1. Identify a product, service, or style that was recently adopted by you and/or some of your friends. Identify what type of innovation it is and describe its diffusion process up to this point in time. What are the characteristics of the people who adopted it first? What types of people did not adopt it? What feature of the product, service or style are likely to determine its eventual success or failure? – Chapter 14 11th Edition (Page 379) – 20 marks
The product that our team has chosen is the Samsung Galaxy S10 which has been launched on the 4th of June in 2019 (Samsung Mobile 2019). The Galaxy S10 or S10 in short belongs to the premium segment of the Android-powered smartphone market and was established to compete directly with Apple’s own flagships, the iPhones. The S10 belongs to a product-oriented type of innovation – the continuous innovation. Schiffman et al. (2014, p. 537) defines continuous innovation as the introduction of a modified product rather than a totally new product. This is due to the fact that the S10 is the successor of previous S series devices such as the S7, S8 and S9 (Samsung Mobile 2019). The modifications that came with the S10 include a longer battery life, better-quality speed and performance, and an improved camera (Samsung Mobile 2019). However, with the introduction of new features that were not available in any other smartphone devices at the time of the launch, the S10 also shows a dynamically continuous innovation. The dynamically continuous innovation is defined as a more disruptive form of innovation that doesn’t change existing consumer behaviour patterns (Schiffman et al. 2014, p. 537). An example of a feature that were yet to be discovered is the Ultrasonic Fingerprint scanner which has been infused into the screen (Samsung Mobile 2019).
The diffusion of innovations is the framework of consumer acceptance towards a new product, and the diffusion process is concerned with how innovation is spread or assimilated within a market (Schiffman et al. 2014, p. 536). Diffusion is defined by five characteristics namely: relative advantage, compatibility, complexity, trialability, and observability (Schiffman et al. 2014, p. 539). These five characteristics will be elaborated in the S10’s context.
Relative advantage: Relative advantage is the degree to which potential customers perceive a new product as superior to existing substitutes (Schiffman et al. 2014, p. 539). The superiority of new technologies is easily discernible to customers today as there is an influx of information available on the internet for product comparisons. YouTube stars are noted to have a high impact on youth decision making and purchasing decisions, and the platform’s top tech influencers such as MKBHD have given a thorough reviews on the specifications of the S10 as well as compared its performance with the iPhone in terms of value for money (Arnold 2017).
Compatibility: Compatibility is the degree to which potential customers feel that a product is consistent with their present needs, values and practices. For instance, Samsung has placed heavy marketing on the S10 which doesn’t just focus on the physical aspects of the device, but also how the device is to be integrated with our hectic modern lifestyles which requires access to information and communication at anytime and anywhere (Samsung Mobile 2019).
Complexity: Complexity is the degree to which a new product is difficult to understand or use (Schiffman et al. 2014, p. 540). To allow consumers to transition between different operating systems such as the iOS, Samsung has created step by step tutorials on the usage of the phone as the consumer explores the device (Samsung Mobile 2019). Therefore, the dominant ‘technological fear’ of technical complexity can thus be overcome.
Trialability: Trialability is the degree to whicha new product is being tried on a limited basis (Schiffman et al. 2014, p. 540). As with all other smartphone manufacturers, Samsung has physical stores located all over Malaysia to allow consumers to test the device out for themselves prior to making a purchase decision (Samsung Malaysia 2019). In Klang Valley alone, there are 26 ‘Samsung Experience Stores’ for consumers to choose from (Samsung Malaysia 2019).
Observability: Observability is defined as the ease of which a product’s benefits or attributes can be observed, imagined, or described to a potential customer (Schiffman et al. 2014, p. 540). Its noted that tangible products are much easier to be observed as compared to intangible products. Since S10 is a smartphone, it falls under the category of a physical product, and can therefore be easily visible.
Based on the Product Life Cycle (PLC), the S10 is now at the growth stage where sales are increasing at the fastest rate. According to Schoon (2019), the S10’s sales are growing faster than ever with an increase of 19% in sales numbers compared to its predecessor, the S9. Its success has also translated to a higher market share for Samsung in the mobile industry with higher volume transactions (Schoon 2019). To maintain such numbers, the company has launched numerous marketing initiatives such as advertisements on social media platforms (Samsung Malaysia 2019). Despite being a premium smartphone, the target market for the early adopters were actually youths and the working class. Triggs (2019) notes that a variation of the S10, called the S10e was developed specifically for younger budget conscious youths who had a penchant for advanced technologies. His research dictates that younger people were conscious of the specifications and performance of their smartphones, and that the international branding of Samsung played a big role in attracting this segment. However, there are also reasons as to why the product was not adopted by some people. One of the reasons is that early adopters are noted to experience glitches with the new products. These glitches can come in the form of quality control or software bugs. A notable incidence of inconsistent manufacturing quality by Samsung is the case of the Note 7 which caught on fire due to quality control issues with their lithium battery suppliers in China (Jones 2016).
