Diffusion of Innovations in Marketing Concepts - Essay Example

Marketing Concepts Institution Affiliation Diffusion of innovation and product concept Diffusion of innovation seeks to explain ways in which new ideas and technological advancement spreads to people of diverse origins and culture around the globe. Diffusion of innovation entails the process by which a new and unique innovation is brought and communicated to people of different social orientations. The process of innovation diffusion is anchored on four main elements. These are outlined as follows: I. Innovation itself. II. Communication channels III. Time IV. Social system. The process of diffusion of innovation heavily relays on human capital. Intensive human capital must be invested to ensure the spread and consequent acceptance of any product. Innovation must be widely accepted in order to ensure the innovation is self-reliant and that it can sustain itself in the long run. The diffusion of innovation and its subsequent acceptance as a process is not universal. This process varies from one product to another and or from one service to another. Some products or service offerings gain quick acceptance, and the rate of diffusion is fast and rapid. For example, a color TV set in India continent took considerably a long period to undergo the process of product diffusion, but for the satellite television set technology, the rate of diffusion process was notably was very high. Notably also was cordless telephone technology that took a long time to get diffused into Indian homes, but the cell phones got readily accepted by all and diffusion was very fast. Thus, all products or services that are new do not possess the same ease and potential for consumer acceptance. Diffusion of any given innovation and its subsequent adoption is significantly impacted by socio-economic, cultural, technological as well as legal factors. It’s also significantly influenced by individual determinants like psychological variables and demographics. These are all forces in most cases uncontrollable by the marketer. There are also more relevant effects, related to innovation product/ or service that constitute what are called controllable, and which are wholly in the hands of the marketer. This could be in the form of marketing communication or interpersonal communication, etc. The marketer could use it in a manner that facilitates faster acceptance of the innovative offer. There are also certain features that an innovation has that can influence the adoption and diffusion and process. There are certain service and product features that affect the diffusion process and can have an impact on consumer acceptance of the new product and services. The five main factors that can impact on the diffusion process, and the degree of adoption are as follows; a) Relative advantage The relative benefit of the inventive product or service offering over already established products or services accelerates its rate of adoption by the target market. The degree to which customer perceive a new product or service as superior to similar existing products determines the relative advantage. A product or a service that provides an advantage over an already product offering is said to be greater than the existing market alternatives. Thus, the product is said to be great in terms of value as compared to other market products. b) Compatibility: The compatibility of the inventive product and service offering with the current backgrounds, behavior and routine patterns of consumers also affects its acceptance by the public. A product’s or service’s compatibility measures how closely it relates to needs, value systems and norms, lifestyles, culture, etc. when the levels of compatibility are high rate diffusion is going to be high. Is going to be; and likewise lower the compatibility, the lower the diffusion rate. c) Complexity The levels of complexity in a commodity, buying and usage affect the rate diffusion process of the product. An established innovative of a product is quickly diffused when there exist an ease of understanding, buying and usage of a product. When it is easier to understand the usage a commodity, the more likely It’s going to be accepted and liked by consumers. However, it’s of paramount importance to note that technological complexity is a barrier to the diffusion process. Users tend to resist adoption of new products and innovation in the market because of fear of complexity in the purchase and consequent usage of the new product. High technological firms easily understand this d) Trialability: This is the ease with which the service or a product can be tried and tested. This aspect critically determines the rate of acceptance of a new product. When the degree of trialability is considerably high, the rate of the diffusion process is also high. This simply because it gives chances to try the product or a service. Evaluation is then done it on whether r to accept or reject the product. Trialability can be encouraged by providing free samples, or providing smaller packs and smaller-than-average sizes. e) Observability of a product This is the ease with which the a product commodity is observed. Observability aspect of the innovative product refers to the rate in which a product beneficial attributes can be imagined, seen as well as perceived by a willing consumer. A product that possess a high degree of