Economics of innovation. Lecture 3: Innovation, Demand and Consumption

Сентябрь 11, 2022

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Economics of innovation. Lecture 3: Innovation, Demand and Consumption

Содержание

2. Consumers and innovation: demand and supply We will focus on: 1. The diffusion of innovations 2.
3. The diffusion of innovations Diffusion is the process by which innovations are adopted and used by
4. Diffusion of successful innovations follow a common path (S curve) Percentage of customer/user groups
5. Diffusion of online social networks (http://sephskerritt.com/2008/03/05/market-diffusion-of-online-social-networks/)
6. Diffusion of various innovations http://andrewgelman.com/2012/04/08/technology-speedup-graph/
7. Drivers of the diffusion of innovations 1.RANK Approach Firms can be ranked in terms of the
8. 4. EPIDEMIC Approach Diffusion spreads across the population like a disease based upon information acquisition and
9. The demand for innovation Marketing e.g. Information acquisition approach (Bass 1969) Economics e.g. Consumer preferences (Deaton
10. Types of Consumers Consumers are not a homogeneous group.
11. Six Types of Consumer Economic Consumer Veblen/Bourdieu Consumer Marshall Consumer Douglas Consumer Galbraith Consumer Routine Consumer
12. Economic Consumer Fixed, pre-determined wants, which the consumer knows in detail If all consumers were economic
13. Veblen Consumer Veblen’s concept of “conspicuous consumption” Desires distinction through visible consumption of expensive items Bourdieu
14. Veblen consumers upon the launch of iPhone 5
15. Nike making an appeal to Veblen consumers with their customized shoes CREATE YOUR OWN NIKE FREE
16. Marshall Consumer “In every stage of his progress he is destined to contrive and invent, to
17. Marshall Consumers- the creative consumer Von Hippel E., Ogawa S. & De Jong J. (2011) The
18. Douglas Consumer “the real moment of choosing is ... choice of comrades and their way of
19. Galbraith Consumer “As a society becomes increasingly affluent, wants are increasingly created by the process by
20. Routine Consumer Just sticks to familiar consumption items (“tried and tested”) Does not optimise Not influenced
21. Other Types of Consumer ….
22. Ethical consumer Green consumer Consumption choices with reference to effects on sustainability Ruskin consumer Consumption choices
23. Ethical Consumption and Innovation Can you think of examples of companies innovating to appeal to the
24. Learning consumer Recognition that something is an acquired taste and a taste worth acquiring Demand grows
25. Innovation and Learning consumers Educating is an important consideration when it comes to promoting innovations at
26. Dutiful consumer Consumption as a duty Duty to whom, or to what? Country (?) Science (?)
27. Different Types of Consumers and Product Life Cycle Let’s match different stages of the product life
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Слайд 2

Consumers and innovation: demand and supply
We will focus on:
1. The diffusion

of innovations
2. The demand of innovation: consumers types

Слайд 3

The diffusion of innovations
Diffusion is the process by which innovations are

adopted and used by consumers, or in the case of process innovations, by other organisations.
Diffusion is the rate at which innovations are adopted
Whether a product or a process, it takes a long time for an innovation to diffuse across users/consumers.
The speed at which an innovation diffuses is critical to its (commercial) success.

Слайд 4

Diffusion of successful innovations follow a common path (S curve)
Percentage of

customer/user groups

Слайд 5

Diffusion of online social networks
(http://sephskerritt.com/2008/03/05/market-diffusion-of-online-social-networks/)

Слайд 6

Diffusion of various innovations
http://andrewgelman.com/2012/04/08/technology-speedup-graph/

Слайд 7

Drivers of the diffusion of innovations
1.RANK Approach
Firms can be ranked

in terms of the benefits to be obtained from the use of the new technology, assuming that adopters are different in some important dimensions (Size, Age, etc.)
2. STOCK Approach
The larger the number of users the lower the gross benefits from adoption
3. ORDER Approach
The firm’s position in the adoption order determines its gross return from adoption. Firms high in the adoption order get greater return than those lower down in the adoption order

Слайд 8

4. EPIDEMIC Approach
Diffusion spreads across the population like a disease based

upon information acquisition and contact.
5.EVOLUTIONARY Approach
Diffusion is the outcome of competitive selection across technologies
6.Marketing approach (see also 4)
Diffusion is the outcome of advertising and information dissemination.

Drivers of the diffusion of innovations

Слайд 9

The demand for innovation
Marketing
e.g. Information acquisition approach (Bass 1969)
Economics
e.g. Consumer

preferences
(Deaton and Mullebower 1980)

Слайд 10

Types of Consumers
Consumers are not a homogeneous group.

