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N T E R N A T I O N A LB
U S I N E S SS
C H O O L JÖNKÖPING UNIVERSITYThe Impact of Radical Innovation
on Consumer Behaviour
A case study of iPhone
Master Thesis within Business Administration Author: Antika Ungsusing
Phromporn Pinyotrakool Tutor: Mike Danilovic
Abstract
Master Thesis within Business Administration
Title: The Impact of Radical Innovation on Consumer Behaviour Authors: Antika Ungsusing
Phromporn Pinyotrakool Tutor: Mike Danilovic
Date: May 2009
Subject terms: Radical Innovation, Diffusion of Innovation, Strategic Market-ing Communication, Consumer Behaviour
Introduction In most industries, innovation is the most essential driver of com-petitive advantage. Particular to Radical Innovation, it underlies the firm’s success in an attempt to be different and innovative leader. Undoubtedly, it requires hard-working and tough decision to launch such breakthrough and manage consumer’s uncertainty. Sometimes a very new to the world product introduces behaviour change and this is rather complicate to the unknown and unfamiliarity. How-ever, one that can successfully motivate consumer to embrace it will potentially win the battle.
Purpose The purpose of this study is to investigate how a radical innovation is adopted and analyze the impact it has on consumer behaviour to understand the key influential driver of success through the case study of iPhone.
Method A qualitative approach was used to fulfil the purpose of this thesis. Interviews with eighteen iPhone users in Asia, Europe and North America were made to gather different perspectives of iPhone and its relation with the behaviour changes. Two observations were later conducted in order to further explore the key findings. Secondary data such as online written document was also utilized to enhance the value of our findings.
Conclusion iPhone changes the way consumers interact with the mobile phone. Particularly, it forms human bonding with the users and influences their behaviour in terms of information access and digital lifestyle. In this case, marketing communication strategy and product charac-teristics play the critical roles regarding uncertainty management and innovation adoption and diffusion. iPhone has now become early majority’s beloved device. It is interesting to keep an eye on its next step if it could successfully be accepted prevalently in the mass mar-ket.
Acknowledgements
We would like to sincerely thank our tutor Mike Danilovic for his dedicated guidance and support during the process of writing this thesis. In addition, we would like to thank our fellow students for their valuable feedback and comments during the review process. Last but not least, we are deeply thankful to our lovely iPhone users who voluntarily partici-pated in our research interviews and observations - without you, this thesis and nothing else would ever have been possible.
Table of Contents
1
Introduction ... 1
1.1 Radical innovation & Incremental innovation... 2
1.2 Telegraph: The historical radical innovation that changed consumer behaviour... 3
2
iPhone Case Study... 5
2.1 iPhone as a Radical innovation? ... 6
2.2 iPhone as a design icon... 8
3
Purpose... 9
3.1 Hypotheses... 9
3.2 Research Questions ... 9
4
Frame of Reference... 10
4.1 The diffusion of innovation and adopter categories ... 10
4.2 Crossing the Chasm ... 12
4.3 The Innovation Decision Process ... 13
4.4 Consumer involvement and attitude dynamics ... 14
4.5 Sources of influence in Attitude formation ... 15
5
iPhone Strategy Marketing Communications... 17
5.1 Steve Jobs, the marketing CEO ... 17
5.2 iPhone Launching Strategy... 18
6
Method ... 24
6.1 Research Design ... 24 6.2 Data Collection ... 24 6.3 Secondary data... 27 6.4 Trustworthiness ... 28 6.5 Method evaluation ... 29 6.6 Limitations... 307
Empirical Findings & Analysis... 31
7.1 The interviewees... 31
7.2 The observations ... 32
7.3 Attitude... 40
7.4 Behaviour... 46
8
Conclusion and Implication ... 57
8.1 The impact of iPhone to consumer behaviour ... 57
8.2 The key influential drivers of innovation diffusion ... 58
9
Discussion ... 64
9.1 Crossing the Chasm ... 64
10
Final Remarks... 67
10.1 Further Studies ... 67
Tables
Table 4.1 Four Consumer Involvement/Brand Differentiation Decision-Making
Models (Schiffman & Kanuk, 1987). ... 14
Table 7.1: Before using iPhone - Young Tech Savvy User ... 32
Table 7.2: After using iPhone - Young Tech Savvy User ... 34
Table 7.3: Before using iPhone - Professional User ... 36
Table 7.4: After using iPhone - Professional User ... 38
Figures
Figure 1.1 Technology push model (The Open University, 2009)... 2Figure 1.2 A man operating an electro-magnetic telegraph (Goodrish, 1844). ... 3
Figure 2.1 iPhone components (Apple Inc., 2008a). ... 5
Figure 2.2 iPhone demonstrating a built-in accelerometer (Apple Inc., 2009b). . 5
Figure 2.3 Phone icon (Apple Inc., 2008a)... 7
Figure 2.4 iPod icon (Apple Inc., 2008a). ... 7
Figure 2.5 Internet icon (Apple Inc., 2008a). ... 8
Figure 4.1 Diffusion of innovation (Rogers, 1983)... 10
Figure 4.2 Adopter categories (Brown, 1992). ... 10
Figure 4.3 Crossing the chasm (Moore, 1991 & Searls, 2003). ... 12
Figure 4.4 The innovation decision process (Schiffman & Kanuk, 1987)... 13
Figure 5.1. iPhone timeline (iPhoneGold.org, 2008) ... 19
Figure 5.2 iPhone marketing communications and public relations (Kahney, 2008). ... 21
Figure 6.1 Research design ... 28
Figure 7.1: Chart respondents... 31
Figure 7.2 Personal interviews (April, 2009). ... 41
Figure 7.3 Personal interviews (April, 2009). ... 42
Figure 7.4 Personal interviews (April, 2009). ... 43
Figure 7.5: Personal interviews (April, 2009) ... 44
Figure 7.6 Personal interviews (April, 2009). ... 45
Figure 7.7 Personal interviews (April, 2009). ... 46
Figure 7.8 Personal interviews (April, 2009). ... 47
Figure 7.9 Personal interviews (April, 2009). ... 49
Figure 7.10 Personal interviews (April, 2009). ... 50
Figure 7.11 iPhone applications (Apple Inc., 2008a & 2009b). ... 51
Figure 7.12: How the iPhone changes consumer behavior (Tesla, 2009, p.1). 52 Figure 7.13 Personal interviews (April, 2009). ... 53
Figure 7.14 Personal interviews (April, 2009). ... 55
Figure 7.15 Personal interviews (April, 2009). ... 56
Figure 8.1: iPhone vertical integrated solution (Apple Inc., 2009b, 2009f; Google Inc., 2009; Telefónica Europe plc, 2009; TeliaSonera AB, 2009; AT&T Inc., 2009)... 62
Figure 9.1 Crossing the chasm (Moore, 1991 & Searls, 2003). ... 64
1 Introduction
Companies everywhere are engaged in a new product wars. The battlefields are the market-places around the world. The great weapons are the thousands of great technological dis-covered every year in the hope of successfully being adopted and accepted by consumer. Most recently another business guru, Rosabeth Moss Kanter, concluded from a survey of 105 innovations in leading American companies that competitive advantage derives from the encouragement of ‘idea power’ (Kanter, 1987). It underlies the firm’s success in an at-tempt to be different and innovative leader. Significantly, the quest is for product superi-ority- seeking product breakthrough and differentiation in order to gain competitive advan-tage. It requires hard-working and tough decision to launch such radical innovation and manage consumer uncertainty. Yet, most of companies fail to launch the new product that captures consumer’s interest. Business Week states: As the consumer market for technol-ogy soars, companies that sell stuff ranging from cellular phones and computers to soft-ware and Internet services have some surprising blind spots about who their customers are and what motivates them (Judge, 1998). Most of the times, a very new to the world inven-tion introduce behaviour change that is discontinuous from existing behaviour and some-times this is rather complicate and cause doubt and unfamiliarity. However, one that wisely manage uncertainty and motivate consumer to embrace it will potentially win the battle. Business Week (2008a) ranks the world’s top 100 brands every year based on brand value or projected future earnings. It is interesting to note that most of the top global brands could be categorized as high-tech brands. Apple was ranked number 24 on this list in 2008. “Its products are hotter than ever, in part because of price cuts and clever advertising. Still, investors continue to fret over CEO Jobs’ health” (Business Week, 2008a, p.25).
