Buyer Decision Making Cycle

and Diffusion of Innovation

Theories, models, and future

directions

Notes compiled by Dr. Swati Nalawade

EFFECTIVE USE
OF CONSUMER
BEHAVIOR
PRINCIPLES FOR
DEVELOPING
WINNING
MARKETING
STRATEGIES
WINNERS TRY TO IDENTIFY WHERE AND HOW THE NEW
PRODUCT OR SERVICE WILL CHANGE THE LIVES OF ITS
CONSUMERS.

AND, THIS MEANS...

HOW A PRODUCT IS DEVELOPED SHOULD BE LESS A

FUNCTION OF ITS TECHNICAL POSSIBILITIES AND MORE A
FUNCTION OF ITS UTILITY TO CONSUMERS.
 HOW TO DECIDE UPON
PROVIDING THIS UTILITY?

THE BUYER UTILITY MAP

By W. Chan Kim & Renee Mauborgne….
 THE SIX STAGES OF THE BUYER EXPERIENCE CYCLE

PURCHASE DELIVERY USE SUPPLEMENTS MAINTE DISPO

NANCE SAL

Consumer
Productivity

Simplicity THE
SIX
Convenience UTI-
LITY
LEV
Risk ERS

Fun &
image

Environmental
friendliness
 •Why do people buy
THE SIX STAGES OF THE BUYER
EXPERIENCE CYCLE
these products
PURCH DELIV USE SUPPLEM MAI DIS •What is it that they like
ASE ERY ENTS NTE PO
NAN SA in these products?
Consum
er
CE L •Why would people buy
Product A given brand in these
ivity
Simpli T categories?
city H •What was the
Conveni
E INNOVATION in these
ence SI categories?
X
Ris
k UT
I-
Fun & LI
image TY
LE
VE
Environ RS
mental
friendline
ss
Uncovering the Buyer Experience Cycle

The Buyer Experience Cycle

Purchase Delivery USE Supplements Maintenance Disposal

DOES THE
HOW LONG HOW LONG PRODUCT DO YOU DOES THE DOES USE
DOES IT TAKE DOES IT REQUIRE NEED
PRODUCT OF THE
TO FIND THE TAKE TO TRAINING OR OTHER
REQUIRE PRODUCT
PRODUCT YOU GET THE EXPERT PRODUCTS EXTERNAL CREATE
NEED? PRODUCT ASSISTANCE? AND MAINTENAN WASTE
DELIVERED? SERVICES CE? ITEMS?
IS THE PLACE IS THE TO MAKE
OF PURCHASE HOW PRODUCT HOW EASY HOW EASY
THIS
ATTRACTIVE DIFFICULT IS EASY TO PRODUCT IS IT TO IS IT TO
AND IT TO STORE WHEN WORK? MAINTAIN DISPOSE
ACCESSIBLE? UNPACK AND NOT IN USE? & UPGRADE OF THE
INSTALL THE IF SO, HOW THE PRODUCTS
HOW RAPIDLY HOW
NEW COSTLY
CAN YOU EFFECTIVE PRODUCT ?
PRODUCT? ARE THEY?
MAKE A ARE THE
PURCHASE? PRODUCT’S
FEATURES &
FUNCTIONS?
TOUCH YOUR CUSTOMERS……
--BILL GATES IN
Business @ Speed of Thought

EDDIE BAUER’S ONLINE

CATALOG ENABLES A
CUSTOMER TO POST HIS
NAME, HIS SIZE, AND A
WISH LIST OF
PRODUCTS HE’D LIKE
SO THAT HIS FRIENDS
AND FAMILY CAN BUY
HIM GIFTS HE WANTS.
INCREASE PROFITS
FROM CUSTOMER
RELATION-SHIPS

Acquire new customers- Increase the number of

people who use a product or service

Enhance profitability of existing customers- Motivate

people to engage in behaviors that generate higher
returns.

Extend duration of customer relationships-

Maintain enhanced behavior for a longer time.
USE VALUE EXCHANGE:
RELATIONSHIP BETWEEN FINANCIAL INVESTMENT A COMPANY
MAKES IN PARTICULAR CUSTOMER RELATIONSHIPS AND THE
RETURN THAT CUSTOMERS GENERATE BY THE SPECIFIC WAY
THEY CHOOSE TO RESPOND TO THE COMPANY’S OFFERING.

