Marketing radically new products requires a dose of familiarity

Consumers adopt innovation only when the costs—and risks—are low, says Vanderbilt marketing professor Steve Hoeffler.


iPadCommercial


When Apple unveiled the iPad, a new kind of tablet computer, critics scoffed.

They pointed out that other tech companies had previously tried—and failed—to crack the elusive market for tablet computers. Commentators also ridiculed the device as an overgrown iPod that fell incoherently between a mobile unit and a laptop.

As it turned out, the critics were very wrong.

Consumers rushed to buy the iPad, at least in part so they could access a new generation of rich-media software available through the well-established App Store. By June 22, 2010, just 80 days after going on sale, the company had sold three million units. Competitors have since attempted to catch up by offering more powerful, cheaper rivals, yet Apple controls about 70 percent of the rapidly expanding tablet market.

The iPad’s launch marks a shining success story in an area known to marketing experts as Really New Products (as opposed to Incrementally New Products). Really New Products enable consumers to do things they can’t accomplish otherwise using items already in the marketplace.
Professor Steve Hoeffler
Steve Hoeffler, a professor of Marketing at the Vanderbilt Owen Graduate School of Management, writes that “consumer response to such products is often difficult to predict and can vary widely depending on how a product is positioned.”

But by taking into account the factors driving perceptions of previously unknown products, managers can devise a clear set of guidelines for how to introduce them. Hoeffler outlines these principles in a chapter included in the new book Cracking the Code: Leveraging Consumer Psychology to Drive Profitability, edited by Steven S. Posavac, also a marketing professor at Vanderbilt’s Owen Graduate School.

When it comes to Really New Products, marketers must bridge familiar and unfamiliar domains for consumers using tools like advertising and product demonstrations, Hoeffler and co-author Michal Herzenstein write.

Guided analogies and mental simulation have proven effective in helping a target audience learn about new products. “Marketers should encourage consumers to concretely visualize themselves using the product rather than abstractly visualizing others using it.”

The first television commercial for the iPad—aired during the 2010 Oscars—begins with someone effortlessly flicking the machine on, then going through a set of familiar activities like reading The New York Times, watching Star Trek, and reading Ted Kennedy’s autobiography, all in a strikingly new way. The shots of the person using the iPad are closely cropped, showing neither a face nor any other memorable characteristics, thereby allowing viewers to imagine themselves whipping around the new features available on the device. If consumers wanted to test-drive the iPad at a local Apple store, this ad gives them a basic level of understanding about the product before using it in person.

By combining familiar items like a Star Trek movie with the new technology, Apple simultaneously showcases the iPad’s differentiating features, while reducing the perceived learning costs—that is, the time and effort necessary to master a new product.

Hoeffler cautions, “When an RNP is especially innovative and complex, its exciting new features may actually reduce product evaluation and preference because consumers may infer that higher learning costs are required.”

Similarly, consumer uncertainty can have a profoundly negative impact on the adoption of Really New Products. “Will society at large and consumers’ close friends and colleagues appreciate their purchase of an RNP and bolster the users’ social status?” Hoeffler asks. “If the answer is unclear, consumers may be reluctant to adopt the RNP (especially the most innovative ones).”

While building consumer awareness for Really New Products is key to their adoption, marketers must do so in a way that highlights never-before-seen benefits in a familiar and clear context.

“The decisions managers face about marketing strategies,” Hoeffler writes, “play an important role in the success (or failure) of an RNP.”

ADDRESSING CONSUMER NEEDS
Marketers must also convince potential buyers that a product’s benefits outweigh any perceived risks.

For example, when airbags were first introduced in automobiles, and later when inventor Dean Kamen unveiled his much-hyped Segway Personal Transporter, the new products presented consumers with physical risks. Adopting a new technology may also entail financial risk. Battles over standardized formats—such as those seen in VHS vs. Betamax, or HD-DVDs vs. Blu-Ray—can take years to resolve, leaving buyers wary about betting on a losing format. “Marketers and engineers face the difficult task of convincing consumers that the [Really New Product] is safe and easy to use.”

Sometimes companies themselves can face confusion over how to categorize a new product. When TiVos were introduced, store managers didn’t know whether to place them alongside TVs or computers. Similar questions arose when digital cameras came onto the market.

To effectively showcase a new product, Hoeffler writes that it helps to understand the four basic categories of customer satisfaction, as described by Japanese researcher Noriaki Kano:

  • Indifferent needs: These are features that customers tend to be completely indifferent to, such as the style of ambient lighting in a car, something that won’t raise or lower satisfaction in any significant way.
  • Basic needs: These are the prerequisites than any product in the category must have, such as good brakes—they won’t raise satisfaction levels, but it’s a deal breaker without them.
  • Performance needs: This is a situation in which better performance, such as increased durability or speed, leads to greater satisfaction.
  • Exciting needs: Innovations that aren’t expected, but can help lead to a competitive advantage—heated seats in a car, for example.


When introducing novel products, marketers can use these satisfaction categories to help define a product as something that’s either familiar, and thereby entails little perceived risk, or as an innovation breakthrough, marking a clear differentiation.

Hoeffler writes that when Chevrolet first introduced its electric car, the Volt, the company characterized its performance as capable of achieving 230 miles per gallon, rather than using the unfamiliar metric of 40 miles per charge. “Thus, when marketers communicate the features that address a performance need, they may limit the perception of newness.”

By contrast, Apple has consistently promoted innovative product features in the “exciting needs” satisfaction category—touch-screens and accessibility to Apps, for example—as a way to emphasize the novelty of its products.

Hoeffler writes that by understanding and using this classification system, “Marketers have an opportunity to shape customer expectations by changing the ‘image’ of features.”

Published Sep 19, 2011 in Vanderbilt Business Intelligence
Contact: vbintelligence@owen.vanderbilt.edu
Copyright 2011 Vanderbilt Owen Graduate School of Management