Furthermore, Once again, Apple’s design whizzes lead the list in all three key strategic re-gions: Asia, Europe and North America, followed by Google’s search geniuses and To-yota’s hybrid car mavens in The World’s 50 Most Innovative Companies in 2008& 2009 by Business Week (2008b, 2009). From this two significant rankings, we can see that it is about time to get much more scrutiny with the innovation and we are curious about how Apple is able to maintain the leader position in the innovation market.
Apple iPhone is one of the most talk of the town innovation at the moment. It is the de-vice that integrates a mobile phone, an iPod music player and real Internet web application with a Multi Touch user interface which allow users to fully control the phone by just a finger touch. Looking around us, only few people do not know an iPhone. Most of our friends own it and they enjoy using it with the finger touch control.
“iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone” said Steve Jobs (Apple Inc., 2007a, p.1). Is it different to the wide array of devices available today? Will it have a great impact to consumer behaviour as iPod did be-fore?
The impact of radical innovation to consumer behaviour through the case study of iPhone aims to provide
an understanding of innovation, diffusion and adoption process, marketing communication and consumer behaviour as ongoing processes with a range of factors affecting success. Readers will gain an understanding of the strategic process by which marketers come up with creative product idea, launch the innovative product into the competitive marketplace and what factors that motivate consumer behaviour, obstacles that have to be overcome to bring an invention to market and the key drivers that influence the successful diffusion of
1.1 Radical innovation & Incremental innovation
According to Schilling (2008), the radicalness might be conceived as the combination of
newness and the degree of differentness. A technology could be new to the world, new to an
industry, new to a firm, or new merely to an adopting business unit. The most radical inno-vations would be new to the world and exceptionally different from existing products and processes.
Some researchers refer to breakthrough innovations as revolutionary (Shanklin & Ryans, 1984). And they are developed in supply-side markets (Maney, 1999). Supply-side markets are characterized by innovation-driven practice, in which a company’s goal is to achieve profitable commercial applications for laboratory output; research & development (R&D) is the key mover behind marketing efforts, and specific commercial applications or targets are considered only after the innovation is developed. For these reasons, these markets are sometimes referred to as ‘technology-push’ situations (The Open University, 2009).
The technology push model is a simple linear model which suggests that the innovation process starts with an idea or a discovery – it is sometimes called ‘idea push’ (The Open University, 2009).
Figure 1.1 Technology push model (The Open University, 2009).
In his book Enabling Innovation, Douthwaite (2002) criticised this process and dubbed it the ‘over-the-wall model’. An R&D team assumes it knows enough about the users’ needs to develop a new product without involving them in its specification or design. The team simply develops the product and tosses it ‘over the wall’ to users in the belief that there’s a need for it, the technology is complete and ready to use, and users are technically skilled enough to use it without help (The Open University, 2009).
On the other hand, market pull model indicates that a successful approach to innovation would be to research the market thoroughly first, assess what needs exist, how far they are met by existing products and processes and how the needs might be met more effectively by means of a new or improved innovation (The Open University, 2009). Incremental in-novations often occur in this demand-side markets (Maney, 1999), in which product char-acteristics are well defined and customers can articulate their needs.
In addition, an incremental innovation might not be particularly new or exceptional; it might have been previously known to the firm or industry and involve only minor change from existing practices (Schilling, 2008). For example, changing the configuration of a cell phone from one that has an exposed keyboard to one that has a flip cover or offering a new service plan that enables free weekend minutes more would represent continuous in-novation.
However, the radicalness of an innovation is relatively, and may change over time or with respect to different point of view. An innovation that was once considered radical may eventually be considered incremental as the knowledge base underlying the innovation be-comes more common. Furthermore, an innovation that is radical to one firm may be in-cremental to another or it is viewed as continuous in the eye of innovating firm but it is a
1.2 Telegraph: The historical radical innovation that changed
consumer behaviour.
By 1830 the industrial revolution was tremendously rising. In particular to communication industry, it was radically changed between 1830 and 1899. It can be regarded as a revolu-tion within the industrial revolurevolu-tion. After Michael Faraday succeeded in exploit the rela-tionship between electricity and magnetism which could be used to instigate movement in the motor or generate electricity in the dynamo. A series of innovations followed in the wake of electricity’s mechanical liberation from the shackles of the chemical battery. The electric telegraph, fax machine, telephone and wireless radio had fundamentally shaped the new way of human socialization (Dyson & Uhlig, 2004).
Prior to the electrical telegraph, all but very small amounts of information could be moved only as fast as physical transportation (historically, human or animal) could travel. The
in-vention of telegraph had replaced the horseback messenger as the means of conveying information over long distances. The telegraph freed communication from the constraints of geography boundlessly (Carey, 1989). It isolated the message (information) from the physical movement of objects or the process (Wark, 1997).
Worldwide telegraphy also changed the gathering of information for news reporting. Since the same messages and information would now travel far and wide, the telegraph demanded a language stripped of the local, the regional; and
colloquial. Media language had to be standardized, which led to
the gradual disappearance of different forms of speech and styles of journalism and storytelling. It is believed that objective journalism finds its roots in the communicative structures of the telegraph. This led to transmission of news
without the luxury of detail and analysis (Carey, 1989).
