Consumer Behaviour

An Introduction
By
Prof (Dr) Dhananjay Beura
B. Pharm, PGDM, PhD, PGDM DM
What is Consumer Behaviour?
Those activities directly involved in
obtaining , consuming and disposing
of products and services, including
the decision processes that precede
and follow these actions
 This study draws on concepts
from various other disciplines
• Psychology
• Sociology
• Anthropology
• Economics
• Marketing
 Need to study ?

‘You cannot take the consumer for granted

any more’
Therefore a sound understanding of
consumer behaviour is essential for the
long run success of any marketing program
 Perspectives
• Logical Positivism
1. Understanding and predicting consumer
behaviour
2. Cause and effect relationships that govern
persuasion and/or education
• Post Modern – to understand consumption
behaviour without any attempt to
influence it
 Why is this important?
• Out of 11000 products launched by 77
companies, only 56% are present five years
later – Kuczmaski & Associates
• Only 8% of new product concepts offered
by 112 leading companies reached the
market. Out of this 83% failed to reach
marketing objectives – Group EFO Ltd., Marketing
News, Feb 1, 1993, Pg 2
 “MEET THE NEW
CONSUMER
and smile when you do because
she is your boss. It may not be
the person you thought you
knew. Instead of choosing from
what you have to offer, she tells
you what she wants. You figure it
out how to give it to her.”
-Fortune Editor
 A new product must satisfy
consumer needs, not the needs
and expectations of management.

Understanding and adapting to

consumer motivation and behaviour
is not an option – it becomes a
necessity for competitive survival
 Consumer sovereignty presents a
formidable challenge but skilful
marketing can affect both motivation
and behaviour if the product or
service offered is designed to meet
consumer needs and expectations
A sales success occurs because demand
either exists already or is latent and
awaiting activation by the right marketing
offering
Dominant forces shaping Consumer
Research
• Factors that move an economy from
Production-driven to Market-driven
• Level of sophistication with which human
behaviour is understood in psychology and
other behavioural sciences
Environmental factors that affect the
marketing challenge
• Extent to which the supply of valid products and
services exceed consumer demand
• Ability to communicate with customers quickly
and accurately
• Existence of multiple avenues of distribution
quickly and economically
• Extent to which marketers can influence to induce
distributors to comply with overall marketing
strategy
• Economic growth, both nationally and globally
 Motivational Research
• It seeks to learn what motivates people in
making choices. The techniques are such as
to delve into the conscious, subconscious
and the unconscious.
• ‘women don’t buy cosmetics, they buy
hope.’
• ‘women bake cakes out of the unconscious
desire to give birth’
The advice to footwear salesmen
should be ‘Don’t sell shoes – sell
lovely feet’

Marketers must contend with small

changing segments of highly selective
buyers intent on receiving genuine value at
the lowest price
 All managers must become astute
analysts of Consumer motivation
and Behaviour

Three foundations for marketing decisions

• Experience
• Intuition
• Research
Enhancing Consumer Value-added

Marketers have to constantly innovate after

understanding their consumers to strip out
costs permanently by focusing on what
adds value for the customer and
eliminating what doesn’t.
 Individualised Marketing
• A very personal form of marketing that
recognises, acknowledges, appreciates and
serves individuals who become or are
known to the marketer.
• Data – based marketing; DM
• Customized marketing
 Variables involved in
understanding consumer
behaviour
• Stimulus – ads, products, hungerpangs
• Response – physical/mental reaction to the
stimulus
• Intervening variables – mood, knowledge,
attitude, values, situations, etc.
Overall Model of Consumer Behaviour
External Influences Decision Processes
Culture
Subculture
Demographics Problem Recognition
Social status
Reference groups Information Search
Family
Marketing Activities Self-Concept
& Alt Eval & Selection
Internal Influences Learning
Perception Outlet select &
Learning Purchase
Memory
Motives Postpurchase
Personalit Processes
yEmotions
Attitude
s
CONSUMER BEHAVIOR