Слайд 11

Six Types of Consumer
Economic Consumer
Veblen/Bourdieu Consumer
Marshall Consumer
Douglas Consumer
Galbraith Consumer
Routine Consumer

Слайд 12

Economic Consumer
Fixed, pre-determined wants, which the consumer knows in detail
If all

consumers were economic consumers there would be little market risk in innovation
Consumer is a skilled optimiser but is asocial (consumes in private)
Given same prices and income, (s)he will never vary consumption
Interested in innovations that reduce price or increase a sought-after feature of a good
Otherwise, not interested in innovation

Слайд 13

Veblen Consumer
Veblen’s concept of “conspicuous consumption”
Desires distinction through visible consumption of

expensive items
Bourdieu consumer is similar, but seeks distinction with more modest expenditure
Veblen and Bourdieu consumers are interested in innovation to the extent that these give an opportunity to show distinction, e.g. Rolls Royce

Слайд 14

Veblen consumers upon the launch of iPhone 5

Слайд 15

Nike making an appeal to Veblen consumers with their customized shoes
CREATE

YOUR OWN NIKE FREE iD
However close to barefoot you like your run to feel—your reasons are exclusively your own. Run Free, your way.

EXPRESS YOUR IDENTITY

Слайд 16

Marshall Consumer
“In every stage of his progress he is destined to

contrive and invent, to engage in new undertakings; and when these are accomplished, to enter with fresh energy upon others.”
(McCulloch, 1864, quoted in Marshall, 1927)
Marshall consumers are interested to explore what innovations can do for them, but they are not uncritical in their consumption of innovations (see Von Hippel, 2005)

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Marshall Consumers- the creative consumer
Von Hippel E., Ogawa S. & De

Jong J. (2011) The age of the consumer-innovator, MIT Sloan Management Review, Fall,53, 1, 27-35.

Слайд 18

Douglas Consumer
“the real moment of choosing is ... choice of comrades

and their way of life”
(Douglas, 1983)
Douglas consumers may be cautious about consuming innovations that might seem to cast doubt on their peer group loyalty
But they may find innovation and imaginative ways to confirm group loyalty
And if the group leader(s) adopt(s) an innovation, then other Douglas consumers may follow rapidly

Слайд 19

Galbraith Consumer
“As a society becomes increasingly affluent, wants are increasingly created

by the process by which they are satisfied …. producers may proceed actively to create wants through advertising and salesmanship. Wants thus come to depend on output.”
(Galbraith, 1958)
Mass market and advertising
Galbraith consumers need encouragement from marketers to give innovations a try

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Routine Consumer
Just sticks to familiar consumption items (“tried and tested”)
Does not

optimise
Not influenced by advertising
Does not seek distinction
Does not seek novelty
Not influenced by peer pressure
Liable to be very suspicious of innovations

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Other Types of Consumer ….

Слайд 22

Ethical consumer
Green consumer
Consumption choices with reference to effects on sustainability
Ruskin consumer
Consumption

choices with reference to effects on producing labour

Слайд 23

Ethical Consumption and Innovation
Can you think of examples of companies innovating

to appeal to the ethical consumers?

Слайд 24

Learning consumer
Recognition that something is an acquired taste and a taste

worth acquiring
Demand grows as consumer acquires the taste – learns how to appreciate the product/service

Слайд 25

Innovation and Learning consumers
Educating is an important consideration when it comes

to promoting innovations at early stages to learning consumers

Слайд 26

Dutiful consumer
Consumption as a duty
Duty to whom, or to what?
Country (?)
Science

(?)

Слайд 27

Different Types of Consumers and Product Life Cycle
Let’s match different stages

of the product life cycle and
different types of consumers

Economics of innovation. Lecture 3: Innovation, Demand and Consumption

Содержание

Consumers and innovation: demand and supply We will focus on:1. The diffusion

The diffusion of innovationsDiffusion is the process by which innovations are

Diffusion of successful innovations follow a common path (S curve)Percentage of

Diffusion of online social networks (http://sephskerritt.com/2008/03/05/market-diffusion-of-online-social-networks/)

Diffusion of various innovationshttp://andrewgelman.com/2012/04/08/technology-speedup-graph/

Drivers of the diffusion of innovations1.RANK Approach Firms can be ranked

4. EPIDEMIC ApproachDiffusion spreads across the population like a disease based

The demand for innovationMarketing e.g. Information acquisition approach (Bass 1969)Economicse.g. Consumer

Types of Consumers Consumers are not a homogeneous group.

Six Types of ConsumerEconomic ConsumerVeblen/Bourdieu ConsumerMarshall ConsumerDouglas ConsumerGalbraith ConsumerRoutine Consumer

Economic ConsumerFixed, pre-determined wants, which the consumer knows in detailIf all

Veblen ConsumerVeblen’s concept of “conspicuous consumption”Desires distinction through visible consumption of

Veblen consumers upon the launch of iPhone 5

Nike making an appeal to Veblen consumers with their customized shoesCREATE

Marshall Consumer“In every stage of his progress he is destined to

Marshall Consumers- the creative consumer Von Hippel E., Ogawa S. & De

Douglas Consumer“the real moment of choosing is ... choice of comrades

Galbraith Consumer“As a society becomes increasingly affluent, wants are increasingly created

Routine ConsumerJust sticks to familiar consumption items (“tried and tested”)Does not