In addition, the electric telegraph revolutionized communications behaviour between indi-viduals and nations and had far-reaching effects on society at all levels. New lifestyle found when romances blossomed over its cables, there were weddings by telegraph. On the other hand, it spawned new crimes, prompting governments to attempt with little success to regulate the medium. The telegraph also made dozens of new enterprises possible and made others redundant. The electric telegraph network not only radically refined the hu-man connection but also laid the foundations for the mass communications technologies that followed (Dyson & Uhlig, 2004).
As one of the following technology, telegraph led to radio and then mobile telephony. The work of Bell, Edison and others on improving the telegraph and transmitting sound along wires led the way to wireless transmission – Marconi was transmitting Morse code mes-sages from ship to shore in 1897 and eventually across the Atlantic in 1901. The first commercial transatlantic radio voice service began in 1927. The first radiotelephone service for vehicles was introduced in the US in 1946 (The Open University, 2009).
In 1947 microwave radio transmissions started to be used for long-distance telephony and by the early 1960s telecommunications satellites connected people around the world. The first portable cellular phone appeared in 1979. Today’s mobile phones might seem like a
Figure 1.2 A man operating an electro-magnetic
tific discoveries and developments in technology that leads to one another (The Open Uni-versity, 2009).
As with many discontinuous innovative technologies, it is difficult to claim that people were demanding its invention. Most people were satisfied with the existing means of com-municating across distances. It took a good deal of vision to foresee that the ability to speak to others at a distance offered by a mobile phone would eventually replace the tele-graph in business and the letter in personal communications. On top of that, it took a greater deal of imagination to foresee that people across the world will be interconnected by just one click. And these capacities will be integrated creatively to fully function by just one finger touch on a glass surface of a small smart phone called iPhone.
People are not expressing a need to be able to communicate more rapidly and what more they could do on their phones. But once the means become available to do so they willingly take advantage of the new technology. Then positive feedback takes over and the better the technology become the more people get used to its benefits and adapt themselves for it. Developments in technology can create a need that provides a ready market for improved versions of the technology. And so it goes on.
2 iPhone Case Study
iPhone is a portable device that provides not only a typical phone call feature but also a fully functional web browser, an email client, a visual voicemail, a music player, a video player, and web applications. iPhone has delivered new user interface concepts, consisting of a built-in accelerometer which changes the display from movement, vibration, and shock de-tections of the phone and a multi-touch user interface which allow users to fully control the phone by tapping, flicking, or pinching the screen with one or several fingers (Apple Inc., 2008a). See figure 2.1 for the iPhone components.
Figure 2.1 iPhone components (Apple Inc., 2008a).
iPhone came with state-of-the-art user interfaces and applications that suit people lifestyles and needs. “iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone,” said Steve Jobs, Apple’s CEO. “We are all born with the ulti-mate pointing device—our fingers—and iPhone uses them to create the most revolution-ary user interface since the mouse.” (Apple Inc., 2007a, p.1).
Figure 2.2 iPhone demonstrating a built-in accelerometer (Apple Inc., 2009b).
iPhone integrated three key products—a mobile phone, a widescreen iPod with touch con-trols, and an Internet communications device with desktop-class email, web browsing, searching and maps—into one small and lightweight handheld device (Apple Inc., 2007a).
with those innovative user interfaces (Apple, 2009a). In 2008, Apple has released the iPhone’s software development kit (SDK) which attracts group of developers to create over 35,000 applications for iPhone (Apple Inc., 2009d).
2.1 iPhone as a Radical innovation?
Technological innovation can come from various sources and take many forms. Different types of innovation require different kinds of underlying knowledge and offer varying op-portunities for organizations and society, and they pose different demands upon producers, users, and regulators. This dimension is useful for understanding some key ways that one innovation may differ from another and why we might categorize iPhone as a radical inno-vation.
The radicalness can also lead to distinctive eras of industry. Anderson and Tushman (1990) argued that a technological breakthrough, or discontinuity, initiates an era of intense tech-nical variation and selection, culminating in a single dominate design. As mentioned by Tomi Ahonen (2007), an independent 3G strategy consultant, the mobile telecoms world would count its time in two eras. The Era BI: time before the iPhone, and the ERA AI: time after the iPhone. Ahonen (2007) analysed these two eras through the capabilities of smart phones such as handsets, mobile Internet capabilities, etc. and the effects on in-dustries e.g. media industry, advertising, and so on. Following are three major points that we can obviously see the distinction between two eras: handsets, mobile Internet, and me-dia industry.
Firstly, the handsets capability, Ahonen (2007) pointed out that more than outwardly de-sign, is the internal software on user interface. Since the iPhone, most reviews of smart phones compare all new high-end phones with the iPhone and try to see if they are being
almost as good as the iPhone. Secondly, the mobile Internet capability, unlike most early
Inter-net-capable monochrome WAP phones or modest speed GPRS phones with tiny colour screens, iPhone offers the sharp 3.5” screen and its powerful web access software. This capability has a big impact on the mobile Internet industry as well as the value-added ser-vices industry of mobile telecommunications. Thirdly, considering the media, not only the music industry that iPhone has taken a majority due to its iPod application, but also the rest of media industries such as radio, TV, newspaper, and video-gaming in which we could ultimately foresee an impact on those industries from iPhone (Ahonen, 2007).
According to Derene (2007), recent smart phones in the market have several capabilities that serve not only business functions such as email and Internet but also entertainment functions such as high-resolution camera, music & movie player for non-business users. Many companies such as Palm, Research In Motion (BlackBerry) and Microsoft (Windows Mobile operating system) have created such multi-purpose smart phones but there was still slow evolution among them until the appearance of iPhone. The problem of other smart phones is that although most functionalities were fulfilled, they were frustratingly difficult to use. Hence, Popular Mechanics has conducted a comparison between iPhone and other seven competing smart phones and the result showed that iPhone received an overall ‘A’ grade due to its multimedia flexibility and ease of use as well as a superslim and buttonless appearance. They admitted that the intuitive interface of iPhone guided the testers to songs, photos, web pages and other functions in less than half the time of the nearest com-petitors (Derene, 2007).
2008). Most experts and technology reviewers thought this was a serious deficiency. “Typ-ing on glass? You have to be kidd“Typ-ing! If you did a customer survey you’d get the same reac-tion” Baker (2008, p.21) said. But Steve Jobs and his engineers recognized that this feature enabled the use of a large display, valuable for many of the other functions such as web browsing. In these other modes when the keyboard is not needed it simply disappears, something a real keyboard could not do. Seemingly, this product has succeeded in spite of conventional wisdom or an expert’s dislike of it. Having said that, we consider iPhone as the result of a technology-driven and also a visionary leader who looks at a different way to do something, quite apart from how it has been before. Conventional marketing testing is far less useful in this case.