DIMENSIONS OF CONSUMER
BEHAVIOR
 CONSUMER BEHAVIOR
• Consumer behavior is the study of how
people buy, what they buy, when they buy
and why they buy. It attempts to understand
the buyer decision making process, both
individually and in groups. It studies
characteristics of individual consumers such
as demographics, psychographics, and
behavioural variables in an attempt to
understand people's wants.
 Definition of CB
Consumer behavior is defined as the
behavior that consumers display in
searching for purchasing, using, evaluating
& disposing of products & services that
they expect will satisfy their needs
STAGES OF THE CONSUMER BUYING
PROCESS
Consumer buying decision process includes
six stages. They are:
• Problem Recognition
• Information Search
• Evaluation of alternatives
• Purchase Decision
• Purchase
• Post-Purchase Evaluation
 1. PROBLEM RECOGNITION

• Difference between the desired state and the

actual condition.

Example:
 By seeing a commercial for a new pair of shoes,
stimulates your recognition that you need a new
pair of shoes.
 Hunger stimulates your need to eat.
 2. INFORMATION SEARCH
• Internal Search:
--- Memory
• External Search:
--- Friends and Relatives
A successful information search leaves a buyer with
possible alternatives, the evoked set.

Example:
Hungry, want to go out and eat, evoked set is
 Chinese food
 Indian food
 Burger king
 3. EVALUATION OF ALTERNATIVES

• Need to establish criteria for evaluation,

features the buyer wants or does not want.
• Rank/weight alternatives.

Example:
If you want to eat something spicy, then
Indian food gets the highest rank etc…
 4. PURCHASE DECISION :
Choose buying alternative, includes
product, package, store, method of
purchase etc.

5. PURCHASE :
May differ from decision, time lapse
between purchase decision and the actual
purchase, product availability.
6. POST-PURCHASE EVALUATION :
It is the outcome Satisfaction or
Dissatisfaction. This can be reduced by
warranties, after sales communication etc.

Example:
After eating an Indian meal, you may
think that really you wanted a Chinese
meal instead.
 TYPES OF CONSUMER BUYING
BEHAVIOR :

There are four types of consumer buying

behavior, they are :
• Routine Response/Programmed Behavior
• Limited Decision Making
• Extensive Decision Making
• Impulse buying
 1. ROUTINE
RESPONSE/PROGRAMMED
BEHAVIOR

Buying low involvement, frequently

purchased, low cost items.

Examples :
Soft drinks, snack foods, milk etc.
 2. LIMITED DECISION
MAKING
• Buying product occasionally.
• That is when you need to obtain
information about unfamiliar brand in a
familiar product category.

Example:
Clothes--know product class but not the
brand.
 3.EXTENSIVE DECISION
MAKING :
Complex high involvement,
unfamiliar, expensive and infrequently
bought products.
Spend a lot of time seeking
information and deciding. High degree of
risk.

Example:
Cars, homes, computers, education.
 4. IMPULSE BUYING :
No conscious planning.
The purchase of the same product does not
always elicit the same Buying Behavior. Product
can shift from one category to the next.
For example:
Going out for dinner for one person may be
extensive decision making (for someone that does
not go out often at all), but limited decision
making for someone else. The reason for the
dinner, whether it is an anniversary celebration, or
a meal with a couple of friends will also determine
the extent of the decision making.
 Segmentation
The process of market segmentation.
1. Identify existing and future wants in the current
market
• Marketers must understand the changing needs of
customers.
• This process helps to know whether the customer is
satisfied with the existing products or not.
• It also helps to test the company’s new and
innovative concepts.
2. Examine the attributes that distinguish among
segments.
• In this process, marketers separate different types of
wants into similar categories.
• The separation may be done on the basis of product
features, lifestyle or behavior.
3. Evaluate the proposed segment attractiveness on the basis
of measurability, accessibility and size
• Segments selected in second step should be analyzed for measurability,
accessibility, substantial, actionable and differentiability.
• The further plans of the company depend on the result of this process.
 Bases for Segmenting Consumer Markets

