CATIPAY, CHARLES P.

1. Which innovation characteristics could Apple leverage to manage resistance

to future generations of Apple Watch?

The Apple Watch should focus on its S-O innovative strategies to develop a
differentiated value proposition. Differentiated value proposition of Apple Watch is the
combination of characteristics the product does better than anything else. The strength
of Apple Watch, which composed of strong branding; sleek, stylish and elegant design;
small and compact in size, and easy to wear as it is strapped in place being a
wristwatch. The said factors matched to the opportunities namely cheaper internet
connectivity and accessibility of futuristic nano-technology shall provide a number of
innovative characteristics that can be perceived by consumers as great value
proposition. However, the said opportunities become available to every tech company, it
becomes easy to enter into the competition. Since many competitive products are lurking
behind Apple Watch and offer cheaper prices than the brand, Apple must develop some
things that highlight a big difference from competitors. Apple Watch must set the bar high
by developing future Apple Watches with features that tell consumers why they must buy
the product despite being so expensive.

Opportunity arises when people complain, Jack Ma, the founder of Alibaba, quoted.
Thus, Apple Watch must focus on innovative developments that meet consumer high
demands from paying a such a luxury price, as well as, the company must satisfy
consumer complaints or bad feedback about older versions of Apple Watch. These
features, which I believe they must push on future generations to exceed consumer
expectations on usefulness, and create a value that they might not perceived from a
regular smart watch, are as follows:

 Health monitoring such a device that count calories, measure blood pressure,
body temperature, and sleep.
 Mobile wallet, such a device that can be used in paying merchandise or monthly
dues.
 GPS such a device that can track location or gives direction
 Audio-video recorder and can accommodate a sufficient size of data for such
purpose
 Control other electronics such as phone or laptop privacy locks; or the so-called
Internet of Things, wherein the device can be used to give instruction such as
turning the lights on/off, locking/unlocking the car or starting it, or report a crime
in real time and automatically transmit to the police the location
 Wireless, fast charging and longer power consumption same with mobile phones;
the watch may come with Super Saver mode for the consumers to enjoy the
product utility longer.

2. Discuss the role of propagation mechanisms in reducing resistance to Apple

Watch.

Ram (1987) proposed a detailed model of innovation resistance. Based on this model,
innovation resistance can be viewed as dependent on three factors: Perceived

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 CATIPAY, CHARLES P.

Innovation Characteristics, Consumer Characteristics, and Characteristics of

Propagation Mechanisms.

Propagation is defined as the spreading out and affecting a great number or greater
extent of area. In biology, it denotes growth, breeding or reproduction. In marketing,
Propagation Mechanisms are tools, methods, or techniques capable of kick-starting,
controlling and exploiting a product into its target market. The type of propagation
mechanism would depend on what marketing channel or propagation media is utilized
for a new product or innovation of a product. Nowadays, the most used media is the
internet or social media as it desirably creates “Word-of-Mouth”, which is the propagation
mechanism in increasing brand awareness or viral marketing. Viral marketing uses the
potential of electronic transmission to encourage consumers to become messengers of
the company or brand.

In Ram’s model, propagation mechanisms have two types: (1) marketer controlled vs.
non-marketer controlled, and (2) personal vs. impersonal. The characteristics of
propagation mechanisms are credibility, clarity, source similarity and informativeness.
However, this model was modified by Yu and Lee (1994) who discussed that Innovation
Characteristics and Consumer Characteristics generate consumer resistance to
innovation but Propagation Mechanism does not. Instead, it plays a role as a barrier in
diffusion of innovation from social perspective. Diffusion describes the way in which an
individual customer learns about innovation. This seeks to explain how, why and what
rate new ideas and technology spread.

Improper propagation mechanism such as transmitting invalid resources or difference in

information causes information asymmetry, the problem of Apple Watch in pushing its
innovation to its target market. While positive feedback and honest advertising will
strengthen Apple Watch as a brand. Therefore, if propagation mechanisms are properly
applied, such as the “Word-of-Mouth” in social media, this form of communication could
rapidly build a reputation of the product or brand. By taking advantage of the ease of
distribution that current technologies have offered, credible and clear information can be
transmitted to the consumers. Social media is very effective in diffusing new Apple
products or new innovation to old products such as Apple Watch into target markets.
Particularly when the information about the product is transmitted by a close friend or
acquaintance, this can generate the feeling of being special that works ideally. Most
especially when you can see photos that the product is being used or worn by them, this
encourages participation.

Khan, K. & Hyunwoo, K. (2009). Factors Affecting Consumer Resistance to Innovation.

(Master’s thesis, Jonkoping International Business School, Jonkoping, Sweden).
Retrieved from http://hj.diva-portal.org/smash/get/diva2:223332/FULLTEXT02

3. What are the consumer characteristics that Apple needs to influence to

overcome consumer resistance to its smartwatch?