In the view of the radicalness characteristics in iPhone, Apple Inc. (2007a) has embedded the radical innovative technologies through its three main elements: Phone, iPod (music & video player), and Internet. These key elements will be described as following;
2.1.1 iPhone as a Mobile Phone
In addition to typical mobile phone features such as making phone calls, syncing contact information from personal computers, and calendar application, iPhone was pioneering an industry first Visual Voicemail which lets users look at a list of their voicemails, decide which messages to listen to, then go directly to those messages without listening to the prior messages, just like an email system (Apple Inc., 2007a).
Considering the SMS application, iPhone makes use of its new user interface,
a full QWERTY soft keyboard, to allow users easily send and receive SMS
messages in multiple sessions, similar to an instant messaging and chat style. When users type, iPhone presents them with a full soft keyboard which is predictive to prevent and correct mistakes, making it much easier and more efficient to use than the small plastic keyboards on many smart phones. Additionally, iPhone features a camera and a photo management application that allows users to browse their photo library with just a flick of a finger. Photos can be easily attached to email or synced to personal computers (Apple Inc., 2007a).
2.1.2 iPhone as a Widescreen iPod
iPhone lets users enjoy all their iPod content, including music, audiobooks, audio podcasts, video podcasts, music videos, television shows and movies. These contents can be synced from personal computers to iPhone. iPhone also features touch controls which users can scroll through entire lists of songs, artists, albums and playlists with a flick of a finger as well as a Cover
Flow – an Apple’s technology that allows users to navigate music library by
selecting album cover artwork. In addition, with a 3.5-inch widescreen display, iPhone offers an ultimate way to watch TV shows and movies on a pocketable device, with touch controls for play-pause, chapter forward-backward and vol-ume (Apple Inc., 2007a).
Figure 2.3 Phone icon (Apple Inc., 2008a) Figure 2.4 iPod icon (Apple Inc., 2008a).
2.1.3 iPhone as a Internet Communications Device
iPhone contains a rich HTML email client which fetches email in the back-ground from mail services and displays photos and graphics right along with the text. iPhone is compatible with most industry standard IMAP and POP based email services, such as Microsoft Exchange, Apple .Mac Mail, AOL Mail, Google Gmail and most ISP mail services (Apple Inc., 2007a).
In addition, iPhone features the most advanced web browser on a portable device with a version of Safari web browser for iPhone. Users can see any web page in the way it is designed to be seen, and then easily zoom-in to expand any section by simply tapping on iPhone’s display with their fingers. Users can surf the web over Wi-Fi, EDGE, or 3G and can automatically sync their bookmarks from their personal computers. As partnership between Apple Inc. and Google Inc., iPhone’s Safari web browser also includes built-in Google Search so users can instantly search for informa-tion on their iPhone just like they do on their computers. Moreover, iPhone also includes Google Maps, featuring Google’s maps service application. Users can view maps, satellite images, traffic information and get directions from iPhone (Apple Inc., 2007a).
2.2 iPhone as a design icon
According to Scanlon (2007), Apple products come with a minimalist aesthetic and churn-ing out shiny appearance. Every component even cords and ear buds, for example, is held to the same exacting design standards. Grossman (2007) argued that iPhone is one of a typical piece of design from Jonathan Ive, Apple’s head of design, which reflects to an aus-tere, abstract, platonic-looking form that somehow also manages to feel warm and organic and ergonomic. As a part of iconic iPhone design, Ive’s won an incredibly rare D&AD Black Pencil, which is a marker of creative genius. D&AD is one of the most important awards for creative talents of the advertising and design industries (Beale, 2008).
During the interview with Ive by the Design Museum, Ive noted that Apple was re-establishing the core values which are to pursue design and innovation as an important part of the firm’s direction. In the 1970s, Apple talked about being at the intersection of tech-nology and the arts. The defining qualities are about use: ease and simplicity. Caring beyond the functional imperative, they also acknowledge that products have a significance way be-yond traditional views of function. He admitted that materials, processes, product architec-ture and construction are huge drivers in design (Design Museum, 2007).
Philippe Spruch, a founder of LaCie, pointed out that “It’s not that Apple design is better or worse than the design of the Sony Vaio. But you feel that it’s part of the DNA. They are crazy about every detail, and you feel that. Today, many more companies invest in design, but they do it because they are forced to, not because they like it, and I think you can feel that in their products.” (Scanlon, 2007, p.2). Regarding Spruch’s point of view, we can see that Apple has embedded a vibrant design culture in its organization. To create such a stunning piece of art, especially for high technology devices, it requires skills, creativity, and a high commitment to deliver a better customer experience.
Figure 2.5 Internet icon (Apple Inc., 2008a).
3 Purpose
The purpose of this study is to investigate how a radical innovation is adopted and analyze the impact it has on consumer behaviour to understand the key influential driver of success through the case study of iPhone.
3.1 Hypotheses
Since today we live in a time of swiftly technological advances and relative affluence, in our view, technology becomes a universal language. It connects people around the world by enabling instant communication on a global scale. Thus, we would like to investigate in three key strategic regions following The World’s 50 Most Innovative Companies 2008 survey by Business Week (2008b); Asia, Europe and North America. We hypothesize that iPhone is a radical innovation that introduces behaviour change and it will have an effect on consumer behaviour. We also assume that there will possibly be some differences in consumer attitude and reaction toward radical innovation due to diverse cultural and geo-graphical background.
In addition, we anticipate that psychographics profile such as lifestyle and attitude may play an important role in innovation adoption. Differences in ages and lifestyles among the interviewees will add to diverse perspectives and insights assumedly. Youngster and busi-ness man mobile users are our main interests as we think that these two groups are the most sensitive and enthusiastic case toward technological innovation adoption in particular to iPhone technology. Based on our hypothesis, we intentionally identify the psychographic profile of these two groups as below;
Youngster: They are exposed to new innovation and excited to try new things. They have resource and access to evolving and new technologies. They want and expect to have con-trol over their media experiences. Life is all about fun and technology is mostly for their entertainment. Mobile phone for them is rather for social communication and entertaining device. We call them ‘Young tech savvy’.
Business man: They have to catch up with news, trend and technological movement in the market. They have resource and access to evolving and new technologies. Life is all about work and achievement. Mobile phone is the most important device for business connec-tion and technology serves them as work assistance. We call this group ‘Professionals’.
3.2 Research Questions
All above have led us to the following research questions.
• How an iPhone is adopted by consumer and what is the key influential driver of innova-tion diffusion?
4 Frame of Reference
This section examines a major aspect of consumer behaviour of the acceptance of new product and services. It is drawn from the area of research known as the diffusion of
innova-tions. The central interests in this particular area have been to better understand how the
ac-ceptance of a new product spreads within the market and the individual consumer deci-sion-making process that lead to the acceptance and adoption.