1. Geographic segmentation: Dividing the

market into different geographical units such as
nations, states, regions, cities or neighborhoods
2. Demographic Segmentation: In this
segmentation the market is divided into groups on
the basis of variable such as age, family size,
family life-cycle, gender, income, occupation,
education, religion, race, generation, nationality
and social class.
Some factors used for demographic
segmentation are:
• Age and life cycle stage – The needs and wants of
consumers change with age. On the basis of age, a
market can be divided into four classes, children,
young, adults and old. A good marketing manager
should understand the age group for which the
product is most suitable and then plan his
marketing, pricing and advertising policy
accordingly.
For example, Hindustan Unilever launched
Pepsodent Kids for small children.
• Gender – Segmentation on the basis of gender is
useful in clothing, hair-styling, cosmetics and
magazines.
• Income – Segmentation on the basis of income is
useful for products and services like automobiles,
clothing, cosmetics and travel.
 Psychographic Segmentation
• VALS ("Values, Attitudes And Lifestyles") is a proprietary
research methodology used for psychographic market
segmentation.
• VALS was developed in 1978 by social scientist and consumer
futurist Arnold Mitchell and his colleagues at SRI International.
• Mitchell used statistics to identify attitudinal and demographic
questions that helped categorize adult American consumers into
one of nine lifestyle types: survivors (4%), sustainers (7%),
belongers (35%), emulators (9%), achievers (22%), I-am-me
(5%), experiential (7%), societally conscious (9%), and
integrated (2%). The questions were weighted using data
developed from a sample of 1,635 Americans and their partners,
who responded to an SRI International survey in 1980.
 VALS 2
• VALS2 puts less emphasis on activities and interests and more on a
psychological base to tap relatively enduring attitudes and values.
• VALS2 has two dimensions. The first dimension –Self orientation, determines
the type of goals and behaviours that individuals will pursue, and refers to
pattern of attitudes and activities which help individuals reinforce, sustain or
modify their social self-image. This is a fundamental human need.
• The second dimension- Resources-reflects the ability of individuals to pursue
their dominant self orientation that includes full range of physical,
psychological, demographic and material means such as self-confidence,
interpersonal skills, inventiveness, Intelligence, eagerness to buy, money,
position, education, etc.
• According to VALS2, a consumer purchases certain products and services
because the individual is a specific type of person. The purchase is believed to
reflect a consumer’s lifestyle, which is a function of self –orientation and
resources.
3. Psychographic Segmentation: In this segmentation, buyers
are classified into different groups on the basis of life-style or
personality and values.
• People belonging to the same demographic group may show
very different psychographic characteristics.
• Some factors used for psychographic segmentation are
a) Life-style: Different people have different life-styles and the
products they use shows their life-style.
– One of the most common psychographic profiling scheme is the VALS,
developed by SRI International, INC.
– VALS defined adult consumers into eight segments. They are people with high
resources
1. Innovators: They are successful, sophisticated, active, take charge. They are
people with high self-esteem and rich resources. They are business leaders and
interested in growth, innovation and change. They are image conscious.
2. Thinkers: They are mature, satisfied, comfortable, thoughtful people who value
order, knowledge and responsibility. Favor durability, functionality, and value
in products.
3. Achievers: They are successful career and work oriented
people who want a controlled life. They prefer predictability
and stability over risk. They are committed to work and
family. Favor premium products that demonstrate success to
their peers.
4. Experiencers: They are young, enthusiastic, impulsive,
disloyal, disobedient. They want variety and excitement.
They like variety and enjoy new things. They like exercise,
sports, outdoor recreation and social activities.
3. People with lower resources :
4. Believers: They are traditional people with high commitment to
family, community and nation. They have a moral code. They prefer
American products and established brands.
5. Strivers: They look for motivation and approval from others. They are
unsure of themselves and have less economic, social and psychological
resources. Trendy and fun loving people who are resource constrained.
Favor stylish products that emulate the purchase s of those with great
material wealth.
6. Makers: They are practical people who have constructive skills and
value self-sufficiency. They are happy with their families and have
little interest outside their family. Favor american made products with
a practical and functional purpose.
7. Survivors: They are poorly educated, low skilled and concerned about
their health. They satisfy urgent needs of the present. They are
concerned for security and safety. They are cautious consumers. They
are loyal to favorite brands.
• VALSTM
INNOVATORS
High Resources
High Innovation
Primary Motivation
Ideals Achievement Self-Expression