observability has greater the chances of the innovativeness. There certain attributes that adversely affect diffusion rate of innovation and subsequently the adoption. These hindrances have been dealt with considerably by consumer researchers. These attributes could range from micro level product feature to the more macro, social, cultural, economic and technological factors. While product feature like compatibility, trialability, relative advantage enhance the speed of diffusion and adoption, the possibility of complexity in usage of innovative offerings, slows down the diffusion process. Innovations of a new product could also find market resistance from economic, social, cultural and technological forces. The innovativeness offering of a news product may fail to be compatible with social values and norms of the society, lifestyle of the community or even economic stratification The most primary hindrances to diffusion and subsequent acceptance include; risk, costs, usage and psychological factors. a) Usage The usage of a product as a hindrance to innovation diffusion and adoption is said to occur when the targeted market segment finds the product to incompatible to the existing and current usage and consumption norms. They hence find it difficult finds it hard to accept the product innovation and use it. Consumers tend find it to be incompatible with their existing behavioral norms. The hindrances tend to be more psychological, based on deeply rooted values and customs, perceptions, attitudes, and beliefs. This usually results in a behavior of product innovation non-acceptance as well as non-usage. A good example to this is that people are often unwilling to engage in online monetary based transactions businesses for fear of loss of privacy or occurrence of a fraud. b) Value Consumers in the market can also decline to accept an innovation if they feel inferior about the expected value of producer innovation. Consumers may hold the notion that the new innovation offering is the same as existing product innovation in the market and that the new innovation has nothing new or any better value to offer. An example to this is that while looking at mobile phone charges people tend compare the post-paid strategy with the pre-paid policy plans in terms of calling charges. A person may conclude that pre-paid plans are cheaper; this is despite their rental being considerably high. The lack of value of the producer may be due to the following factors I) Product or service doesn’t provide much utility over the existing market alternatives. II) The product or service is relatively expensive and is not worth its’ selling price. The customers’ perceptions of exaggerated inevitably take over the perception of innovation product utility benefit. In most markets, a value is always measured in terms of price. It’s important to note that price is an attractive issue compared to any benefits attached to the product. Price tends to appear more tangible as compared to product benefits. c) Risk Risks in the product market tend to be a significant barrier to the rate diffusion of an innovation. Consumers display unwillingness to the usage of an innovative product or service primarily because of fear of the risk taking action. There are about six types of risks a consumer is likely to face. These include i) The functional risk -will the product perform as anticipated by the consumers? ii) The physical risk – will the product use and or consumption result into a threat? iii) The social risk- shall the product cause a social embarrassment and shame? iv) The financial risk- shall the product really be worth its cost? v) The psychological risk -will the product innovation annoy consumers’ super-ego? vi) The time risks will the product innovation lead to wastage and misuse of time as one makes the purchase? It is important to note these risk barriers are a considerably significant obstacle to the process of diffusion and adoption of a product. Potential customers may fear to purchase, use or consume an innovative product, hence continue to patronize and use the existing market alternatives, instead of adopting new market offering ones due to fear of making a wrong decision by choosing the product. To overcome this challenge, marketing departments should use effective marketing communication e.g. traditional print media and audio visual and interpersonal communication e.g. word of mouth communication as well as use of opinion leadership d) Psychological factors Psychological factors play a tremendous role in preventing a consumer from accepting a new product or service in the market. Psychological factors commonly relate to an individual’s culture, perception, belief, attitude, lifestyle, values, etc. These factors may make a person to find the innovation to be threatening. But two most common threats are usually tradition barrier, and image barrier. This significantly affects the consumers’ perception towards a product. Marketing strategies that increase the diffusion of a product Marketing strategies encompasses all long-term and necessary activities in the field of firm marketing, mostly dealing with the analysis of formulation evaluation and selection of available marketed based strategies and plans. This contributes to market targets of the company and sales objectives. Effective marketing strategies that may be adopted by a firm to increase its sale revenues