CONSUMER
ADOPTION PROCESS
Adoption is an individual’s decision to become a regular user
of a product. Sequence of events beginning with consumer awareness of a new
product leading to trial usage and culminating in full and regular use of the
new product. Over time the adoption process resembles a bell curve formed by
innovators, early adopters, the majority of consumers, late adopters, and
laggards.
An innovation is any good,
service, or idea that is perceived by someone as new. The idea may have a long
history, but it is an innovation to the person who sees it as new. Innovations
take time to spread through the social system. Rogers defines the innovation
diffusion process as “the spread of a new idea from its source
of invention or creation to its ultimate users or adopters.”
The consumer-adoption process focuses on the mental process
through which an individual passes from first hearing about an innovation to
final adoption. Adopters of new products have been observed to move through
five stages:
1. Awareness -The consumer becomes aware of the innovation but lacks
information about it.
2. Interest-The consumer is stimulated to seek information about the
innovation.
3. Evaluation -The consumer considers whether to try the
innovation.
4. Trial-The consumer tries the innovation to improve his
or her estimate of its value.
5. Adoption -The consumer decides to make full and regular use of the
innovation.
The new-product marketer should facilitate movement through
these stages. A portable electric dishwasher manufacturer might discover that
many consumers are stuck in the interest stage; they do not buy because of
their uncertainty and the large investment cost. But these same consumers would
be willing to use an electric dishwasher on a trial basis for a small monthly
fee. The manufacturer should consider offering a trial-use plan with option to
buy.
FACTORS
INFLUENCING THE ADOPTION PROCESS
People differ in their approach towards adopting a new
product. Some differ in adopting new fashion, some in adopting new appliances,
some doctors are hesitant to apply new medicines and still some farmers do not
apply new implements. This is called adoption culture. Once the customer buys
the product, they increase the use and then others follow. Here others means
are late adopters by nature. Let us categorize these customers into three units
1) One who are early adopters. They are very quick in their
response. These people are venture some and willing to try new ideas. In fact
they are innovators in life and early adopters.
2) Secondly Early Majority. They are very careful people and take
time to adopt things. They tend to collect information about the change or the
product, study carefully and then adopt on the basis of their merits.
3) The third ones are
late majority and traditionalists. They are the ones who adopt late and then use the product.
The following the main factors influence the customers
towards new product
INTRODUCTION
All products
and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal from market. During this period significant changes are made in the way that the product is behaving into
the
market i.e. Its reflection
in respect
of
sales
to
the
company that introduced it into the market. Since an increase in profits is the major
goal of a company that introduces a product into a market.
The understanding of a product’s life cycle, can help a company to understand and realize when it is time to introduce and withdraw
a product from a market, its position in the market compared to competitors, and the product’s success or
failure.
For a company to fully understand the above and successfully manage a product’s life cycle, needs to dev e l o p strategies and methodologies, some of which are discussed
later on.
PART 1: PRODUCT LIFE CYCLE MODEL
The product’s
life cycle - period usually
consists of five major steps
or phases: Product development, Product introduction, Product
growth, Product maturity and Product decline. These
phases exist and are applicable to all products
or services.
Fig. 1:
Product Life Cycle Graph
PRODUCT DEVELOPMENT PHASE
Product development
phase begins when a company finds and
develops a new product idea. This involves
transforming various pieces of information and converting them into a new product. A
product is usually undergoing several
changes involving a lot of money and time during development, before it is sent
to target customers through test markets. Those products
that survive the test market are then introduced into a real mmarket and the introduction phase of the product begins.
During the product development phase,
sales are zero and revenues
are negative.
It
is the
time of
spending with absolute no return.
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements
to getting it launch in such a way so that it will have maximum impact at the moment of sale.
A
good
example of such a launch
is
the
launch
of
“Windows XP” by Microsoft Corporation.
This period
can be described as a money
loss period compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick
but costly service requirements
are introduced. A company must be prepared to spent a lot
of money and get only a small proportion of that back.
In this phase
distribution arrangements are introduced. Having
the product in every counter
is very important and is regarded as an impossible challenge. Some companies avoid
this stress
by hiring external contractors or outsourcing the entire distribution arrangement. This has
the benefit of testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot
for something new and this will help a bit to minimize that sinkhole that was mentioned
earlier. Later the pricing policy should be more aggressive so that the product can become competitive.