While there has been quality issues, the company still successfully attracts consumer by radical innovations and a string of patented technology that cannot be copied or replicated by competitors. An example of such technology is the OLED screen which allows screens to be thinner, lighter and more energy efficient. While Samsung does make a portion of its profit from OLED sales to other smartphone manufacturers such as Apple, the company still reserves the best quality screens for their own devices. Therefore, it can be concluded that a determining factor for its success in the industry is its radical Research and Development (R&D).
2. The key characteristics that influence buyer behaviour toward new products are perceived risk, media influence, social characteristics, and demographic characteristics. Imagine that you are planning to purchase a brand new luxury motor vehicle, and explain how each of these factors would affect your purchase decision. Please use examples to support your responses – Chapter 14 11th Edition (Page 379) – 20 marks
The luxury motor vehicles that my team and I have picked to be compared are BMW and Lexus. Specifically, we have chose the BMW X5 and the Lexus RX for comparison as both of these vehicles belong in the midsize SUV category.
The first characteristic to be discussed is perceived risks. Perceived risks are defined as the likelihood of a consumer trying a new brand or product, and it is also the degree of uncertainty or fear about the consequences of product purchase (Schiffman et al. 2014, p. 557). A form of perceived risk is physical risk which can be attributed to the safety of a vehicle. The Lexus RX has been extensively reviewed for safety by the Insurance Institute for Highway Safety (IIHS) and the National Highway Traffic Safety Administration (NHTSA) (Lexus 2019). The vehicle has received the best crash scores from both parties with its adaptive cruise control, rear-view camera, forward collision warning, automatic emergency braking, lane departure warning, and pedestrian detection. In addition, the vehicle also has a head-up display, a surround-view parking camera, front and rear parking sensors, and blind spot monitoring with rear cross traffic alert (Lexus 2019). In comparison, the X5 is equipped with BMW’s Active Protection System, a head-up display, night vision, Evasion Assistant, a surround-view camera, and parallel and perpendicular park assist (BMW Malaysia 2019). Therefore, the Lexus successfully wins in the category of perceived risks as it has more features that cover the safety of not just the driver but also the passengers.
The second factor is media influence which involves the role of the innovator in exposing their new products to their target market or audience (Schiffman et al. 2014, p. 557). Lexus has recently launched a product placement in the movie ‘Black Panther’, which is one of the highest grossing films of 2018. Meanwhile, BMW has stuck to their traditional advertising channels such as car magazines. Therefore, the winner of this round is Lexus.
The third factor is social characteristics the ability of innovators to integrate themselves into the community and belong to social groups and organizations (Schiffman et al. 2014, p. 558). In the United States, there is a Lexus Owner’s Club where a community of Lexus drivers openly discuss about the general public perception of Lexus vehicles (Lexus 2019). From this ‘club’, innovators at Lexus are able to gauge the perception that Lexus vehicles are family-friendly cars meant for older people with children. These feedbacks have allowed the car designers to create and develop sportier and more modern designs (Lexus 2019). On the other hand, BMW also has similar initiatives in forming a social group for their driver through the ‘BMW Club’ (BMW Malaysia 2019). Similarly, this club discusses general issues of various car models. An advantage BMW has over Lexus is that this club goes beyond online discussions, but also sets up physical meetups for their members by inviting them for new product launches and forums (BMW Malaysia 2019). Another advantage BMW has over Lexus is that the club is focussed on Malaysia, so there will be minimal cultural differences in the communication of the members. As a potential customer, we choose BMW as the winner in this round as we feel that they are more active in reaching out to customers.
The final factor is demographic characteristics which studies the consumer innovator’s age, formal education, family background, income and other similar attributes (Schiffman et al. 2014, p. 557). According to MotorTrend (2019), Lexus is on the hunt for younger, more diverse customers. Their justification for this decision is that the White baby boomer generation aren’t the only ones earning higher than average median incomes in today’s economy. The rise of developing economies such as Malaysia, India and China over the years have attracted attention as a number of their recoded billionaires are below thirty. Meanwhile, according to the Hedge Company (2019), BMW is still targeting the generation of baby boomers as they perceive this generation as able in financial capability as compared to younger generations.
Overall, we prefer Lexus over BMW in their effort to seek out new markets and effort to enhance the safety of consumers.
Written by:
Sak Jeng Mun (5506487)
Lin Yi Wei (5586483)
Li Yunzhe (5674268)
Huang Lei (5930571)
References
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