2/11/20

Consumer Behavior
Professor Wendy Liu
MGT 477 Winter 2020
FT MBA and Flex MBA
UCSD Rady School of Management

Session 6
Adoption of Innovation

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Levels of Customer Understanding

Macro
Anthropology § Cultures
History
§ Subcultures
Sociology § Demographics
§ Psychographics
§ Need-based segmentation
Psychology § Individuals
§ Actions, behaviors
Neuroscience § Brain Functions
§ Neurons
Micro

Agenda

§ Case: Polyphonic HSS

§ Selling a radical innovation
§ The ACCORD Model
§ Innovation Adoption Model
(Chasm Model)

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Case: Polyphonic HSS

(2003)

Background

§ Money Ball (Michael Lewis) was

published in 2003
§ Oakland A’s story was in 2002
§ A’s went to the play offs in 2002 and
2003
§ The movie was made in 2011
§ Polyphonic case was 2003

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The Sales Meeting

Seller
(Selling to record labels)

§ Predict a song’s likelihood of becoming a

Billboard top 40

§ Based on a cluster analysis of “hit song

clusters”

§ Accurate 90% of time

§ When HSS predicts success, 90%
success, 10% false positives
§ Industry false positives at 90%
§ Can save record labels millions a year by
avoiding marketing cost of flops

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The Sales Meeting

§ Buyer’s decision options:

§ Sorry, don’t think so
§ Come back next time with …
§ Ok, let’s negotiate a deal

What Constitutes a “Good

Proof”?

§ Why information is sufficiently convincing

to the buyer?

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What to Do Absent of Good

Proof?

§ ”Risk Free” trial?

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Technical Notes on the

Product

§ Prediction vs. Causation

§ Predicting Exogenous vs. Endogenous
Processes

§ Static vs. Dynamic Learning Models

§ Incomplete Input
§ Blackbox algorithm
§ False Positives vs. False Negatives

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Endogenous Process

§ 18 songs may be marketed differently

than 100 songs

§ 18 songs may be received differently by

the audience than 100 songs (if all
companies adopt HSS the number of
songs put on the market will change
drastically)
§ Can the software be dynamically “re-
trained” to predict future winners?

§ Can the software accommodate change in

consumer trends and marketing methods
(these are causal factors)

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Calculating the Benefit:

Prediction vs. Causation

Out of Predicted
100 (90%
Songs accuracy)
Success Failure Total
Actual Success 9 1 10
Failure 9 81 90
Total 18 82 100

Produce all 18 songs predicted to be successful

Calculate Success Rate:
9/18 = 50%
Still high compared to industry’s 10%
But different from the “prediction accuracy” of 90%

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Food for Thought

§ HSS was not successful

§ What are the similarities and differences
between the music industry and sports
with respect to “Money Ball”?

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Selling a Radical Innovation

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Types of New Products

Does not require Requires
behavioral change behavioral change
Cost Radical
Reduction, Features,
Feature Revolutionary
Strengthening New Category

New Features

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Types of New Products

Cost Radical
Reduction, Features,
Feature Revolutionary
Strengthening New Category

New Features

Sell with compelling More than just

Value Proposition Value Proposition

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How radical is your product?

§ A matter of risks, uncertainties, and

behavior change

§ Assess using the ACCORD Framework

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Roger’s ACCORD Framework

§ Advantage – potential benefits

over current alternatives
§ Complexity – difficulty to
understand and use
§ Compatibility – is perceived as
consistent with existing systems,
behaviors and values
§ Observability – benefits are
easily and rapidly seen
§ Risk – risks while using, and loss
entailed if product fails to
perform
§ Divisibility (Small trials) – may
be experimented with on limited
basis

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Types of New Products

Cost Radical
Reduction, Features,
Feature Revolutionary
Strengthening New Category

New Features
Extremely
OK Problematic
good
ACCORD ACCORD
ACCORD

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Using the ACCORD to

assess AND improve

1=Poor, 1=Poor,
5=Great 5=Great
Advantage Advantage
Complexity Complexity
Compatibility Compatibility
Observability Observability
Risk Risk
Divisibility Divisibility

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Key Take-Away

§ Innovation Marketing Strategy Step 1:

Make your innovative product as close to
a selfie stick as possible

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Marketing Strategy for

Innovative Products

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How to market an innovation?

ACCORD

A FEW
PERFECT TERRIBLE
PROBLEMS

IMPROVE
Using the ACCORD as
STP 4P’S ACCORD THE
BEST YOU CAN improvement tool (not just
assessment tool)
Better, but
Near-Perfect
cannot be
ACCORD perfect

Innovation
STP 4P's
Adoption Model

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Selling Radical Innovation

§ The Chasm Model

§ Customer Segmentation
§ By psychological trait of
response to innovation in
domain X
§ Conquer each segment
differently

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Innovation Adoption Model

§ Chasm Model

C Early Late
h majority majority
a
Innovators s
Early m Laggards
adopters

Time of adoption of innovations

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Those Who Embrace

Innovation

§ Innovators
§ Inherently excited by new
technology
§ Early Adopters
§ Looking to gain competitive
edge by adopting a new
technology
§ Both groups willing to give new
things a try, to suffer some
messiness, but for different
motivations

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Exercise

§ For which product category are

you an innovator?
§ For which product category are
you an early adopter?

