Innovative products and adaptation


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Innovative products and adaptation

  1. 1. INNOVATIVE PRODUCTS AND ADAPTATION<br />An important first step in adapting a product to a foreign market is to determine the degree of newness as perceived by the intended market. How people react to newness and how new a product is to a market must be understood. In evaluating the newness of a product, the international marketer must be aware that many products successful in the United States having reached the maturity or even decline stage in their life cycles, may be perceived as new in another country or culture and thus must be treated as innovations. From a sociological viewpoint any idea perceived as new by a group of people is a innovation.<br />Whether or not a group accepts an innovation and the time it takes to do so depends on the product’s characteristics. Products new to a social system are innovations and knowledge bout the diffusion (i.e. the process by which innovation (spreads) of innovation is helpful in developing a successful product strategy. Sony’s marketing strategies for the US introduction of its PlayStation 2 were well informed by its wild successes achieved six months earlier during the product’s introduction in Japan. Conversely mid 1990s dips in Japanese sales of Apple computers were preceded by dips in Apple’s home US market. Marketing strategies can guide and control to a considerable degree the rate and extent of new product diffusion because successful new product diffusion is dependent on the ability to communicate relevant product information and new product attributes.<br />A critical factor in the newness of a product is its effect on established patterns of consumption and behavior. In the preceding cake mix example the fancy iced cake mix was a product that required both acceptance of the difficult to believe that is that dried eggs and milk are as good in cake as the fresh products, and the acquisition of new ideas that is that easy to bake fancy cakes are not a slight to one’s domestic integrity. In this case, the product directly affected two important aspects of consumer behavior and the product innovation met with sufficient resistance to convince the company to leave the market. Had the company studied the target market before introducing the product, perhaps it could have avoided the failure.<br />Another US cake mix company entered the British market but carefully eliminated most of the newness of the product. Instead of introducing the most popular American cake mixes the company asked 500 British housewives to bake their favorite cake. Since the majority baked a simple very popular dry sponge cake, the company brought to the market a similar easy mix. He sponge cake mix represented familiar tastes and habits that could be translated into a convenience item and did not infringe on the emotional aspects of preparing a fancy product for special occasions. Consequently after a short period of time, the second company’s product gained 30 to 35 per cent of the British cake mix market. Once the idea of a mix for sponge cake was acceptable the introduction of other flavors became easier.<br />The goal of a foreign marketer is to gain product acceptance by the largest number of consumers in the market in the shortest span of time. However, as discussed and as many of the examples cited have illustrated new products are not always readily accepted by a culture; indeed they often meet resistance. Although they may ultimately be accepted the time needed for a culture to learn new ways, to learn to accept a new product is of critical importance to the marketer because planning reflects a time frame or investment and profitability. If a marketer invests with the expectation that a venture will break even in three years and seven are needed to gain profitable volume, the effort may have to be prematurely abandoned. The question comes to mind of whether the probable arte of acceptance can be predicted before committing resources and more critically if the probable rate of acceptance is too slow, whether it can be accelerated. In both cases, the answer is a qualified yes. Answers to these questions come from examining the work done in diffusion research – research on the process by which innovations spread to the members of a social system.<br />DIFFUSION OF INNOVATIONS<br />The crucial elements in the diffusion of new ideas are (1) an innovation, (2) which is communicated through certain channels, (3) over time, (4) among the members of a social system. Rogers continues with the statement that it is element of time that differentiates diffusion from other types of communications research. The goals of the diffusion researcher and the marketer are to shorten the time lag between introduction of an idea or product and its widespread adoption.<br />Product innovations have a varying rate of acceptance. Some diffuse from introduction to widespread use in a few years; others take decades. Patterns of alcoholic beverage consumption are seen to be converging across Europe only when a 50 year time frame is considered. Microwave ovens, introduced in the United States initially in the 1950s, took nearly 20 years to become widespread; the contraceptive pill was introduced during that same period and gained acceptance in a few years. In the field of education, modern math took only five years to diffuse through US schools whereas the idea of kindergartens took nearly 50 years to gain total acceptance. A growing body of evidence suggests that the understanding of diffusion theory may provide ways in which the process of diffusion can be accelerated. Knowledge of this process may provide the foreign marketer with the ability to assess the time it takes for a product to diffuse – before a financial commitment is necessary. It also focuses the marketer’s attention on features of a product that provoke resistance thereby providing an opportunity to minimize resistance and hasten product acceptance.<br />At least three extraneous variables affect the rate of diffusion of an object: The degree of perceived newness, the perceived attributes of the innovation, and the method used to communicate the idea. Each variable has a bearing on consumer reaction to a new product and the time needed for acceptance. An understanding of these variables can produce better product strategies for the international marketer.<br />The more innovative a product is perceived to be, the more difficult it is to gain market acceptance. That is, at fundamental level, innovations can be disruptive. Consider alternative fuel cars in the United States. Although they are popular with consumers, dealers did not appreciate their low maintenance requirements which reduced after sale service revenues. Further the infrastructure to support hydrogen fuel cell cars has been expensive to build. Thus, some suggest that the technology is inappropriate for the US, whereas china without the established infrastructure may be able to leap frog the older gasoline fueled options. Additionally the perception of innovation can often be changed if the marketer understands the perceptual framework of the consumer. This had certainly proved to be the case with the fast global diffusion of Internet use, e-tailing and health and beauty related products and services.