COMPANIES NEED TO IDENTIFY THE CUSTOMERS THAT HAVE

- THE HIGHEST PROFIT-IMPROVEMENT POTENTIAL,
-USE DATABASES TO UNDERSTAND THE SPECIFIC NEEDS OF THOSE
SUB SEGMENTS, AND
-TAKEADVANTAGE OF FLEXIBLE MANUFACTURING & DELIVERY
TO PROVIDE COST-EFFECTIVE OFFERINGS TAILORED TO EACH SUB-
SEGMENT .
-OFFERINGS SUCH PRODUCT FEATURES, PRICE DISCOUNTS,
PRODUCT WARRANTY ETC.
 CONSUMER
LEARNING AND
BRAND EQUITY

WHAT OSSELAER & ALBA HAVE TO SAY IN THEIR RESEARCH

FINDINGS……………...
CONSUMERS UNDERGO A LEARNING PROCESS THAT GIVES
IMPORTANCE TO BRAND EQUITY AT THE EXPENSE OF QUALITY
DETERMINING ATTRIBUTES.

SINCE PURCHASE DECISIONS ARE BASED ON PREDICTIONS OF

PRODUCT PERFORMANCE, CONSUMERS BASE THEIR
PREDICTIONS ON CERTAIN PRODUCT CUES LINKING IT TO THE
BRAND EQUITY.
 CONSUMERS VALUE BRAND CUES

BRAND CUES BLOCK THE LEARNING OF QUALITY-

DETERMINING ATTRIBUTE CUES

THIS IS AN ALTERNATIVE APPROACH TO UNDERSTAND

PRODUCT EVALUATION & CHOICE

IN ORDER TO UNDERSTAND THE VALUE

CONSUMERS PLACE ON PRODUCT CUES IT IS
HELPFUL TO UNDERSTAND HOW CONSUMERS
LEARN.
 Original Theorists

• Gabriel Tarde (1903)

– S-shaped curve for diffusion processes

• Ryan and Gross (1943): adopter categories

– Innovators
– Early adopters
– Early/Late Majorities
– Laggards
 Original Theorists
• Katz (1957) :
– media  opinion leaders  opinion followers

• Everett M. Rogers
Diffusion of Innovations (1962-95)
– the process by which an innovation is
communicated through certain channels over
time among the members of a social system
• think of an innovation in Mobile Apps category

• describe different groups of students in your institute who

would respond early and favorably, as well as later and
unfavorably

• what are the differences between these groups?

• how could you use this information to market the innovation

to them more effectively?
The S Shaped Curve
•Why do people buy these products
•What is it that they like in these
products?
•Why would people buy A given brand in
these categories?
•What was the INNOVATION in these
categories?
Uncovering the Buyer Experience Cycle

The Buyer Experience Cycle

Purchase Delivery USE Supplements Maintenance Disposal

DOES THE
HOW LONG HOW LONG PRODUCT DO YOU DOES THE DOES USE
DOES IT TAKE DOES IT REQUIRE NEED
PRODUCT OF THE
TO FIND THE TAKE TO TRAINING OR OTHER
REQUIRE PRODUCT
PRODUCT YOU GET THE EXPERT PRODUCTS EXTERNAL CREATE
NEED? PRODUCT ASSISTANCE? AND MAINTENAN WASTE
DELIVERED? SERVICES CE? ITEMS?
IS THE PLACE IS THE TO MAKE
OF PURCHASE HOW PRODUCT HOW EASY HOW EASY
THIS
ATTRACTIVE DIFFICULT IS EASY TO PRODUCT IS IT TO IS IT TO
AND IT TO STORE WHEN WORK? MAINTAIN DISPOSE
ACCESSIBLE? UNPACK AND NOT IN USE? & UPGRADE OF THE
INSTALL THE IF SO, HOW THE PRODUCTS
HOW RAPIDLY HOW
NEW COSTLY
CAN YOU EFFECTIVE PRODUCT ?
PRODUCT? ARE THEY?
MAKE A ARE THE
PURCHASE? PRODUCT’S
FEATURES &
FUNCTIONS?
Diffusion of Innovation

Products tend to go through a life cycle.

Initially, a product is introduced. Since the product is not well known
and is usually expensive (e.g., as microwave ovens were in the late
1970s), sales are usually limited.

Eventually, however, many products reach a growth phase—sales

increase dramatically. More firms enter with their models of the product.

Frequently, unfortunately, the product will reach a maturity stage where

little growth will be seen.

Some products may also reach a decline stage, usually because the
product category is being replaced by something better. (typewriters)

The product life cycle is tied to the phenomenon of diffusion of

innovation.
.

When a new product comes out, it is likely to first be

adopted by consumers who are more innovative than
others—they are willing to pay a premium price for
the new product and take a risk on unproven
technology.

It is important to be on the good side of innovators

since many other later adopters will tend to rely for
advice on the innovators who are thought to be more
knowledgeable about new products for advice.
At later phases of the PLC, the firm may need to modify its market
strategy. For example, facing a saturated market ,Dettol is asking
it’s consumers to use Dettol as an after wash for kids nappies,
clothes, cleaning floors – as disinfectants and also in bathing water
etc.
It is sometimes useful to think of products as being either new or
existing.

