Social Influences and Innovations

TASMANIAN SCHOOL OF BUSINESS AND ECONOMICS Lecture 9 Social Influences Chapter 9 Social influences Chapter 12 Innovations Learning objectives-Chapter 9 & 12 1.Understand the types, characteristics and effects of reference groups. 2.Discuss the importance of word -of -mouth and the situation when peer recommendations are important . 3.Be aware of the role of opinion leaders, both online and offline, in shaping the behaviour of others in the marketplace. 4.Describe how innovations can be classified. 5.Understand the concept of diffusion of innovation and how curves relate to the product life cycle. 6.Outline the main factors that affect adoption, resistance and diffusion, and show how marketers can use these knowledge. What is a Group? Two or more individuals who share a set of norms, values, or beliefs , and have certain implicitly or explicitly defined relationships which make their behaviour interdependent. GROUPS - We are active in - We belong to - We want to belong to - We avoidPROVIDE -Information - Rewards - IdentityINFLUENCE -Purchases - Consumption - Communication Reference Groups Reference group A group whose presumed perspectives or values are being used by an individual as the basis for his or her behaviour psychologically significant set of people with whom individuals compare themselves for guidance in developing their own attitudes, knowledge and/or behaviours. (Hoyer et al, 2018, 318) Aspirational reference groups Positive attraction: strong influence on some products Dissociative reference groups Groups which consumers dont identify with and wish to avoid association Characteristics of Reference Groups (I) Degree of contact Larger groups generally have less contact Primary groups generally have frequent interpersonal contact Secondary groups generally have limited interpersonal contact Formality Homophily(similarity among group members) Attractiveness Desirability of being member Either positive or negative Characteristics of Reference Groups (II) Density Degree of identification Tie-strength The extent to which a close, intimate relationship connects people Often characterised by frequency of contact Reference Groups Affect Consumer Socialisation Consumer socialisation: the process by which we learn to become consumers People as socialising agents parents, friends Media and marketplace as socialising agents TV programs, movies, music, products Reference group influences key terms Conformity-the tendency to behave in an expected way; to be like relevant and significant others Can be a powerful influence even in situations where others are not significant Solomon Asch experiments Norms -collective decision about what constitutes appropriate behaviour; general expectations about behaviours; often communicated non- verbally Social identity The component of the individuals self -concept that is obtained from their knowledge of belonging to a particular social group , along with the value and emotional significance attached to group membership How does group influence work? Informational influence Behaviours and opinions of reference groups are used as potentially useful pieces of information Normative influence (utilitarian influence) When an individual fulfils group expectations to gain a direct reward or avoid a punishment Identification influence (value-expressive influence) When an individual uses perceived -group norms and values as a guide for their own attitudes or values Informational Influence Normative Influence Identification Influence Degree of reference group influence Marketing strategies based on reference-group influences Personal selling strategies Asch phenomenon Socio-metric stars -likeable/attractive people (relates to opinion leaders more soon) Advertising strategies All three types of reference group influences are used by advertisers: informational (use as information) normative (to avoid/gain) identification (aspire to join) Opinion leadership Opinion leaders: An individual who has greater long-term involvement with a product category Product -or activity -specific Broader range of social contacts than normal Function primarily through interpersonal communications and observation Higher levels of exposure to relevant media Similar demographic characteristics to the group Market mavens opinion leaders across many products and shopping in general Mass communication information flows Quester et al. 2014, Figure 14.7 Mass communication information flows Marketing strategy and opinion leadership Identifying and targeting opinion leaders: Product sampling Retailing/personal selling Advertising to encourage and simulate opinion leadership Innovations Diffusionis the macro process concerned with the spread of a new product (and innovation) from its source to the consuming public Adoptionis a micro process that focuses on the stages through which an individual consumer passes when deciding to accept or reject a new product The process of diffusion of innovationis a group phenomenon. Defining Innovation 'an offering that is perceived as new by consumers within a market segment and that has an effect on existing consumption patterns.' An innovation can be a(n): product service attribute idea What is an example of a new service innovation that has changed your life for the better? Categories of innovations Categories of innovations Innovations and Co-creation Benefits of co-creation: Better fit with consumer needs Relatively fast and inexpensive idea gathering Strengthen relationships Higher demand due to an enhanced sense of psychological ownership Adoption of innovations Adoption The process by which individuals become committed to the continued use of a new product Rate of Adoption Refers to how long it takes for a new product to be adopted by members of a social system Globally, diffusion is becoming more rapid Key marketing objective for a new product is to gain wide acceptance as quickly as possible Penetration pricing (i.e. low introductory price) is used to assist adoption and reduce competition Fast adoption facilitates ongoing retailer support Sometimes slower adoption with a price skimming strategy is more financially attractive Stages in the adoption process Initial exposure to product innovation, which is somewhat neutral Awareness When consumers develop an interest in the product, they search for information about how the innovation can benefit themInformation Search Using this information, consumers mentally evaluate whether a new product will satisfy needs betterAttitude Formation Consumers use the product on a limited basisTrial Based on their trials and evaluation, consumers decide whether to continue using the product Adoption Stages in the adoption process (Cont.) Initial exposure to product innovation, which is somewhat neutral Awareness Consumers use the product on a limited basisTrial Using this information, consumers mentally evaluate whether a new product will satisfy needs betterAttitude Formation Based on their trials and evaluation, consumers decide whether to continue using the product Adoption Adoptions of an innovation over time Quester et al., 2014, Figure 14.14 Adoptions of an innovation over time Adopter Categories (Sequence and Proportion of Adopter Categories among the Population that Eventually Adopts) Innovators Percentage of Adopters by Category Sequence Early Majority Late Majority Early Adopters Laggards 2.5% of population Venturesome Very eager to try new ideas Acceptable if risk is daring More cosmopolite social relat io nship s Communicates with other innovators 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 o f o pinio n leaders Are ro le mo dels34.0% of population Deliberate Adopt new ideas just prior to the average time Seldo m ho ld leadership po sit io ns Deliberate for some time before adopting34% of population Skeptical Adopt new ideas just after the average time Adopting may be both an economic necessity and a reaction to peer pressures Innovations approached caut io usly16% of population Tradit io na l The last people to adopt an innovat ion Most localite in outlook Oriented to the past Suspicious of the new Diffusion 'the percentage of the population that has adopted an innovation at a specific point in time.' Where adoption reflects the behaviour of an individual, diffusion reflects the behaviour of a marketplace of consumers Pattern of adoption/diffusion curve S -Shaped = associated with risk Exponential = little risk, switching cost low Why do some goods diffuse quickly, while others lag? The S-Shaped Diffusion Curve The Exponential Diffusion Curve Product life cycle stages (PLC) The Product Life Cycle Curve Style and Substance Fad short product life cycle Fashion lengthier and potentially cyclical product life cycle Classic lengthy product life cycle How would you categorise: Hula hoops? Denim jackets? Havianas? Marketing Strategies and Diffusion Process Market segmentation Innovators and early adopters Diffusion-enhancement strategies Identify the obstacles to adopt innovation Example: trialability or observability, switching cost Enact a strategy to counteract Example: offer free trials, in -store demonstrations, price promotion Diffusion- enhancement strategies Summary Types and characteristics of reference groups Effects of reference groups on the consumption process: informational, normative and identification influences Role of opinion leader in social influence and its importance in the marketplace. Innovations categories of innovation Adoption and diffusion: processes for high -and low -effort adoption, different adopter groups, diffusion curve and diffusion enhancement strategies TASMANIAN SCHOOL OF BUSINESS AND ECONOMICS Thank You!