4.1 The diffusion of innovation and adopter categories
S-curves are also often used to describe the diffusion of a technology. It is obtained by plotting the cumulative number of adopters of the technology against time. This depict processes which is initially slow when an unfamiliar technology is introduced to the market, it accelerates as the technology becomes better understood and move into fast growth when utilized by the mass market, and eventually the market is saturated so the rate of new adoptions declines.
Figure 4.1 Diffusion of innovation (Rogers, 1983).
S-curves in technology diffusion are often explained as a process of different categories of consumer adopting the innovation at different times. One typology of adopter categories that gained prominence was proposed by Rogers (1983).
4.1.1 Innovators
Innovators are the first individuals to adopt an innovation and are comprised of technology enthusiasts; people who appreciate technology for its own sake and are motivated by the idea of being a change agent in their reference group. They love to get their hands on the latest and greatest innovations. Extremely adventurous in their purchasing behaviour, they are comfortable with a high degree of complexity and uncertainty. Innovators typically have access to substantial financial resources (and thus can afford the losses incurred in un-successful adoption decisions). Though they are not always well integrated into a particular social system, innovators play an extremely important role in the diffusion of an innovation because they are the individuals who bring new ideas into the social system. Although not much revenue comes from this group, it is the key to accessing the next group. Rogers (1983) estimated that the first 2.5 percent of individuals to adopt a new technology are in this category.
4.1.2 Early adopters
The second category of adopters is the early adopters or as visionaries. These people are at-tracted by high risk, high reward projects, and because they envision great gains in competi-tive advantage from adopting new technology, they are not very price sensicompeti-tive. So they are also the first constituency who can and will bring real money to the table. Early adopters are well integrated into their social system and have the greatest potential for opinion lead-ership. Early adopters are respected by their peers and know that to retain that respect they must take sound innovation adoption decisions. Other potential adopters look to early ad-opters for information and advice, thus early adad-opters make excellent missionaries for new products or processes. Rogers (1983) estimated that the next 13.5 percent of individuals to adopt an innovation (after innovators) are in this category.
4.1.3 Early majority
Rogers (1983) identifies the next 34 percent of individuals in a social system to adopt a new innovation as the early majority. The early majority are the pragmatists. Rather than inspired by revolutionary changes, this group is motivated by evolutionary changes to gain more productivity enhancements in their needs. They are typically not opinion leaders, but they interact frequently with their peers.
Pragmatists generally want to reduce risk in the adoption of the new technology and there-fore follow three principles (Moore, 1995):
• When it is time to move, let us all move together. This principle is why adoption increases so rapidly at this point in the diffusion process, causing the landslide of demand.
• When we pick the vendor to lead us to the new paradigm, let us all pick the same one. This obviously determines which firm will become the market leader.
• Once the transition starts, the sooner we get it over with, the better. This is why this stage occurs very rapidly.
From a marketing perspective, these people are not likely to buy an innovation without a reference from a trusted colleague. The question is who is considered as a trust colleague by a pragmatist. It is neither visionary nor enthusiast who has a different view of technol-ogy. How to get just one pragmatist to buy when the first will not buy without another pragmatist’s reference? Yet, pragmatists are the mainstream market.
4.1.4 Late majority
The next 34 percent of the individuals in a social system to adopt an innovation are the late majority, according to Rogers (1983). They are termed as conservatives. Like the early ma-jority, the late majority constitutes one-third of the individuals in a social system. Those in the late majority approach innovation with a skeptical air and may not adopt the innovation until they feel pressure from their peers. The late majority may have scarce resources, thus making them reluctant to invest in adoption until most of the uncertainty about the innova-tion has been resolved. They are motivated to buy innovainnova-tion just to stay even with the competition and often rely on a single, trusted advisor to help them make sense of tech-nology.
4.1.5 Laggards
The last 16 percent of the individuals in a social system to adopt an innovation are termed laggards. They are technology skeptics who want only to maintain the status quo. They may base their decisions primarily upon past experience rather than influence from the social network, and they possess almost no opinion leadership. They are highly skeptical of inno-vations and innovators, and they must feel certain that a new innovation will not fail before adopting it. The almost only way they might buy is if they believe that all their other alter-natives are worse and that the cost of justification is definitely valid (Rogers, 1983).
4.2
Crossing the Chasm
Figure 4.3 Crossing the chasm (Moore, 1991 & Searls, 2003).
According to Moore (1991), the marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries (early adopters) and pragmatists mainstream (early majority). The chasm is derived from critical differences between these two. Vision-aries want to be the first in bringing new ideas to the market, but pragmatists want to go slow and steady. Visionaries will think and spend whereas pragmatists are prudent and want to stay within the confines of reasonable expectations and budgets. The Chasm arises be-cause the early market is saturated but the mainstream market is not yet ready to adapt. Thus, there’s no one to sell to.
The nature of firm’s marketing strategy in selling to visionaries is a very different than the marketing that is required to be successful with pragmatists. Many firms do not understand this difference and are unable to make the necessary shift in strategies to be successful (Moore, 1991).
inno-haviour by the customer) are still best described by the original technology adoption lifecy-cle. Confusion between continuous and discontinuous innovation is a leading cause of fail-ure for high tech product (High Tech Strategies Inc., 2007).
4.3 The Innovation Decision Process
This process concerns how a new product is accepted by those who will adopt it. Some re-searchers recommended that the focus be expanded to explore consumers’ current use be-haviour, expectations for future use and level of satisfaction (Price & Ridgway, 1984). The focus of this is the stages through which an individual consumer passes in arriving at a de-cision to try or no try, to continue using or not continue using a new product with an up-date into a more general in decision-making model (Gatignon & Robertson, 1985).
• Knowledge - Consumers are exposed to the innovation’s existence and gain some understanding of how it functions
• Persuasion (attitude formation) - Consumers form favourable or unfavourable attitudes toward the innovation.
• Decision - Consumers engage in activities that lead to a choice to adopt or reject the innovation.
• Implementation - Consumer put an innovation into use.
• Confirmation - Consumers seek reinforcement for their innovation decision, but may reverse this decision if exposed to conflicting messages about the product (Rogers 1983).
Figure 4.4 The innovation decision process (Schiffman & Kanuk, 1987).
This model depicts in diagrammatic form the operation of the innovation decision process. Briefly, it suggests a number of prior conditions: felt needs and social system norms and characteristics of the decision making unit: socioeconomic status and personality factors that influence the reception of information about the product innovation during the
know-ledge stage. At the persuasion (attitude formation stage), the consumer is furthered
influ-ence by communications channels and by perceptions of the characteristics of the innova-tion. Additional information received during the decision stage enables the consumer to
as-stage, further communication is received as the consumer puts the innovation to use. The final stage, confirmation, is also influenced by communication sources; it is at this stage that consumers evaluate their purchase experiences, look for support for their behaviour, and decide to continue or discontinue using the product (Schiffman & Kanuk, 1987).
