Diffusion of Innovations : International Research Into New Technologies in the Consumer Services Sector

ABSTRACT - Consumer research into new technologies in the retail service area has evolved from unsophisticated industry studies. Focusing on point-of-sale scanning systems, various research studies are reviewed following an indication of the more general conceptual bases which could be relevant internationally.



Citation:

Robin N. Shaw, Frederick W. Langrehr, and Virginia B. Langrehr (1985) ,"Diffusion of Innovations : International Research Into New Technologies in the Consumer Services Sector", in SV - Historical Perspective in Consumer Research: National and International Perspectives, eds. Jagdish N. Sheth and Chin Tiong Tan, Singapore : Association for Consumer Research, Pages: 90-94.

Historical Perspective in Consumer Research: National and International Perspectives, 1985     Pages 90-94

DIFFUSION OF INNOVATIONS : INTERNATIONAL RESEARCH INTO NEW TECHNOLOGIES IN THE CONSUMER SERVICES SECTOR

Robin N. Shaw, Monash University

Frederick W. Langrehr, Brigham Young University

Virginia B. Langrehr, Brigham Young University

ABSTRACT -

Consumer research into new technologies in the retail service area has evolved from unsophisticated industry studies. Focusing on point-of-sale scanning systems, various research studies are reviewed following an indication of the more general conceptual bases which could be relevant internationally.

INTRODUCTION

The literature on innovation and new product marketing and the general diffusion of innovations is increasingly comprehensive (see, for example, Rogers 1983). However, while disciplines such as rural sociology have long studied new ways of doing things rather than just new "things", the attention of marketing writers has tended to focus on the creation and dissemination of tangible additions to consumers' standards of living.

Recently, there has been greater interest in the consumer services sector, but despite the proliferation of new technologies involved there has been little analysis of the appropriateness of the existing theoretical concepts and research approaches to current and future marketing situations. Further, the transnational nature of many of the promoters of the new technologies and the increasingly common consumption patterns throughout the world indicate the likely relevance of experiences in other countries to the probable course of events in a particular country.

A case in point is the introduction of point-of-sale scanners in grocery stores since 1974, beginning in the USA and now in more than 20 countries throughout the world. An associated feature of scanning has been the tendency to reduce the proportion of item price-marking, and hence to emphasize the changes in consumer behavior involved.

The economic importance of the new scanning technology is immense. For example, the cost of installing scanning equipment is approximately $10,000 per checkout (or about $100,000 per store). In the USA, more than 11,000 stores have installed scanning with Japan also having several thousand "scanstores" and many other countries having more than 100 scanstores. Obviously the US investment alone already exceeds one billion dollars.

The cost of item price-marking varies, but is gene-rally estimated at more than one-tenth of one per cent of sales. Recognizing that grocery retailing net profits after tax often amount to only one per cent of sales, the potential importance in retailer decision making of the item price-marking "issue" is clear. Not only might consumers who value item price-marking shop elsewhere if it were reduced, but there might also be so much agitation for its retention that laws may be passed prohibiting any reduction.

The major focus of this paper is the consumer research aspects of "new technology retailing services", particularly scanning and item price-marking, but also with some reference to new -banking services such as interest-paying checking (NOW) accounts and electronic funds transfer (EFT) at the point-of-sale (POS) and in relation to automated teller machines (ATMs), and other topics such as telemarketing including videotex, and earlier technologies such as in-store self-service and vending operations.

CONCEPTUAL ANALYTIC APPROACHES

At least five reasonably distinguishable although obviously related areas of study provide some guidance for the current research topic. These areas may be termed (a) diffusion of innovations, (b) technology in the services sector, (c) patronage/store choice, (d) information processing, and (e) cross-cultural behavior.

Diffusion of Innovations

While much of the research to be discussed has aspects of explicit relevance to the applied dimensions of the topic, the essence of the research is the theoretical notion of innovation and particularly the diffusion of innovation. However, as has been asserted by Rogers (1983), the innovation process should be more broadly conceptualized and hence researched, including its six main phases, viz. (i) needs/problems, (ii) research (basic and applied), (iii) development, (iv) commercialization, (v) diffusion and adoption, and (vi) consequences. Many aspects of this process have been examined in relation to the early years of scanning in North America (Shaw 1977), but there is a need for a broader study from an international perspective.