Another strategy is that of a pre-set price believed to
be the right one to maximize sales. This however demands a very good knowledge of the market
and of what a customer is willing to
pay for a newly introduced product.
3. GROWTH PHASE
The growth phase offers
the satisfaction
of increasing
the sales in the market place. This is the appropriate timing to focus on increasing the market share. If the
product has been introduced first
into the market, (introduction into a “virgin”1 market or into an existing market)
then it is in a position
to gain market share relatively easily. A new growing market alerts the competition’s attention.
The company must
offer product extensions, services, warranty and try to differentiate them from the competitors ones. A frequent
modification process
of the product is an effective
policy to discourage competitors from gaining
market share by copying
or offering similar products.
Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the
use of external promotional
contractors to build awareness and interest in market.
This period
is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing
and discount policy are major
factors in gaining customer confidence. Good coverage in
all marketplaces is
worthwhile goal throughout the growth phase.
4. MATURITY PHASE
When the market becomes saturated with variations of the basic product, and all
competitors are represented in terms of an alternative product,
the maturity phase
arrives. In this phase market
share growth is at the expense
of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns from the product. A company that has achieved its market share goal
enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing
positioning into the marketplace.
During this period new brands are introduced even when they compete with the company’s
existing product and model changes are more frequent (product, brand, and model).
This is the time to extend the
product’s life.
Pricing and discount policies
are often changed
in relation to the competition policies i.e. pricing moves up and down accordingly with the competitors one and sales
and coupons are introduced in the case of consumer products.
Promotion and advertising
relocates from the scope of getting
new
customers,
to
the
scope
of
product
differentiation in terms of quality
and reliability.
The battle
of distribution continues using multi distribution channels2. A successful product maturity
phase is extended
beyond anyone’s timely expectations. A good example of this is
“Tide” washing powder, which has grown old, and it is still growing.
5. DECLINE PHASE
This is the time to start withdrawing variations of the product from the market that are
weak in their market position.
This must be done carefully since
it is not often apparent
which product variation brings in the revenues.
The prices must be cut and
promotion should be pulled back at a level that
will make the
product presence visible
and at the same time retain the “loyal”
customer. Distribution is narrowed.
The basic channel is should be kept efficient but alternative channels should be abandoned.
PART2: ANALYSIS OF PRODUCT LIFE CYCLE MODEL
There are some major product life cycle management techniques
that can be used to optimize a product’s revenues
in respect to its
position into a market and its life cycle. These techniques are mainly marketing
or management strategies that are used by
most
companies worldwide To comprehend
these strategies one must first make a theoretical analysis of the model of product life cycle.
In the mid 70’s the model of product life cycle described in “Part 1”, was under heavy
criticized by numerous authors. The reasons behind
this
criticism
are
described
below:
a. The shift changes
in the demand of a product
along a period of time makes the distinction of the product life cycle phase very difficult,
the duration of those almost
impossible to predict and the level
of sales of the product somewhat in the realm of
the imagination.
b. There are many products
that do not follow the usual shape of the product life cycle
graph as shown in fig.
c. The product life cycle does not entirely
depend on time as shown in fig.1. It also depends on other parameters such as management policy, company strategic
decisions and market trends. These parameters are difficult to be pinpointed and so are not
included in the product life cycle as described in “Part 1”.
Nevertheless, a product manager must know how to recognize which phase of its life cycle is a product,
regardless of the problems in the model discussed above. To do that a good method is the one, suggested by Donald Clifford in 1965, which
follows.
- Collection
of information about the product’s behavior
over at least
a period of 3 – 5 years (information will include
price, units sold, profit margins,
return of investment – ROI, market share and value).
- Analysis
of
competitor short-term strategies (analysis
of
new
products
emerging into the
market and competitor
announced plans about
production increase, plant upgrade and product promotion).
- Analysis
of number of competitors in respect of market
share.
- Collection of information of the life cycle of similar products that will help to
estimate the life cycle of a new
product.
- Estimation of sales volume for 3 – 5 years from product
launch.
- Estimation of the total costs
compared to the total sales for 3 – 5 years after
product launch (development, production, promotion costs). The estimate should be in the range of 4:1 in the beginning
to 7:1 at the stage where the product reaches maturity