4.4 Consumer involvement and attitude dynamics
The level of consumer involvement also influences the extent of consumer information processing and may therefore affect the direction of the attitude behaviour relationship. When consumers believe a purchase decision is highly relevant and important and are will-ing to exert effort to acquire information, we consider such concern to be indicative of
high involvement such as luxurious or hi-tech product. In contrast, when consumers
be-lieve a purchase is unimportant and see little reason to acquire product information, we consider such concern to be indicative of low involvement for example, consumer products in the supermarket (Schiffman & Kanuk, 1987). A practical four models describes informa-tion search between high involvement and low involvement purchases is shown below.
Table 4.1 Four Consumer Involvement/Brand Differentiation Decision-Making Models (Schiffman & Kanuk, 1987).
Involvement Level
High Low
High
(Active Learning Model)
Awareness/Beliefs Attitudes Behaviour (Low-involvement Model) Awareness Behaviour Attitudes Level of Perceived Brand Differentiation Low (Dissonance-Attribution Model) Behaviour Attitudes Beliefs (Modified Low-involvement Model) Awareness Behaviour
The model portrays consumers as progressing through a three-stage hierarchy from aware-ness and knowledge to the formation of attitudes, and then to behaviour. It is a classical example of Think before you act.
Active learning Model
The active learning model, as depicted in the upper left is based on traditional cognitive learning theory. Consumers are active learner and engage in extensive problem solving. They see the brand alternatives as quite different in their benefits and satisfaction ability. Consumers are likely to perceive decisions involving high relevance and high brand differ-entiation as quite risky; therefore, the acquisition of information about the product is ne-cessary for decision making (Schiffman & Kanuk, 1987).
Dissonance-Attribution Model
The dissonance attribution model (lower-left) represents a decision situation that couples high relevance to the consumer with little or no perceived differences among brands. The three stages of this model correspond to the behaviour-before-attitude that characterizes post-purchase dissonance theory and attribution theory (Schiffman & Kanuk, 1987).
Original Low-Involvement Model
In this case, the three-stage hierarchy begins with a progression from awareness to behav-iour, and then from behaviour to attitudes. The model suggests that awareness of alterna-tives is likely to be sufficient information for consumers to make a purchase decision under conditions of product relevance. Following from this, attitudes are depicted as an outcome of consumer’s experiences with the brand and these thoughts are formed as consumers es-tablish preferences for the brand that provides them with the greatest amount of satisfac-tion (Schiffman & Kanuk, 1987).
Modified Low-Involvement Model
The final model (lower right) portrays a situation where consumers have little involvement and perceive little difference between brands in the market. In this case, the model consists of only two stages- brand awareness and behaviour. The consumer perceives the various brands to be so uniform that pre existing attitudes toward the overall product category are sufficient for all brands, and there is no additional need to establish brand specific attitudes (Schiffman & Kanuk, 1987).
4.5 Sources of influence in Attitude formation
How consumer attitudes are formed and how they are changed are two closely related is-sues of considerable concern directly to behaviour change. Attitudes may be established, identification of the sources from which consumers obtain information, advice, and influ-ence. The principal sources that affect the formation of consumer attitudes include experi-ence, personal influexperi-ence, and mass media (Schiffman & Kanuk, 1987).
4.5.1 Direct and past experience
The primary means by which attitudes are formed toward goods and services are through the direct experience of trying and evaluating them. Recognizing the direct experience, marketers usually attempt to stimulate trials of new product by offering trial samples and showing demonstration. If a product proves superiority or satisfactory, it is likely that
con-sumers will form positive attitudes and possibly purchase the product and enjoy adopting it (Schiffman & Kanuk, 1987).
4.5.2 Personal Influence
As we live in society, we contact with others especially family, friends and admired indi-viduals, we acquire attitudes that influence our lives. The family is a significantly important source of influence when it comes to the establishment of attitudes. Friends and admired individuals play an important role later on. In particular to attitude toward the high-tech product, professionals and opinion leaders are the critical influential source of attitude formation. Thus, personal influences are often used as an effective tool of advertising by taking advantage of the power of contacts and shared interests to stimulate word-of-mouth (Schiffman & Kanuk, 1987).
4.5.3 Exposure to the mass media
It seems inevitably that in a country where people have easy access to newspaper and an almost infinite variety of general and special interest magazines and television and cable channels, mass media advertising would be an important source of information to influence our attitudes. Particular to our study, we would like to stress how mass media communica-tion is able to form positive attitude toward iPhone object and eventually lead to adopcommunica-tion process as described in the next chapter (Schiffman & Kanuk, 1987).
4.5.4 Personality factors
Consumer own personality is also another source that plays a vital role in attitude forma-tion. To illustrate, introverted individuals are likely to express their introversion in negative attitude toward flashy cars, dancing classes and public activities etc. Similarly, consumer at-titudes toward new products and new consumption situations are strongly influenced by their own personality characteristics (Schiffman & Kanuk, 1987).
Most discussions of both attitude formation and attitudes change stress the view that con-sumer develop attitudes before they act.
The attitude-behaviour relationship is relevant to the prediction of consumption. In this case we concern the demand for new product such as iPhone, before they are placed on the market and the satisfaction and impact when consumers adopt it. Can we use people’s intentions to predict consumption? If attitudes affect consumption this sort of analysis may help in the modification of product design and in the choice of strategic communication strategies.
5 iPhone Strategy Marketing Communications
5.1 Steve Jobs, the marketing CEO
According to Graham (2007a), Apple’s arsenal of getting public attentions holds lessons for any company: designing cool, innovative products, streamlining the product line, investing in memorable ads, working on customer base to make customers feel special and create word-of-mouth agents, and most importantly keeping the world and media surprised, to generate gobs of attention.
Marketing guru Peter Sealey, a professor at Claremont Graduate University, called Steve Jobs, the CEO of Apple, “the best marketing CEO in the business.” (Graham, 2007a, p.1). Sealey expressed his reflections on the outstanding strategies that Apple and Steve Jobs could give a good example for other companies. Main strategies are described as follows: 5.1.1 Make outstanding and innovative products
Apple is obsessed with design and innovation. The history of inventing and designing groundbreaking products in-house brings on the spotlight (Graham, 2007a).
5.1.2 Keep everything simple
Jobs cut off the product line to make it easier for consumers to focus after his return to Apple in 1997. While rivals offer about 100 models products, often with non-memorable product names, Apple has fewer than 20 options, with simple names such as the Mac Mini, MacBook, iMac, PowerMac, iPod Classic, iPod Touch, iPod Nano, iPod Shuffle, and iPhone (Graham, 2007a).
5.1.3 Create memorable and vibrant ads
Graham (2007a) stated that Apple was long time using a hip and effective advertising. Mi-chael Markman, a former director of advertising for Apple in the 1990s, highlighted that a dazzling iPod ad, with dancing hipsters set against a silhouette, is a wordless product demo. It ends with a great tag line that made the product really simple to understand for the masses, ‘One thousand songs in your pocket.’ He noted that no one really understood what an MP3 player was until that tag line.