By concentrating on new technology retailing services it is feasible to investigate a rarely-studied area of innovation diffusion, viz. the "contingent authority innovation decision" (Rogers 1983). This latter concept differs from the usual situation where consumers have the option to adopt (or reject) an innovation, such as in the case of the introduction of video cassette recorders. Rather, consumers may have the innovation (scanning with reduced item price-marking) imposed on them by an authority or outsider (the retailer operating their current supermarket) and then they are faced with the decision to accept (adopt) or reject the innovation after trial. There are many ramifications of this situation, such as the apparent violation of the usual order of the stages in the process knowledge-persuasion-decision-implementation-confirmation.

Technology in the Services Sector

In a major overview, Collier (1983) has categorized the extent to which automation has penetrated, or will penetrate, most service sectors. Collier distinguishes six categories of automation, ranging from primitive fixed sequence robots through to sophisticated totally automated systems. Point-of-sale scanners are classified in the second-lowest category, as variable sequence robots, because their limited set of operations can be modified (programmed) slightly to accept changing information (different products, etc.). Financial sector ATMs are regarded similarly to scanners.

According to Stevens (1975), innovations which occur in retailing are the result of : (1) improving efficiency (and/or effectiveness) in performing the functions involved in moving goods, people, and information, and (2) substituting one type of movement for another. The rise of various retailing forms, such as vending, self-service, supermarkets, and videotex, can be related to these propositions.

Point-of-scale scanning can be seen to offer improvements in moving goods (across the checkout) and information (into the register and onto a visual display at the checkout and onto an improved-receipt tape), and to involve replacing the movement of goods bearing item price-marks held/ inspected by people, with people simply locating/ inspecting shelf price-marks.

Of further interest is the question of the relevance of research which characterizes the adopters of new-technology goods. Jain and Etgar (1977) and Green, Langeard, and Favell (1974) have investigated the relationship between innovation in goods and innovation in services, with generally mixed results suggesting that the earlier adopters of new goods are not necessarily the first to patronize new types of retail outlets.

Patronage/Store Choice

Numerous studies have examined, directly or indirectly, variables which might influence a shopper's choice of store. Of particular note are the Spring 1984 special issue of the Journal of Retailing devoted to store choice and store location, and the article by Verhallen and de Nooij (1982).

However, none of the academic studies sighted (going back more than 10 years in the Journal of Retailing and other major journals) reported a comprehensive examination of the place of scanning-related attributes in shopper decision making (such a study is nearing completion by one of the present authors). While the speed of checkout was sometimes included as an aspect of some research, the focus was usually (and perhaps appropriately) on variables related to convenience, price levels, product assortment, product quality, etc. Features such as price-marking (item or shelf), receipt tapes, cash register displays of transaction data, etc., were generally, ignored.

Virtually the only report directly addressing scanning, and then only partly and in recent years, is the annual trade-sponsored study reported in Progressive Grocer (1984). While the ambiguous characteristic "all prices clearly labeled" was ranked second on a 42-item list of influential aspects in store choice, "store has UPC scanning registers" appeared at rank 36.

Olshavsky and Granbois (1979) suggested that extended search and evaluation typically does not precede store patronage, thereby challenging the validity of the intricate models of decision making being proposed elsewhere. Engel and Blackwell (1982) seem to be partially in agreement, noting that the retail store-choice decision can be one of high involvement or low involvement (p.513). Under low involvement there is an abbreviated decision process, with alternative evaluation following choice rather than preceding it as is the case under high involvement (p.542). The similarity of this proposition to that implicit in Rogers' (1983) notion of contingent authority innovation decision making, is notable.

Information Processing

According to Tornatzky and Klein (1982, p.28), "while so-called primary attributes of innovations can be measured "objectively", the meaning of the objective measure of the characteristic is subjective, that is, in the mind of the perceiver ... Perceptions are always evaluated in reference to some internalized system of values or cognitive framework; the result is a subjective rating of the significance of the "fact"."

This general selectivity or idiosyncratic nature is thought to be operative at all stages of information processing, involving the interaction of memory with exposure to stimuli and subsequent attention, comprehension, yielding/acceptance, and retention (Engel and Blackwell 1982). Thus, differences may be expected in the responses of shoppers to some or all of the attributes of the new technology, particularly the provision of pricing data. Some results from the unit pricing and related literature (Capon and Kuhn 1982) may be relevant.

Cross-Cultural Behavior

The theory of cross-cultural behavior advanced by Sheth and Sethi (1977) emphasizes the perspective of multinational corporations (MNCs) in the diffusion of innovations. While retailing tends to be less the domain of MNCs than other areas of commercial enterprise (with the exception of grocery retailers such as Safeway, or fast food retailers such as McDonalds), the suppliers of goods and services to retailers are quite often MNCs, such as computer/cash register marketers, the manufacturers of grocery products, and accounting and consulting firms.