Many firms today rely increasingly on new products for a large

part of their sales.

The diffusion of innovation refers to the tendency of new products,

practices, or ideas to spread among people.

Usually, when new products or ideas come about, they are only
adopted by a small group of people initially; later, many
innovations spread to other people.
The bell shaped curve frequently illustrates the rate of adoption
of a new product. Cumulative adoptions are reflected by the S-
shaped curve. The saturation point is the maximum proportion
of consumers likely to adopt a product.
In the case of refrigerators in the India, the saturation level is
nearly one hundred percent of households in urban areas in ABC
type of SECs; but it well be below that for TV or DVDs etc.

ATM cards spread relatively quickly. Since the cards were used
in public, others who did not yet hold the cards could see how
convenient they were. Although some people were concerned
about security, the convenience factors seemed to be a decisive
factor in the “tug-of-war” for and against adoption.

What about services like Whats App ? Payment of bills through

net or mobile?
The case of credit cards was a bit more complicated and
involved a “chicken-and-egg” paradox.

Accepting credit cards was not a particularly attractive option

for retailers until they were carried by a large enough number
of consumers.

Consumers, in contrast, were not particularly interested in

cards that were not accepted by a large number of retailers.
Thus, it was necessary to “jump start” the process, signing up
large corporate accounts, under favorable terms, early in the
cycle, after which the cards became worthwhile for retailers to
accept.
Innovations come in different degrees.
A continuous innovation includes slight improvements over
time. Very little usually changes from year to year in
automobiles, and even automobiles of the 1990s are driven much
the same way that automobiles of the 1950 were driven.

A dynamically continuous innovation involves some change

in technology, although the product is used much the same way
that its predecessors were used—e.g., jet vs. propeller aircraft.

A discontinuous innovation involves a product that

fundamentally changes the way that things are done—e.g., the
fax and photocopiers. In general, discontinuous innovations are
more difficult to market since greater changes are required in the
way things are done, but the rewards are also often significant.
Several factors influence the speed with which an innovation
spreads. One issue is relative advantage (i.e., the ratio of risk or
cost to benefits). Some products, such as cellular phones, fax
machines, and ATM cards, have a strong relative advantage.
Other products, such as automobile satellite navigation systems,
entail some advantages, but the cost ratio is high.

Lower priced products often spread more quickly, and the extent
to which the product is trialable (farmers did not have to plant all
their land with hybrid corn at once, while one usually has to buy a
cellular phone to try it out) influence the speed of diffusion.
Finally, the extent of switching difficulties influences speed—
many offices were slow to adopt computers because users had to
learn how to use them.
Some cultures tend to adopt new products more quickly than others,
based on several factors:

•Modernity: The extent to which the culture is receptive to new things.

In some countries, such as Britain and Saudi Arabia, tradition is greatly
valued—thus, new products often don’t fare too well. The United States,
in contrast, tends to value progress.

•Homophily: The more similar to each other that members of a culture

are, the more likely an innovation is to spread—people are more likely to
imitate similar than different models. The two most rapidly adopting
countries in the World are the U.S. and Japan. While the U.S.
interestingly scores very low, Japan scores high.

•Physical distance: The greater the distance between people, the less
likely innovation is to spread.
•
Opinion leadership: The more opinion leaders are valued and
respected, the more likely an innovation is to spread. The style of
opinion leaders moderates this influence, however. In less
innovative countries, opinion leaders tend to be more conservative,
i.e., to reflect the local norms of resistance.
It should be noted that innovation is not always an unqualifiedly
good thing. Some innovations, such as infant formula adopted in
developing countries, may do more harm than good. Individuals
may also become dependent on the innovations. For example, travel
agents who get used to booking online may be unable to process
manual reservations.

Sometimes innovations are disadopted. For example, many

individuals disadopt cellular phones if they find out that they don’t
end up using them much or that the radiations might cause cancer.
Rogers’ (1995) Diffusion of Innovation
 Rogers’ (1995) Diffusion of Innovation
Stages of adoption:
Awareness - the individual is exposed to the innovation but
lacks complete information about it

Interest - the individual becomes interested in the new idea

and seeks additional information about it

Evaluation - individual mentally applies the innovation to

his present and anticipated future situation, and then decides
whether or not to try it

Trial - the individual makes full use of the innovation

Adoption - the individual decides to continue the full use of

the innovation
 What should a Marketing &
Communication Specialist therefore
know?
Midgley & Dowling (1978) : Contingency model.
 Factors affecting diffusion
• Innovation characteristics
• Individual characteristics
• Social network characteristics
• Communication possibilities
• Cultural disposition to adoption
• Category Compatibility

THESE FACTORS TOGETHER DETERMINE THE NEED

OF THE PRODUCT AND DRIVE TOWARDS PURCHASE