THINKERS ACHIEVERS EXPERIENCERS

BELIEVERS STRIVERS MAKERS

Low Resources
Low Innovation
SURVIVORS
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Innovators
– Resources: highest
– Motivation: combination of all three
– Leading edge of change
– Image as expression of taste,
independence, character
– Finer things in life
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Thinkers
– Resources: high
– Motivation: ideals
– Mature, responsible
– Well-educated professionals
– Well-informed
– Rational decision makers
– Open to new ideas and social change
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Believers
– Resources: low
– Motivation: ideals
– Conservative, predictable
– Favor American products
– Modest incomes
– Lives centered on family, church,
community, nation
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Achievers
– Resources: high
– Motivation: achievement
– Successful, work-oriented
– Satisfaction from homes and families
– Conservative, respect status quo
– Favor established products that show
off their success
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Strivers
– Resources: low
– Motivation: achievement
– Values similar to Achievers
– Style is important—trying to
emulate Achievers
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Experiencers
– Resources: high
– Motivation: self-expression
– Youngest segment
– High energy—physical and social
activities
– Spend heavily on clothing, fast food,
and music
– Like new products and services
 Investigate Segmentation Bases
cont.

• VALS Consumer Segment: Makers

– Resources: low
– Motivation: self-expression
– Practical, self-sufficient
– Focus on familiar: family, work,
physical recreation
– Little interest in broader world
 Investigate Segmentation Bases
cont.
• VALS Consumer Segment: Survivors
– Resources: lowest
– Motivation: doesn’t fit with any of
the three, resources too low
– Oldest segment
– Tend to be brand loyal
b) Personality: Marketers use
personality variables to segment the
market. They promote their products
with brand personality that resembles
consumer personalities.
c) Social class: It has a strong
influence on preference in cars,
clothing, home furnishings, leisure
activities, reading habits, etc. Many
companies design products and services
for specific social classes.
4. In behavioral segmentation, buyers are divided into groups
on the basis of their knowledge or attitude towards the use of,
or response to a product.
• Some factors used for behavioral segmentation are
1. Occasions
2. Benefits
3. User status
4. Usage rate
5. Loyal status
6. Buyer readiness stage
1. Occasions: Buyers develop a need, purchase or use a product according to
occasion. For example, Tanishq offer schemes and promotions for purchasing
on Akshaya Truthiya.
2. Benefits: Buyers can be classified according to the benefits they are looking
for.
3. User status: Markets can be segmented into non-users, potential users, first
time users and regular users of a product. Marketing strategy for each
segment is different.
4. Usage rate: Markets can be segmented into light, medium and heavy product
users. Heavy users are less in number but responsible for a large part of total
consumption. Marketers like to attract one heavy user rather than many light
users. For example, textile brand Allan Paine offered 4 cotton trousers for Rs.
999. It wanted to earn profits from sales volume.
5. Loyal status: Consumers have different levels of loyalty for different
brands and stores. According to brand loyalty status, buyers can be
divided into four groups:
a) Hard core loyal: Such consumers buy only one brand all the time.
b) Split loyal: Such consumers are loyal to two or three brands.
c) Shifting loyal: Such consumers shift from one brand to another.
d) Switchers: Such consumers show no loyalty to any brand.
6. Buyer readiness stage: A market consists of buyers who are at different
stages of willingness to buy a product. Some are unaware of the product, some are
aware, some are informed, some are interested, some desire the product and some
plan to buy.
 The Black Box Model
ENVIRONMENTAL FACTORS BUYER'S BLACK BOX
BUYER'S
Marketing Environmental Buyer RESPONSE
Decision Process
Stimuli Stimuli Characteristics