Apple introduced its first ad for the iPhone on the Academy Awards telecast, a 30-second smorgasbord of TV and movie clips, featuring actors from Lucille Ball and Dustin Hoff-man to the animated Betty Rubble from The Flintstones saying hello into a phone. Accord-ing to Sealey, despite Apple spends much less on advertisAccord-ing than its rivals do, the ads just standout because they were so good (Graham, 2007a).
5.1.4 Showcasing the taste-makers
With a declining market share for computers, Apple had to work harder to get its products in front of the public. According to Jeffrey Cruikshank, the author of The Apple Way, Apple has been very PR-centric, pushing to get its products reviewed and used as product placement in movies and TV shows. Apple computers have appeared on screen more than 1,500 times in the past 20 years on TV shows and movies including 24, Sex and the City, Seinfeld and You’ve Got Mail (Graham, 2007a).
5.1.5 Put on a show
According to Graham (2007a), unlike other technical companies such as Microsoft, Intel, Oracle and Adobe which stage events to unveil products or announcing operating system or software upgrade, Apple consistently succeeds in turning those kinds of events into headlines, because of Jobs’ endless devotion to fine-tuning.
Harvard Business School professor, David Yoffie also highlighted that Steve works harder than almost any CEO at being the master showman. And according to Charles Wolf, an analyst for Needham & Co., Apple’s track record at keeping details of new products close to the vest produces a snowball effect. Steve invites the general public, and they flock to these shows. It seems that the press is a willing accomplice. An evangelist, who worked with Jobs on planning speeches, revealed that the actual setup and rehearsal takes a week, but the planning takes months. There are constant meetings about it, and they are very intense (Graham, 2007a).
Regarding the publicity from the iPhone announcement, Yoffie gave an opinion that it will drive people into the stores to test the products and help sell a lot more iPods and iPhones. Think of all that publicity as a substitute for marketing costs and an opportunity for Apple to dramatically increase its market share (Graham, 2007a).
5.2 iPhone Launching Strategy
Introducing an iPhone during MacWorld 2007 event was a great phenomenon in which Apple has successfully pioneered a next generation smart phone to the market. Kahney (2008) argued that the launch of iPhone in MacWorld 2007 was the biggest to date. It sin-gle-handedly eclipsed the much larger Consumer Electric Show in Las Vegas, which was happening at the same time and was more important economically than MacWorld. Be-sides, the iPhone launch also overshadowed announcements from much bigger companies, including the introduction of the consumer version of Windows Vista, and became the biggest technology story of the year (Kahney, 2008).
5.2.1 Launch timing
According to Schilling (2008), instead of trying to decrease costs and increase timing of en-try options by launching new products as early as possible, a firm should consider to use its product launch timing to take advantage of business cycles or seasonal effects, to position its products efficiently with respect to previous generations of related technologies, and to ensure that product capacity, and complementary goods and services are in place.
In Q3 2006, Gene Munster, a senior analyst at Piper Jaffray, a U.S. research and investment firm, reckoned that Apple would launch an iPhone around December 2006 to March 2007. According to his analysis, there were already approximately 25 handsets that come with music functionality and are available to subscribers of U.S. mobile operators. Due to the in-flection point in the music-enabled handset market, Apple was looking for the perfect time to introduce its iPhone. Munster believed that an introduction of iPhone would draw more attention to the music-enabled handset market and it would contribute a significant growth expectation implied in industry analyst market forecasts. Since music-enabled handsets are being introduced by potential handset maker competitors and are being met with increasing success, he believed Apple would likely need to get in the game fairly soon to avoid missing the early adopters (Marsal, 2006).
Apple Inc. (2007a) introduced the first generation of iPhone on January 9, 2007, during the time that Munster had reckoned. Considering related technologies, iPhone came with common technologies that can be seen in typical mobile phones such as address book, SMS, build-in camera, Bluetooth, Internet browsing etc. Moreover, it has featured several technologies that were being used in previous Apple’s devices and operating systems such as iPod - a music player and a video player, Cover Flow – a user interface in OS X to navi-gate music library by selecting album cover artwork, Safari – a web browser in OS X with built-in Google Search (Apple Inc., 2007a). As iPod is one of the key features of iPhone (Phone, iPod, Internet), it is obviously seen that Apple has pioneered its first handset by considering the timing of entry to the music-enabled handset market.
5.2.2 New product preannouncement
“How would you feel if you’d seen dozens of ads for a new product, but when you went to buy it, you discovered that the product wouldn’t be out for several months?” Or, “What if you read a glowing review of another new product, but were told by the sales person at the store that it hadn’t yet been shipped-and, in fact, would be months before it did?” (Mohr, Sengupta & Slater, 2005, p.337)
Scenario such as these happen regularly in the world of hi-technology, and in that industry, it is called vaporware: products that are announced before they are ready for the market (Yo-der, 1995) or products that are not actually on the market and may not even exist but are advertised (Schilling, 2008).
iPhone was first introduced to the public at the MacWorld event on January 9, 2007. How-ever, Apple had planned to start selling iPhone in the U.S. in June 2007, Europe in late 2007, and Asia in 2008 (Apple, 2007b). After the MacWorld event, it generated a big de-mand and many people keep waiting for its first selling day. According to Apple (2007b), iPhone went on sale at Apple retail stores nationwide on June 29, 2007 and during the first selling week, Apple could sell 270,000 iPhones throughout the United States in the first two days (Graham, 2007b).
This strategy was also applied to the second generation of iPhone, iPhone 3G, which was announced on June 9, 2008 and went on sale on July 11, 2008 (Apple Inc., 2008b). For overall iPhone timeline, see Figure 5.1.
5.2.2.1 Advantages and objectives of Preannouncements
By pre-announcing, firms can potentially reap a pioneering advantage, creating barriers to entry to later entrants. By announcing products before they are fully available, a firm can preempt competitive behaviours. It could also stimulate demand. By helping develop word-of-mouth and opinion leader support, preannouncements can accelerate the adoption and diffusion of innovation when the product does hit the market. In addition to building in-terest for the product among channel members and customers, another factor related to consumer behaviour is to encourage consumer to delay purchasing until the announcing firm’s new product is available. This latter reason is primarily used for big-ticket items that are purchased rather infrequently. Ultimately, one of the key drivers of a firm’s propensity to preannounce is its pursuit of a high-profile leadership position within industry (Calan-tone & Kim, 2000).