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Those Who Are Hesitant

about Innovation

§ Main Street
§ Early Majority
§ Pragmatic
§ Want Whole Product Solution
§ Need strong, credible endorsement
§ Can handle technology
§ Late Majority
§ Same as Early Majority, but
§ Cannot handle technology
§ Wait till product becomes standard
§ Laggards

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Exercise

§ For which product category are

you an early majority?
§ For which product category are
you a late majority?
§ For which product category are
you a laggard?

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Selling to Each Segment

§ Selling to Innovators
§ If your product is cool
enough, they will find it and
try it
§ Delight the innovators for
positive WOM and influence
on later segments

How to find Innovators for this?

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Selling to Early Adopters

§ Early adopters have a practical

interest in innovation
§ Want innovation to be a game-
changer competitive advantage

Who are the early adopters for driverless cars?

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The Chasm

§ Diffusion often stalls after early

adopters
§ Why?

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The Chasm

§ How to cross the chasm

between the early groups and
main street?
§ Lower price?
§ Large scale marketing roll out?

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The Chasm

§ How to cross the chasm

between the early groups and
main street?
§ Lower price?
§ Large scale marketing roll out?

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Crossing the Chasm

§ Finding a “first pin” in the bowling alley

§ Deliver a Whole Product to a precisely
segmented group
§ The group is HIGHLY specific
§ The group has a huge pain
§ The Whole Product fulfills all of the
ACCORDs for this group
§ The Whole Product takes care of the
user experience A to Z

Who is a good first early majority for driverless cars?

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FFT: Can you sell “out of

order”?

§ Can you sell to main street first

(before innovators and early
adopters) by smart marketing?

§ Why?

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Critical role of social

influence

§ Early majority wants to see social

validation before buying
§ The most credible endorsement
are other people
§ Establishing the perception of
social norm

§ Before first main street customer:

Get endorsement from 3rd parties
§ After first main street customer:
maximize WOM

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How Long Does Adoption of

a Radical Innovation Take?

§ Benchmarks across all industries

§ At least 3 years before crossing the
chasm

References: See the Bass Diffusion Model

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The Case of Apple

§ How fast were Apple products adopted?

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iPod Worldwide Sales (Cumulative)

2001 01
iTunes 1.0 released

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iPhone and iTouch Worldwide Sales

(Cumulative)
iPhone/iTouch (millions)
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30
Millions sold

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0
0.25 0.75 1.25 1.75 2.25 2.75 3.25
Years

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iPad Worldwide Sales (Cumulative)

Launched April 2010
Within 1 month: >1M units
Within 80 days: 3M units
January 2011: 7.6M units
January 2012: 55.3M units
October 2012: 100 M units

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The different numbers do not just reflect a product’s “awesomeness”, but also
where it is on the diffusion curve.
Some have a fast start; some have greater long-term sales.

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Summary:
Assess and Improve

§ Awesome, radical technology =/=

awesome adoption

§ If you have an awesome radical

technology
§ Use ACCORD to make it akin to a selfie
stick
§ If you can’t…be ready and patient…

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Summary:
Crossing the Chasm

§ Even the best marketing cannot

fundamentally change the adoption
segment dynamic due to their inherent
psychological properties
§ Main street WILL wait
§ Diffusion WILL take time
§ There is no overnight success for
radical innovation
§ Focus on innovators and early adopters
first to establish initial credibility
§ Use targeting, whole product, and social
influence to cross the Chasm to main
street

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Group Assignment:
Improving Adoption of a New
Product (Due Session 10)
§ Take an innovation (can be your product from Lab to Market, or
something you read about, e.g., personal drones; can be a product or
service)

§ Assess the initial ACCORD scorecard of the product (prior to taking this
class)

§ Discuss how you can use the ACCORD to improve upon the product
§ Assess the final ACCORD scorecard after improvement. Decide, after
the proposed improvements whether the product is “new features” or
“radical”

§ Come up with a *brief, high-level* marketing plan accordingly (hint,

plan will be different for “new features” vs. “radical”)
§ For “radical”, you need … (Hint: multi-phased by Chasm Model)
§ For “new features”, what do you do? (Hint: STP 4P’s)
§ Presentation is 7-10 minutes, needs to contain all the above required
elements
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Next Sessions

§ Session 7: Group Presentation: Website

Improvement; Experiences and Influence

§ Session 8: Guest lecture

§ Tuesday 2/25 6:30pm 3E107
§ Matt Penfield
§ VP Consumer Insights at Zynga
§ Session 9: Guest lecture
§ Tuesday 3/3 6:30pm 3E107
§ Mike Diamond
§ SVP & General Manager at Mitek Systems (Fin
Tech)

§ Attendance will be taken at guest lectures

§ TA Session on Need-Based Segmentation
§ Tuesday 2/25 8:30pm 3E107

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Have a Good
One!

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