<br />Analyzing the five characteristics of an innovation can assist in determining the rate of acceptance or resistance of the market to a product. A product’s (1) relative advantage (the perceived marginal value of the new product relative to the old); (2) compatibility (its compatibility with acceptable behavior, norms, values, and so forth) (3) complexity (the degree of complexity associated with product use); (4) trialability (the degree of economic and /or social risk associated with product use); and (5) observability (the case with which the product benefits can be communicated) affect the degree of its acceptance or resistance. In general the arte of diffusion can be postulated as positively related to relative advantage compatibility, trialability and observability but negatively related to complexity.<br />Buy analyzing a product within these five dimensions a marketer can often uncover perceptions held by the market, that if left unchanged would slow product acceptance. Conversely if these perceptions are identified and changed the marketer may be able to accelerated product acceptance.<br />The evaluator must remember that it is the perception of product characteristics by the potential adopter not the marketers that is crucial to the evaluation. A market analyst’s self reference criterion (SRC) may cause a perceptual bias when interpreting the characteristics of a product. Hs, instead of evaluating product characteristics from the foreign user’s frame of reference the marketer might analyze them from his or her frame of reference leading to a misinterpretation of the product’s cultural importance.<br />Once the analysis has been made, some of the perceived newness or causes for resistance can be minimized through adroit marketing. The more congruent that product perception are with current cultural values, the less resistance there will be and the more rapid product diffusion or acceptance will be.<br />INNOVATION DIFFUSION AND NEW PRODUCT ADOPTION<br />In new product marketing, one has to understand the process of innovation diffusion and new product adoption: how an innovation/new product idea spreads and gets adopted by the different segments of a society/market over time. New product diffusion/innovation diffusion is actually defined as the spreading of a new idea from its source of invention to the ultimate users. As the innovation spreads, adoption of the product by the consumers picks up.<br />All consumers in a given market are not responding to a new product in the same manner. The speed and enthusiasm with which different consumers respond to a new product are seen to vary widely. Some are quick in trying out the product and even in adopting it as a regular item of consumption. Some others take more time to embrace the product. Some others hesitate for a longer time and yet others are willing to try it at all. The differing speed in adoption by consumers is one of the most crucial issues in new product marketing.<br />Innovators: Innovators are consumption pioneers who are ready to try out an innovation. And for any product, there will be some pioneers. The job of the marketer is to locate and identify this group and target the new product at them initially. Since volume-wise, these groups will not be big, the marketer has to simultaneously cover the next group in the adopter category — the early adopters, who are willing to try out the new product fairly early.<br />Early adopters: The early adopters are the opinion leaders in their respective community and usually constitute a sizeable segment. For the success of any new product launch, it is essential that group, viz., the venturesome nature of its members plus its size, make it the ideal market segment to target. The task involved is to locate, identify and reach the segment through appropriate marketing programs.<br />Early majority: The next group in the adopter category to try out the new product will be the early majority. Though this group is not that venturesome like innovators or that fast in adoption like the early adopters, they are positive in their approach to new things and try them out earlier than an average person of their community.<br />Late majority: Now comes the late majority in the adopter category who by and large skeptical in their approach to new things and generally try them only after a lot of people around them have adopted it.<br />Laggards: The last category is the laggards who are tradition-bound and will generally take to a new product only after it becomes a known ad accepted product throughout the market.<br />It is to be pointed out that an individual, who is an innovator for a particular product, need not behave in the same way in all new-product situations. This is true of all categories. And that is why the marketer’s job is difficult. He has to decide every time that for this particular product’ who could be the innovators or the early adopters?<br />A new product marketer must understand thoroughly the diffusion process and the diffusion rate, and get a correct indication of the size of early adopters of the product, who will give him the initial sales. In fact, in launching a new product, most attention is given for attracting the innovators and early adopters. As the product mo<br />HOW MACDONALD'S WINS THROUGH ADAPTATION AND INNOVATION<br />Of all companies that have managed to withstand the many challenges time brings to their way, on stands out: McDonald’s (NYSE:MCD). On Friday morning, the company reported another blockbuster quarter, beating both on the bottom and top lines, sending its stock soaring. How the company does it?<br />By adaptation and innovation, coming up with innovative products and services to address the needs of a diverse consumer market—as shaped by demographic, economic and local factors:<br />McDonald’s rode the baby-boomer trend in the 1960s, the swelling ranks of teenagers and the rising female labor force participation, supplying a fast and inexpensive menu. In the 1970s and the 1980s, McDonald’s rode the globalization trend by transferring the American Way of Life to many countries around the world. At the same time, McDonald’s adapted to the social context of each county by franchising to locals.<br />In the 1990s and early 2000s, McDonald’s made successful efforts to restore its corporate image by launching the “Fast an Convenient” campaign that involved the radical adjustment of the company’s product portfolio to emerging food industry trends—the re-furbish of McDonald’s restaurants to achieve a banded, updated, and more natural dining environment. The “fast” and “convenient” elements of the McDonald’s concept were augmented by the “healthy” and “more natural” element, by adding salads, fruits, and carrot sticks to the menu.<br />In nowadays, McDonald’s continue to broaden its product portfolio by offering high quality coffee and healthy drinks (either through its traditional restaurants or the Cafés), competing head to head with Starbucks and local cafeterias—benefiting by local trends like austerity in Europe.<br />