include; a) Competitor analysis b) Target market analysis c) Evaluation of cultural, political and economic environment d) Legal environment e) Technological environment Project management concepts Starbucks deals with sales in drip coffee drinks, espresso-based hot beverages salads, other cold and hot drinks. They also sell products such as sandwiches, snacks, pastries and Panini. The art of changing customer rejection to customer satisfaction then moving forward to make change customer satisfaction to customer product loyalty is crucial to any business organization. Consumers Loyal is the best marketing strategy in. The act of improving customer loyalty will shine as a marketing prospect of the firm and at the same time try to improve service delivery of the products. The list below could help Starbucks focus on their customers’ satisfaction. Just like most companies, practice some of these things some of the time in running of their marketing and customer retention strategies. Whether a business entity is small or large or sells products or services, these items can be adapted to your customers’ retention and management strategies. 1. Always try to thank customers for doing business with you organization. A pre-printed appreciation notes or cards to brand customers on a regular basis could serve this purpose. 2. Making sure that the firm stays in close contact with existing as well past clients on a consistent basis. This is by keeping their contacts. 3. The firm should concentrate to give the customer more than what they anticipate. This is the expected need and fills it. A marketer should answer a question before a customer asks it. Delivering more than what the targeted market expect is the most effective ways to gain customer product loyalty . 4. Learning how to listen to customers. A firm should take time just to listen to what their customers want. If they fail to volunteer any information, the company should ask for it from them. 5. Making sure attention is paid to the most visible things. Employees of the firm should mind their mannerism. They should use the words please and thank you often. Ensure time consciousness for meetings with clients. 6. Ensure promises made are realistic and consistent. Product concept The art of any product concept of any established product brand proposes that a consumer will prefer want to buy a product that possess a better quality, useful feature and one that is deemed to be of a high efficiency. The demand for Starbuck’s coffee as well as snack products are generally driven by factors which include demographic dynamics, world pricing of coffee, people’s attitude towards health, per capita coffee consumption and people disposable incomes. The coffee industry is very sensitive to the macroeconomic factors touch on households’ disposable incomes. During recession economic period, the fall in household disposable earnings due to the high unemployment rate as well as stagnant payments causes a downward movement on the revenue earnings and profit margins in the coffee industry. Another critical factor for analyzing the demand in the coffee industry is the per capita coffee consumption rate. This is a situation whereby an increase in coffee market rate increases the revenue earnings of coffee and snacks and fast food shops. The primary driver of this demand growth would be the increase in consumer disposable income earnings. The economy improves and consumers in the market start to ease their budgets constraints. This prime driver has a very positive effect on the market revenue earnings. The rate of consumption is anticipated to increase in the near future. A key plan and market strategy that Starbucks has religiously followed since its establishment is the art of product differentiation. Production of differentiators such as coffee beverages, premium production mix, locations and observable supreme market customer service delivery has resulted in building a strong , reputable and valued brand that can is be costly for competitors in the market. Starbucks Corporation has adhered to an astute strategy of tactical alliance and making of shrewd acquisitions. Starbucks Corporation did not follow the strategy of franchising model but operated mainly on company based stores and partnership with other firms in the global market. Starbucks Corporation has made some tremendous acquisitions. This includes bay bread that deals with premium food products, Teavana tea products, evolution fresh that solely deals with new juice products among other product brands. This strategy is mainly meant to use idea the product diversification. Another notable and very crucial strategic plan for Starbuck’s tremendous growth has been its global tactics of intensifying into key developed and developing global markets. Starbucks global diversity proved been highly successful exceeding 60 countries globally. These business strategies have enhanced a considerable competition advantage for Starbucks Corporation over its arch rivals and market competitors. Branding strategies of Starbucks Starbucks uses a very effective branding strategy. This has given it an edge over its market competitors and hence more market share. Having a coffee beverage product is the core reason that majority of consumers The most notable branding techniques used by Starbuck are; a) Core benefit. This is the basis or fundamental need that customers want. The