Thus, a two-stage process may be relevant to the current research topic. Firstly, the diffusion and adoption of the pre-requisites to scanning is necessary, involving infrastructure elements such as pre-packaged products merchandised via self-service outlets with an emphasis on speed and accuracy. Secondly, factors such as the scale of operation, supply-side competition, and demand-side preferences and economic capabilities, operate to indicate the desirability of obtaining the direct productivity benefits and indirect informational benefits of installing scanning.

The first stage has been examined in relation to supermarkets by Goldman (1981) for less developed countries, and by Langeard and Peterson (1975) for a developed country (France). Aspects of the second stage have received attention, such as an examination of some cross-cultural differences in the adoption of retail services (Green and Langeard 1975).

STUDIES OF SCANNING

In terms of sheer size, some of the major studies of scanning have been produced by governments [see, for example, United Kingdom Director General of Fair Trading (1982) and Australian Working Party on Electronic Checkout Systems (1983). References cited in this section are not detailed in this paper, but a listing is available from the first-named author]. However, these reports tend not to contain original empirical research although they do serve an integrative function. Some government reports do include empirical results, such as New York Senate Standing Committee on Consumer Protection (1976) and Ontario Ministry of Consumer and Commercial Relations (1980). Probably the most numerous studies, and yet the most inaccessible, are commercial reports prepared usually for individual retailers.

The research which will be discussed here is "academic" research, performed by persons affiliated with academic institutions and reported in the public or academic literature, although sponsorship of the research may have been derived partly from commercial interests. Ten studies are reviewed, although several others are potentially available.

Three studies adopted a primarily information processing approach. In the USA, Harrell, Hutt, and Allen (1976) surveyed nearly 3,000 shoppers who patronized a mixture of scanstores and nonscanstores, with either a low level of item price-marking (IPM) or high IPM. While shoppers in all stores displayed a high level of price awareness, it was concluded that a small but significant difference was found in favor of the performance of shoppers in high IPM stores compared to low IPM shoppers regarding the correctness of price estimation. In Australia, a similar but smaller-scale study did not find appreciable differences in shopper price consciousness (MacKinnon and Kitching 1979).

In the USA, a laboratory experiment conducted by Zeithaml (1980, 1982) resulted in an "exact-price recall error" of 17.5 per cent for the IPM treatment group, compared with 21.3 per cent for the no-IPM treatment group. This result was significant at the 0.05 level but not at the 0.01 level. Unfortunately, several aspects of this study cast doubt on the generalizability of the results. For example, all the experimental subjects usually shopped at stores with high IPM, so the importance of prior or post-experience with low IPM was not addressed. Similarly, because of the design used, four levels of legibility of shelf labeling were employed (upon which subjects had to rely for pricing information in the absence of IPM) thereby clouding the likely result if uniformly good shelf labels had have been used.

Harris and Mills (1980, 1982) investigated the sources and usage of price information, and the attitudes to technology and retailing of 485 Californian shoppers drawn from six scanstores and six non-scanstores. While it was found that 88 per cent of respondents favored the retention of IPM, 30 per cent of all respondents claimed to be confident that the prices paid at the checkout would be accurate if shelf price-marking replaced IPM. Two major constraints on the usefulness of this study were its inclusion of only supermarkets which had high IPM, and its restriction of analysis to successive bivariate cross-tabulations. While this research included elements of information processing, response to technology, and patronage decision making, the last aspect of store choice was approached only inferentially because direct questions were not asked.

While most of the research into scanning and IPM has adopted the perspective of shoppers being free to exercise their patronage choice behavior as an expression of their degree of satisfaction with the various retailer offerings, some research has examined the degree of support for legislative controls as demanded by some vocal community elements. In the USA, Langrehr and Langrehr (1982) conducted a telephone survey among 193 shoppers, many of whom had shopped in a low IPM store. It was found that 42 per cent of respondents favored a law compelling IPM, while 46 per cent were against it, and 12 per cent were undecided. However, of those respondents who had actually shopped in a low IPM store, 80 per cent opposed mandatory IPM.

In an Australian study (Shaw and Gibbs 1981), 1937 household interviews were conducted with grocery shoppers. The main relationship found to be clearly significant (p less than 0.001) was that between favoring government compulsion and favoring the retention of IPM, irrespective of government action. This was an unsurprising result -what was interesting was that 29 per cent of nonretentionists were in favor of government coercion, while 42 per cent of those in favor of retaining IPM were against government action.

