The Innovation • The Channels of Communication • The Social System • Time

32. Defining Innovations • Firm-oriented definitions • Product-oriented definitions • Market-oriented definitions • Consumer-oriented definitions

33. Product-Oriented Definitions Continuous Innovation Dynamically Continuous Innovation Discontinuous Innovation

34. Continuous Innovation A new product entry that is an improved or modified version of an existing product rather than a totally new product. A continuous innovation has the least disruptive influence on established consumption patterns.

35. Dynamically Continuous Innovation A new product entry that is sufficiently innovative to have some disruptive effects on established consumption practices.

36. Discontinuous Innovation A dramatically new product entry that requires the establishment of new consumption practices.

37. Figure 15.5 The Telephone Has Led to Related Innovations Discontinuous Innovations Dynamically Continuous Innovations Continuous Innovations Telephone answering machines Call forwarding Call waiting Caller ID Banking by telephone Call-prompting systems Hold button Line-in-use indicator Redial button Auto dialing feature Touch-tone service 800 Numbers 900 Numbers Telephone Nationwide paging service Stock market quotation devices Sports scores delivery Two-way paging Pager watch Silent alert Message displays Build-in alarm clock Interchangeable fashion color cases Pager Fax modem Mobile fax machines Home office systems (combined fax, copier, computer printer) Plain paper fax Speed dial buttons Delayed send Copy function Paper cutter Fax Machine

38. Product Characteristics That Influence Diffusion • Relative Advantage • Compatibility • Complexity • Trialability • Observability

39. Table 15.6 Product Characteristics That Influence Diffusion CHARACTERISTICS DEFINITION EXAMPLES Relative Advantage The degree to which potential consumers perceive a new product as superior to existing substitutes Air travel over train travel, cordless phones over corded telephones Compatibility The degree to which potential consumers feel a new product is consistent with their present needs, values, and practices Gillette MACH3 over disposable razors, digital telephone answering machines over machines using tape to make recordings Complexity The degree to which a new product is difficult to understand or use Products low in complexity include frozen TV dinners, electric shavers, instant puddings

40. Table 15.6 continued CHARACTERISTICS DEFINITION EXAMPLES Trialability The degree to which a new product is capable of being tried on a limited basis Trial size jars and bottles of new products, free trials of software, free samples, cents-off coupons Observability The degree to which a product’s benefits or attributes can be observed, imagined, or described to potential customers Clothing, such as a new Tommy Hilfiger jacket, a car, wristwatches, eyeglasses

41. Table 15.7 Barriers to Diffusion of an Innovation--On-Line Banking TYPES OF BARRIERS DEFINTIONS AND EXAMPLES FUNCTIONAL BARRIERS Usage • Initial use requires a great deal of consumer learning • Continuing use requires total commitment of system • Partial or inconsistent use results in incorrect account balances Value barriers • Requires purchase of software and supplies • Generally has additional monthly fee Risk barriers • Performance risk is high • Economic risk is moderate • Social risk is low PSYCHOLOGICAL BARRIERS Traditional barriers • Not the way the consumer is accustomed to paying bills, etc. Image barriers • Negative (“hard to use”) image of personal computers in general and on-line banking in particular

42. Time and Diffusion • Purchase Time • Adopter Categories • Rate of Adoption

43. Table 15.8 Time Line for Selecting a New Large-Screen TV Set WEEK PRECIPITATING SITUATIONS/FACTORS 0 Current family room 19-inch TV set works fine but is 10 years old and cannot access a number of the cable channels. The wife has recently purchased a new sofa and new carpeting for the family room, and she and her husband have spoken about possibly having a cabinet built for the wall opposite the sofa that would contain the TV, stereo, tape deck, CD player, and VCR. Several friends have purchased large-screen TVs and have turned their family rooms into home entertainment centers. Couple decides, therefore, to also look at projection TVs. DECISION PROCESS BEGINS 1-4 Consumer senses a need to learn more about the features and availability of large-screen TVs, both those with conventional tubes and projection TVs.

44. Table 15.8 continued WEEK THE TV IS OUT OF MIND 5-8 The transmission in the older of the couple’s two cars, a 1987 Honda, begins to shift erratically. Because of the expense of this repair (the transmission had to be replaced), the hunt for a new TV is put on the back burner. INTEREST IS RETRIGGERED 9 The wife reads a article in one of the magazines hat she periodically buys at the supermarket about a family that purchased a Zenith 52-inch projection TV for their family room and created a home entertainment center. She shows the article to her husband. CONSUMER ACQUIRES A MENTOR (OPINION LEADER) The husband asks a neighbor to serve as a mentor (opinion leader) with regard to home entertainment centers. He agrees.

45. Table 15.8 continued WEEK FEATURES AND BRAND OPTIONS ARE REVIEWED 10 With the advice of the mentor, the decision is made to use a projection TV in the 46- to 50-inch range as the nucleus of the home entertainment center. The couple visits several department store and appliance store TV departments and narrows down the choices to projection units from Pioneer, Sony, and Zenith. OBTAINING MORE FOCUSED INFO ABOUT OPTIONS 11-12 The toll-free 800 numbers of the three TV manufacturers (which were featured in ads) are called to request additional detailed information (brochures and booklets).

46. Table 15.8 continued WEEK PERIOD OF SELF-STUDY 13-14 After reading the brochures and discussing the pros and cons of the alternatives with their mentor (comparing models with regard to features such as picture-in-picture and surround sound capability), a decision is made. The 46-inch Sony is selected because of a magazine review that give it very high marks in terms of its screen brightness and sharpness, and because it offered colored picture-in-picture. ORDERING THE TV Sunday’s newspaper contains an advertisement from a local appliance store chain stating that any projection TV purchased within the next week can be paid for with 6 monthly payments, at no interest charge--the first payment beginning 6 months after the TV is installed. The couple decides to drive to the store and talk to a salesperson about the deal. When the salesperson agrees to lower the price of the Sony 46-inch set to match the lowest price the couple had been quoted, they decide to make the purchase. The TV arrives in the appliance dealer’s truck and is installed in the couple’s family room.

47. Adopter Categories A sequence of categories that describes how early (or late) a consumer adopts a new product in relation to other adopters. The five typical adopter categories are innovators, early adopters, early majority, late majority, and laggards.

48. Figure 15.10 Adopter Categories Laggards 16% Early Adopters 13.5% Late Majority 34% Early Majority 34% Innovators 2.5% Percentage of Adopters by Category Sequence

49. 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

50. 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