Based on Ram’s model, consumer characteristics have two types: (1) Psychological
variables – Perception, motivation, personality, value orientation, beliefs, attitude,
previous innovative experience; and (2) Demographic variable – age, education and
income. Apparently, the second factors are uncontrollable.

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 CATIPAY, CHARLES P.

A compelling value proposition directs an organization’s marketing strategy and branding

efforts in ways that differentiate the business and its products. Differentiated value is
promoted by innovating old products such as new variants or improved technology or
features. The newness offers the target market with many opportunities to choose from
depending on their previous experience from older products. Since people are designed
not to be satisfied, we tend to complain and want for more or better products when we
have been used to accessing the older products. When new innovation comes and the
utility and features that we expect to get from the new product are present, we tend to
afford the price increment because we have perceived properly the improved product
against the increase in price. However, in some cases, the adoption of one innovation
product may have inhibitory effect on the adoption of other innovations (Ram, 1987). For
example, if a person purchases an Apple Watch, the person is not likely to purchase
another variant or higher generation of Apple Watch with improved performance or more
features within a short period of time. Since everyone perceives that technology is
constantly changing and innovation products are being released rapidly, consumers
would postpone their purchase and the reason is that, they would be waiting for a better
product to come with a proportional price. Because of this, the consumers lost their
motivation to purchase new innovations.

Thus, the consumer characteristics that Apple need to influence is the consumer’s
perception, motivation and previous innovative experience.

4. Discuss the barriers and sources of active and passive innovation resistance
in the context of Apple Watch.

Based on Ram’s model, and as modified by Lee and Yu, there are barriers and
resistance in the development, diffusion and adoption of the new products or new
innovations.

First, the barriers, which are classified to two: (1) barriers in development process of new
products, and (2) barriers in diffusion process of new products. According to Lee and Yu
model, there is already a barrier on the first stage of product cycle or development stage.
In the context of Apple Watch, the questions on uniqueness of the new variant, higher
cost than expected, response from competitors, change in consumer needs, and
practicality of the new product are the barriers in developing a new variant of Apple
Watch. If we can see the design of different generations of Apple Watch, we won’t notice
much difference. It’s strategy to counter this is differentiation and uniqueness in color
and wristbands, as evidence in their partnership with Nike and Hermes.

Second barrier is in diffusion process of new products. This is the introduction of the new
products or new innovation to its target market. In the context of Apple Watch, the barrier
factors are the propagation mechanisms, which throw questions on the effectiveness of
propagation media and marketing activities, and effectiveness of Word-of-Mouth. Since
there is information asymmetry in the introduction of Apple Watch to its target market,
buyers are uninformed about the differentiating value of the product, thus negatively
perceive the price premium as too high or perceive the product itself as impractical.

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 CATIPAY, CHARLES P.

On the other hand, innovation resistance in the adoption stage or pre-persuasion stage
in the context of the Apple Watch case is classified into Consumer-dependent (adopter-
specific inclination to resist change) and Consumer-Independent (situation-specific
status quo satisfaction). This resistance is referred to as passive innovation resistance.
The factors of consumer-dependent characteristics are relative advantage, compatibility,
complexity, perceived risk and expectation of better products. As to Apple Watch, this
resistance is sourced from the exclusivity of its target market.

Active innovation resistance happens in the post-persuasion stage, when consumers

have experienced the product and evaluated its utility. As discussed above, people are
designed to complain no matter how great the product is. Thus, creating a negative
attitudinal outcome followed an unfavorable evaluation of a new product. This is critical
for Apple Watch since this may do harm to the brand and to its future generation. When
consumers realized that the Apple Watch have low value due to its limited utility, they
perceive the watch as being impractical and a waste of money.

5. Discuss various consumer segments that arise from variation in resistance.

The consumer segments that arise from variation in resistance include the level of
income, perception, and motivation. The consumer segment of income, which is a
demographic consumer characteristic, determines resistance based on the level of
disposable income that consumers get. High-income consumers are less resistant to
change while low-income consumers are more resistant to adopt new product or new
innovation.

Perception segment, which is also a consumer characteristic, has to do with need,

whether consumers perceive the need for innovation or practicality of the product. This is
a psychological factor subject to how the consumers think. If consumers don’t see the
need for the innovation, they will resist it, most especially if they perceived the price
premium not being equitable with the additional features.

The last segment is the motivation, another psychological consumer characteristic, and
this has to do with whether the consumers are motivated enough to adopt the
innovation. Their motivation has to do with beliefs, habits or practices. If they are used to
the older product or innovation and are comfortable or satisfied with the product’s utility
as against their needs, they will not want to change thus resisting to adopt the newer
and more expensive innovation.

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