Economic Attitudes Problem recognition

Product choice
Product Technological Motivation Information search
Brand choice
Price Political Perceptions Alternative evaluation
Dealer choice
Place Cultural Personality Purchase decision
Purchase timing
Promotion Demographic Lifestyle Post-purchase
Purchase amount
Natural Knowledge behaviour
 The Black Box Model
The black box model shows the interaction
of stimuli, consumer characteristics,
decision process and consumer responses.
It can be distinguished between
interpersonal stimuli (between people) or
intrapersonal stimuli (within people).
 The Black Box Model

The black box model is related to the black box

theory of behaviourism, where the focus is not
set on the processes inside a consumer, but
the relation between the stimuli and the response
of the consumer.
 The Black Box Model
The marketing stimuli are planned and
processed by the companies, whereas the
environmental stimulus are given by social
factors, based on the economical, political and
cultural circumstances of a society.
 The Black Box Model

The buyers black box contains the Buyer

Characteristics and the Decision Process,
which determines the buyers response.
.
 The Black Box Model
The black box model considers the buyers
response as a result of a conscious, rational
decision process, in which it is assumed that the
buyer has recognized the problem. However, in
reality many decisions are not made in awareness
of a determined problem by the consumer. Once
the consumer has recognised a problem, they
search for information on products and services
that can solve that problem
 The Black Box Model
The relevant internal psychological process that is associated
with information search is perception. Perception is defined
as "the process by which an individual receives, selects,
organises, and interprets information to create a meaningful
picture of the world". Consumers' tendency to search for
information on goods and services makes it possible for
researchers to forecast the purchasing plans of consumers
using brief descriptions of the products of interest
 Learning
• The process by which individuals acquire
the purchase and consumption knowledge
and experience that they apply to future
related behavior
• Marketers must teach consumers:
– where to buy
– how to use
– how to maintain
– how to dispose of products
– https://www.youtube.com/watch?v=2L8T5Y
Mc7t8
 Learning Theories

• Behavioral Theories • Cognitive Theories

– Based on observable – Learning based on
behaviors (responses) mental information
that occur as the result processing
of exposure to stimuli – Often in response to
– ( problem solving
https://www.youtube.co
m/watch?v=6o6JJIkam
VY
Surf Excel
advertisement)
 Discussion Question
• For Coca-Cola:
– How have they used behavioral theory in their
marketing?
– Cognitive theory?
– How have they built brand loyalty?
 weblink

Copyright 2007 by
Prentice Hall
 Elements of
Learning Theories
• Motivation (unfulfilled need leads to
motivation)
• Cues (Direct these motives)
• Response (Individual’s reaction to CUEs)
• Reinforcement (Specific response will
happen)
 Behavioral Learning Theories
• Classical Conditioning
• Instrumental Conditioning
• Modeling or Observational Learning
 A behavioral
learning theory
according to which a
stimulus is paired
Classical with another stimulus
Conditioning that elicits a known
response that serves
to produce the same
response when used
alone.
Models of Classical Conditioning
Figure 7-2a
Figure 7-2b
We now associate
this product with
strength.
 Strategic Applications of Classical
Conditioning
Basic Concepts

• Repetition • Increases the association

• Stimulus between the conditioned
generalization and unconditioned
• Stimulus stimulus
• Slows the pace of
discrimination
forgetting
• Advertising wearout is a
problem
PAYTM ADVERTISEMENT

https://youtu.be/8ltz4CPBPKY?
t=65
 Strategic Applications of Classical
Conditioning
Basic Concepts

• Repetition • Having the same response to

slightly different stimuli
• Stimulus • Helps “me-too” products to
generalization succeed
• Stimulus • Useful in product extensions
discrimination • Family branding
• Licensing
• counterfeiting
 Discussion Question
Stimulus Generalization
• How does AMUL use stimulus
generalization for their brands?
• Do you think it is effective?
• Should this be allowable?
• https://www.youtube.com/watch?v=xNWW
BEXXtLE
 Strategic Applications of Classical
Conditioning
Basic Concepts