Jehoshua Eliashberg, marketing professor at the University of Pennsylvania, pointed out that in pre-announcing, a company let a competitor know what it was up to. But what mat-ters more was a company’s position in an industry. Pre-announcing products seemed to be a practice often followed by industry leaders. And according to research by Michigan State University marketing professor Kim Schatzel and Roger Calantone, companies that pre-announce products tend to be bellwether companies because they have more competitive equity. These firms announce products early to steer an industry’s direction, get support for their ideas and promote future plans. For Apple, the success of iPod also influenced the pre-announcing strategy of iPhone. Marketing professor at the University of Pennsylvania, Christophe Van den Bulte, highlighted that the strength of industry-leading products like the iPod may allow Apple to be more aggressive about its iPhone plans. Adding that lesser rivals may even scrap products based on an announcement. Had the iPod not been a tre-mendous success, the iPhone may have had a different launch strategy, he stated (Wharton, 2007).
Another big advantage of pre-announcing products is to freeze the market. Kendall White-house, senior director of IT at Wharton School of the University of Pennsylvania, noted that with the pre-announcement of iPhone six months in advance, Apple clearly wanted to tell people thinking about buying a cell phone in the next few months that they should wait for the iPhone. Some consumers are obliging. Van den Bulte agreed that companies wanted to create a commitment in the consumer’s mind. By announcing in January, Apple has enticed some people to wait for the iPhone. Such scenario also happened to one of his colleagues who lost his Treo (a smart phone by Palm). Instead of buying a new one, he was using his old phone because he knew he was going to get an iPhone (Wharton, 2007).
5.2.2.2 Disadvantage of preannouncement
Preannouncement can cue competitors to what is coming down the pike, allowing them the opportunity to react to the new world (Robertson, Eliasburg, & Rymon, 1995). Delays in its development turned into an advantage for firm’s competitors, which were able to beat it to market (Mohr et. al, 2005). The risk of cuing competitors is one reason why a firm’s propensity to be a pioneer is negatively related to a firm’s use of preannouncements (Calantone & Kim, 2000).
Previously, touch-screen technology was an afterthought in the smart phone market but Apple has exploited it in a unique way by providing the multi-touch interface which is an easy to use and eye-catching interface. The wow factor surrounding the launch of the origi-nal iPhone in the U.S. was still hard to ignore. However, since the launch of Apple’s iconic
touch-screen pie. The touch-screen mobile phone market has exploded in recent times (Catanzariti, 2009).
In addition, preannouncement can result in cannibalization of the firm’s current product line, caused when customers delay purchases of current products in anticipation of the new ones (Mohr et. al, 2005).
One of the key features of iPhone is iPod – a portable music and/or video player from Apple. It raised a big question that whether the iPhone will cannibalize iPod sales. Two analysts in the mobile device industry shared their opinions and predictions of the iPod and iPhone cannibalization effect. Tim Deal, a senior analyst with Pike & Fischer believed that the iPhone’s high price, along with its limited storage capacity, would probably prevent canni-balization of iPods. Similarly, Avi Greengart, principal analyst for mobile devices at Current Analysis, mentioned that there is still plenty of room in the market for both the iPhone and the iPod. There is a good chance that users might own one of each. He contended that the success of the iPod, though fuelled by many things, is based upon the item’s singular pur-pose. “Although the iPod offers a list of features, its primary purpose is the playback of content,” Deal noted (LeClaire, 2007, p.2).
5.2.3 Marketing communications and public relations
How quickly an innovation spreads through a market depends to a great extent on com-munication between the marketer and the consumer and comcom-munication between consum-ers (Shiffman & Kanuk, 1987). For this reason, researchconsum-ers interested in diffusion have paid particular attention to the transmission of product-related information through vari-ous channels of communication, and to the impact of the messages and the channels on the adoption or rejection of new products.
For consumer behaviour the most obvious kind of persuasive communication comes in the form of advertising, whose primary aim is to persuade people to form or increase positive attitudes or intentions towards a particular product (Statt, 1997).
According to Kahney (2008), before official launching, there were several public relations and marketing communications activities that Apple exploited. Figure 5.2 shows that Apple has delivered messages to its consumers by controlling most communication channels. Some of its strategies are well planned as if there was no intentional planning at all. First, the Apple’s PR invited the press and VIPs to join a special event but slightly gave the in-formation on that event. This created an explosion of blog posts and press articles specu-lating on what Apple would announce. The rumours spread through, not only limited to Mac communities but also in general. The national press such as Wall Street Journal, the New York Times, CNN, and the National Heralds Tribune are all interested in those ru-mours and keen on knowing what product that Apple would introduce to the public in the upcoming MacWorld event. At the same time, the Apple’s PR also offered exclusive in-formation as a behind-the-scenes making of peek at the product to the national news and business magazines such as Time, Newsweek, Fortune, and Forbes just to make people want to know more about its product.
On top of that, Apple’s PR also sent a new iPhone to three most influenced technology product reviewers, who strictly sign a non-disclosure agreement, to review the product and publish their articles on the product launch date. Those three reviewers are Walt Mossberg at the Wall Street Journal, David Pouge at the New York Times, and Edward Baig at USA Today (Kahney, 2008).
With the success of rumours and sneak peek, David Yoffie, Harvard Business School pro-fessor, reckoned that it worth equivalent to 400 million dollars in free advertising from those rumours and having a high attention from the press (Graham, 2007a). After Apple announced the release date of its iPhone in June 2007, consumer traffic to the iPhone 8GB product page dramatically increased by 1,900 percent by the end of December 2007 (PriceGrabber.com, 2008)
Beside the presentation of the new iPhone by Steve Jobs, the most interesting marketing activity is that all information about the new iPhone was planned to publish together at al-most the same time. To be able to succeed on this part, Apple had successfully managed the company secrecy among employees and their business partners during the two-and-a-half years of development. The moment that Steve Jobs presented a new iPhone at the MacWorld event, all marketing mechanisms work in harmony: all secret advertising banners were unveiled, the Apple’s website showed off the new iPhone, the pre-coordinated news-papers, magazines, TV, and radio started publishing the information about the product. And within hours, all advertising poster and billboard were up across the country. The messages in the advertisement were so simple and direct (Kahney, 2008).
5.2.4 Buzz
Buzz is created when cool hunters pick up on the latest fashion and start generating inter-est in the product or service. This is then amplified through the interinter-est of mavens (early adopters), who persuade a large number of new consumers (early majority) to follow their lead and start spreading the buzz further afield (Lewis & Bridger, 2001).
For iPhone, Apple seemed to be carving out a hybrid approach -- pre-announcing a pro-duct but also building buzz by keeping the details secret. While the company announced the iPhone in January, few outside Apple have actually seen the product in action. Leonard Lodish, marketing professor at the University of Pennsylvania agreed the iPhone launch was a theatrical production (Wharton, 2008). The product was still a part of Apple’s secrecy
One major stream of communication research is focused on the relative importance of cer-tain types of information sources on early versus later adoption of new product as we will focus on this in section 9.1: Crossing the Chasm.