utility derived by consumer in usage of the product b) Provision Generic product. This is a type of a product containing those features that are essential for it to function. c) Offering expected the product. This are set to product or services that consumers expects whenever they purchase a product. d) Provision of augmented product. There include additional features and characteristics and benefits that serve the purpose of product differentiation from the similar product offered by competitors. e) The use of Starbucks card. This is a supplementary service provision by Starbuck through which customers can buy coffee drinks without necessarily paying out in cash. This is accompanied by an accumulation of customer reward points with the customer’s increase in consumption levels. The above marketing and branding strategies have increased the market share of the Starbucks in the competitive beverages industry. Their effective product differentiation has enhanced their brand loyalty and product preference against their rival products. This has gone a long way in increasing the sale profit margin of the Starbucks. The disadvantages of the branding strategies used by Starbucks are very minimal. They include a high cost of marketing to entice customers and regular branding and rebranding of their product. The high cost incurred to get new customers and increase the size of market share may prove to be unproductive in the long run. When most of the profit revenues are channeled to this undertaking, the firms’ growth may decline. Regular branding and rebranding of the product may create a state of confusion among the existing market share segment and hence decrease in sales turnover. In order to ensure an efficient market organization Starbucks should transfer its core competencies and capabilities round counties and then slowly concentrate on building profit maximization prime drivers in these countries as it continues its global expansion in an organized manner. Starbucks has notably significant growth potential and tremendous opportunities in Fresh Juice and tea products mix. Starbucks should concentrate on building up these products in line with their coffee products that are their prime products. As consumer product preferences, tastes, and lifestyle migrates to more beverages options and snacks, Starbucks should align its menu’s and expand to provide it with healthier product combination. Starbuck products are in product definition Phase. In this stage of product development, a firm it tends to justify a whole range of business activities that it needs to take to the market. These include building and establishing new products to cases justify the firm investment. The main stages of knowledge management in this process are elicitation, analysis, specification and validation of products. Penetration pricing technique and skim pricing technique are pricing strategies commonly used by firms when launching new brands. In price skimming, the companies set the price of the commodity at a relative high price at the beginning of a product sale, and then reduce the price of the product as time goes. The core aim and objective of price skimming is to capture consumers in the early stage of product development with a primary aim of taking advantage of the monopolistic opportunity. The main advantages of price skimming include. I. High-profit margins. A firm makes tremendous profits margins as the top market segment is willing to pay high price. II. It allows the firm to discover its sunk cost. III. The strategy helps to capture the a the attention of consumers in the market Disadvantages of price skimming include; I . The technique is only useful where the product has in II. Stock turn rate can be very slow for products under the skimming strategy. III. It results in a low rate of diffusion and adaptation of a product. The primary aim of penetration pricing is to increase the market share of a product. Price penetration strategy involves setting the price at a relatively low start price. This price is usually lower than the expected rate. Its main aims to attract customers to the product. The advantages of price penetration technique include; I. Prevention of competition through the creation of price barriers. II. Sale volumes are likely to increase. III. It enhances the business to focus on minimizing unit related costs. IV. Makes product promotion effective Price penetration strategy has the following drawbacks I. The initial price creates expectations that the price will remain relatively in the long run. II. The strategy is likely to attract customer looking for bargain instead of customers who will become loyal to the brand. References 1. Evan, W. M., Black, G., and Innovation in Business Organizations: Some Factors Associated with Success or Failure of Staff Proposals, in Rowe, L. A., Boise, W. G., Edited by, Organizational and Managerial Innovation, Goodyear Publishing Company, Inc, (1973) 2. Gatignon, H., Robertson, T. S., “Technology Diffusion: An Empirical Test of Competitive Effects”, Journal of Marketing, Vol. 53, (1989) 3. Hagerstrand, T., “Innovation Diffusion as a Spatial Process”, Translated by A Pred., Chicago, Univ. of Chicago Press, (1963) 4. Johne, F. A., “Industrial Product Innovation, Organization and Management”, Croom Helm, (1985) 5. Porter ME. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors.The Free Press. Read More