A similar result was found by Langrehr and Langrehr (1985) when responses to technology in general, scanning in particular, and IPM as a related aspect, were sought from 246 Milwaukee shoppers. The majority reactions to technology and scanning were positive, and were negative to reduced IPM (as found also by Langrehr and Robin son 1979). But the suggestion that controls were necessary to slow the rate of technological change was rejected by most respondents.

Pommer, Berkowitz, and Walton (1980) undertook a shopper intercept study seeking the cooperation of 393 shoppers in the mail-back of a self-completion questionnaire containing 33 attitude statements, plus some demographic questions. All the respondents were shoppers at three mid-west USA scanstores with high IPM. All the attitude statements dealt with scanning or IPM, factor analysis of which yielded four factors, viz. price removal, checkout service, price and cost benefits, and receipt tape utilization. The statements loading highly on each factor were successively cross-tabulated with each demographic variable, showing that, for example, those respondents least likely to object to low IPM would be younger, or working in professional/managerial positions, or warehouse-store shoppers. While this study contributed to a deeper understanding of the topic by virtue of its factor analytic approach, the absence of shoppers experienced with low IPM or not currently preferring to shop at a scanstore constituted a substantial limitation. Only 17 per cent of respondents considered that scanning was an influence in their store choice.

In a study of patronage decision making, Shaw and Aitchison (1984) offered a mail-back self-administered questionnaire to shoppers at four Australian shopping centers, each center containing a scanstore with low IPM. A sample of 250 shoppers provided data on 172 questions regarding their activities, interests, opinions, and demographics oriented towards variables thought relevant to supermarket shopping. Respondents were clustered into five segments revealing key dimensions including political orientation, price consciousness and technological predisposition. Confirmation was provided of the likely difficulty of marketing ~ui innovation when confronted by target segments differing markedly in their value systems.

DISCUSSION

According to Monroe and Krishnan (1983): "Some of the major shortcomings of traditional attempts to synthesize knowledge include : (1) methodological deficiencies of the literature search process, i.e. incomplete literature searches; (2) qualitative and judgmental reviews without analytical rigor; (3) literary and chronological reporting style; (4) highly uncritical reviews;(5) lack of definitive results." (p. 503)

The relevance of some of these criticisms to the preceding section will be apparent, and it is the present authors' intention to assemble sufficient research detail - both in terms of the quantity of studies and the quality of the data provided - to enable a formal "meta-analysis" to be performed, i.e. the statistical analysis of the summary findings of many empirical studies (Glass, McGaw, and Smith 1981). However, in the interim, it is appropriate to comment on the apparent status of the research area.

An obvious deficiency in the accessible scanning research is the lack of longitudinal studies, and the related lack of control of the effect of prior experience on the reported cross-sectional results. Thus, research is required to examine the extent to which shoppers altered their overt behavior (especially patronage) in response to the new technology, particularly compared with either their covert or expressed intentions, and if store-switching did not occur then what was responsible? Possible hypotheses relate to the tradeoff nature of patronage decision making, the nonconfirmation of negative expectations, and problems with research instruments in terms of their validity in assessing reactions to complex innovations.

The decision-making process can be analyzed regarding the way in which aspects of the situation may be monetized or utilitized or otherwise traded off, such as the inconvenience of having to travel further to a non-scanstore than to the currently patronized scanstore, or even to judge whether overall product prices are cheaper in one store compared with another. The usage of hybrid conjoint models is being examined in this connection by one of the present authors, which reflects a need for more comprehensive modeling and multivariate analytic techniques to be employed in this area.

With the exception of the information processing oriented studies, such as Zeithaml (1982), there is generally an inadequate appeal to theory to guide the research. In particular, the contributions of Rogers (1983) and others in the diffusion of innovations area are - at best - incorporated implicitly in the studies. With the increasing internationalization of the research, the diffusion concepts deserve greater attention.

For example, while Japan has had more scanstores than any other country other than the USA for several years, only now is a major supermarket chain trialing reduced LPM. Apparently, low IPM has been regarded as "incompatible" with accepted Japanese shopper behavior to such an extent that although low IPM was eminently "trialable", it was not thought that Japanese shoppers would perceive sufficient offsetting "relative advantage" of scanning to adequately adopt scanning. Whether the apparent Japanese attachment to IPM qualified as a moderating "norm" of the social system, in Rogers' (1983) sense, is debatable.