• Repetition • Selection of a specific

stimulus from similar
• Stimulus
stimuli
generalization • This discrimination is the
• Stimulus basis of positioning which
discrimination looks for unique ways to
fill needs
• https://www.youtube.com/
watch?v=hSfZB4_N9Qk
 A behavioral theory of
learning based on a
trial-and-error process,
with habits forced as
Instrumental
the result of positive
(Operant)
experiences
Conditioning
(reinforcement)
resulting from certain
responses or
behaviors.
 Types of Reinforcement
• Positive (
https://www.youtube.com/watch?v=ex0iJHL
qxt0
)
• Negative – fear appeals (
https://www.youtube.com/watch?v=gisuyHk
QAVg
)
• Forgetting
•
A Model of Instrumental Conditioning
Figure 7-10
 Instrumental Conditioning and
Marketing
• Customer Satisfaction (Reinforcement)
• Reinforcement Schedules(Total, Fixed and
variable)
• Shaping (test driving by a car dealer)
• Massed versus Distributed Learning
(Timing)
 A process by which
individuals observe
how others behave
in response to
Observational
certain stimuli and
Learning
reinforcements.
Also known as
modeling or
vicarious learning.
 The consumer
observes a
positive response
by two teens.
Advertisement by
DOVE by taking
real time
customer’s
feedback
 Holds that the kind
of learning most
characteristic of
Cognitive human beings is
Learning problem solving,
Theory which enables
individuals to gain
some control over
their environment.
 Information Processing
• Relates to cognitive ability and the
complexity of the information
• Individuals differ in imagery – their ability
to form mental images which influences
recall
Information Processing and Memory
Stores - Figure 7.14
 Information Processing
• Movement from short-term to long-term
storage depends on
– Rehearsal
– Encoding
 Discussion Question
• How do advertisers drive consumers to
rehearse information?
• When does this work against the advertiser?
• Can you think of examples of
advertisements which drive you to
rehearse?
 Retention
• Information is stored in
long-term memory
– Episodically: by the order
in which it is acquired
– Semantically: according to
significant concepts
• Total package of
associations is called a
schema
 Table 7.1 Models of Cognitive Learning

Decision- Innovation Innovation

Promotional Tricompetent Making Adoption Decision
Model Model Model Model Process

Sequential Attention Cognitive Awarenes Awaren

Stages s ess Knowled
of Interest Affective Knowled Interest ge
Processing
Desire Evaluatio
ge Evaluati Persuasio
Action Conative Purchase
n Trial
on Decision
n
Postpurch Adoptio Confirma
ase n tion
Evaluatio
n
 Issues in Involvement Theory
• Consumer Relevance
• Central and Peripheral Routes to Persuasion
• Measure of Involvement
 Consumer Relevance
• Involvement depends on degree of personal
relevance.
• High involvement is:
– Very important to the consumer
– Provokes extensive problem solving
 Central and Peripheral Routes
to Persuasion
• Central route to persuasion
– For high involvement purchases
– Requires cognitive processing
• Peripheral route to persuasion
– Low involvement
– Consumer less motivated to think
– Learning through repetition, visual cues, and
holistic perception
Peripheral route to
persuasion
 Measures of Consumer Learning
• Recognition and Recall Measures
– Aided and Unaided Recall
• Cognitive Responses to Advertising
• Attitudinal and Behavioral Measures of
Brand Loyalty
 Brand Loyalty
• Function of three groups of influences
– Consumer drivers
– Brand drivers
– Social drivers
• Four types of loyalty
– No loyalty
– Covetous loyalty
– Inertia loyalty
– Premium loyalty
Harley-Davidson Has Strong Brand
Loyalty

weblink
 Brand Equity
• Refers to the value inherent in a well-
known brand name
• Value stems from consumer’s perception of
brand superiority
• Brand equity reflects learned brand loyalty
• Brand loyalty and brand equity lead to
increased market share and greater profits
Diffusion of Innovation
 Why does this happen?
Macromarketing issues
• Valuable resources are wasted which might have
been deployed towards more productive uses
• Products that might have helped people do things
more productively or attain higher levels in their
quality of life, fail to be used
• Successful products are those that become
culturally anchored.
Micromarketing issues
• Succesful new product development is an
important element in achieving long term
competitive superiority and profitability,especially
in low growth markets
• New product development plays an important role
in market leadership and profitability. Market
leaders normally have three times higher returns
than firms with lower market shares
• A successful new product can be the beginning of
a whole new company
 The value chain
Contemporary firms are being attacked by
competitively on every dimension and
from every direction. The only way to
survive this onslaught is to create a ‘value
chain’ to serve the customer, which will
serve to differentiate the successful firm
from its competitors and will provide
competitive superiority on the critical
attributes of importance to the consumer
 What is an innovation?

It is any idea or product perceived by

the potential adopter to be new. New
products are ideas, behaviour or
things that are qualitatively different
from existing forms
 Diffusion of innovation
• A process through which a new product
moves from initial introduction to regular
purchase and use
• A process by which an innovation (idea) is
communicated through certain channels
over time among the members of a social
system – Everett Rogers
 Diffusion variables
• Innovation
• Communication
• Time
• Social system
 Types of Innovations
• Continuous – modification or improvement of an
existing product
• Dynamically continuous – may involve the
creation of either a new product or the alteration of an
existing one ,but does not generally alter established
patterns of customer buying and product use
• Discontinuous – production of an entirely new
product that causes customers to alter their behaviour
patterns significantly
Innovations include both a hardware
and a software component

The hardware are the physical and

tangible aspects of a product. The
software is the understanding
consumers’ values and lifestyles
Likelihood of innovation success
• Relative advantage – new products that are most likely to
succeed are those that appeal to strongly felt needs
• Compatibility – degree to which the product is consistent with
existing values and past experience of the adopters
• Complexity – degree to which an innovation is
perceived as difficult to understand and use
• Trialability – the ability to make trials easy for new
products without economic risk to the consumer
• Observability – reflects the degree to which results from
using a new product are visible to friends and neighbours
 Types of Innovators
• Cognitive – problem solving, cerebral, new mental
experience
• Sensory – fantasy, day dreaming, hedonistic, thrill
seeking
• Monomorphic - consumers who are innovators for one
type of product
• Polymorphic – consumers who are innovators for
more than one type of product
New products in the market

Every year around 5000 new

products appear in the market.
However, most fail and only a few
remain ( around 20%). Products
which are innovative.
Characteristics that encourage rejection

• Value barrier
• Usage barrier
• Risk barrier
 Speed of diffusion
• Competitive intensity
• Reputation of the supplier
• Standardised technology
• Vertical coordination
• Resource commitments
Communication of new products
• Mass media
• WOM
• Homophily – degree to which pairs of individuals
who interact are similar in beliefs, education and social
status
• Heterophily – inconsistent with own beliefs and views
The Adoption – Decision Process
Everett Rogers

Knowledge

Persuasion

Decision

Implementation

Confirmation
 Adopter classes
• Innovators - 2.5%
• Early adopters – 13.5%
• Early majority – 34%
• Late majority – 34%
• Laggards – 16%
 Innovativeness
This is the degree to which an individual
adopts an innovation relatively earlier than
others
• Based on time of adoption
• Based on number of new product adoption
 Parameters for innovativeness
• Socio-economic variables
• Personality and attitude
• Communication variables
 Socio – economic variables
• Education
• Literacy
• Higher social status
• Upward social mobility
• Larger-sized units
• Commercial orientation
• Favourable attitude towards credit
• Specialized operations
 Personality and attitude
• Empathy • Ability to cope with
• Ability to deal in uncertainty
abstraction • Favourable attitude
• Rationality towards education
• Intelligence • Favourable attitude
• Favourable attitude towards science
towards change • High aspirations
 Communication variables
• Social participation • Exposure to interpersonal
• Interconnectedness with communication channels
the social system • Knowledge of innovations
• Cosmopoliteness • Opinion leadership
• Change agent contact • Belonging to highly
• Mass media exposure interconnected systems
 Polymorphism

The degree to which innovators and early

adopters for one product are likely to be
innovators for other products. Consumers
who are innovators for one product are
monomorphic. Consumers who are
innovators for more than one product are
polymorphic.