An example of a "theory driven" research study could be the investigation of the shopper profiles of scanstores, depending on whether the scanstore was either a quite new store which opened with scanning and low IPM, or whether the store converted to scanning after previously having operated with or without low IPM. While many other variables could be involved in store choice (or few, if Olshavsky and Granbois (1979) were followed)the influence of scanning/IPM in two types of Rogers' (1983) innovation-decision situations could be examined, viz. the "optional" and "contingent authority" situations. The new store (optional) situation parallels the usual "new goods" offer facing consumers, and it could be expected that the initial customers (innovators and early adopters) would exhibit different characteristics to those shoppers who, coincidentally, are patronizing a store which converts to scanning. Related aspects are the longitudinal changes in shopper profiles for various stores, which may be further related to the "continuity" of the changes which occur in existing store operations such as whether there was high or low IPM prior to scanning

Rogers' (1983) concern with the needs/problems which motivate innovations and the consequences of those innovations can also be addressed. For example, the first scanstore in Papua New Guinea, opened in 1985, was prompted by the desire to reduce "shrinkage", i.e. losses due to theft, damage, errors, and perishability.

An important potential consequence of scanning with low IPM is the effect on the utilization of price data in consumer decision making. Critics of low IPM suggest that desensitization to price will occur, with consequently more economically "irrational" decisions being made. Longitudinal studies, making due allowance for the likely presence of segments which vary in their basic price salience, are clearly required.

CONCLUSION

Consumer research into new technologies in the retail services area has grown out of pragmatic and methodologically primitive commercial research. There is a need for a greater volume of research which draws on and then evaluates existing conceptual approaches from different areas. In particular, the diffusion of innovations literature contains many useful and important guidelines to the construction of an appropriate theoretical framework.

For example, if Rogers' (1983) level of individual control over the adoption of an innovation (optional, collective, and authority) is related to the perceived degree of continuity (Robertson 1967) of an innovation, then an imagined depiction may have four quadrants. The southeast quadrant contains those innovations which require the least behavior change and where the consumer has the most control over adoption. Savings and checking accounts that are slight modifications of previous offerings fit here. The southwest quadrant contains those innovations where consumers have little control over adoption and use but the changes have little impact on their behavior. The changes at the retail checkstand best fit here. The northeast quadrant contains those changes that th~ consumer has control over adopting but which require major changes in or new behavior. Home computer retailing and ATMs are sited here.

The northwest quadrant contains those innovations/ changes to which consumers are least likely to react positively. Here they must change their behavior and have less control over the decision to adopt the change. Reduced item price-marking in supermarkets may well illustrate this type of change. Low IPM can require behavioral changes, and consumers must now obtain and use price information from different sources. For example, without item price-marking by individual shoppers, price checking of the store shelf-listed price and computer-stored price at the checkout is difficult without an accurate memory. Consumers also have little or no direct control over whether an individual store or chain item price-marks. They do have ci choice to shop at a different chain but what if all chains reduce IPM? This is the case in certain markets in the USA.

REFERENCES

Capon, Noel and Deanna Kuhn (1982), "Can Consumers Calculate Best Buys?", Journal of Consumer Research, 8 (March), 449-453.

Collier, David A. (1983), "The Service Sector Revolution: The Automation of Services," Long Range Plannin~, 16, 6, 10-20.

Engel, James F. and Roger D. Blackwell (1982), Consumer Behavior, 4th edn., Chicago: The Dryden _~ress.

Glass, Gene V., Barry McGaw, and Mary Lee Smith (1981), Meta-Analysis in Social Research, Beverly Hills, California: Sage Publications.

Goldman, Arieh (1981), "Transfer of a Retailing Technology into the Less Developed Countries: The Supermarket Case,'' Journal of Retailing, 57 (Summer), 5-29.

Green, Robert I. and Eric Langeard (1975), "A Cross-National Comparison of Consumer Habits and Innovator Characteristics,"Journal of Marketing, '39 (July), 34-41.

Jain, Arun K. and Michael Etgar (1977), "Overlap in Retail Outlet and Product Innovator Characteristics," Journal of Retailing, 53 (Summer),63-74.

Langeard, Eric and Robert A. Peterson (1975), "Diffusion of Large-Scale Food Retailing in France: Supermarche et Hypermarche," Journal of Retailing, 3 (Fall) 43-63, 80.

Monroe, Kent B. and R. Krishnan (1983), "A Procedure for Integrating Outcomes Across Studies," in Advances in Consumer Research, 10, 503-508.

01shavsky, Richard W. and Donald H. Granbois (1979) "Consumer Decision Making - Fact or Fiction?" Journal of Consumer Research, 6 (September)93-100.

Progressive Grocer (1984), "Consumers - 42 Ways to Choose a Super," Progressive Grocer, 63 (May),58.

Robertson, Thomas S. (1967),"The Process of Innovation and the Diffusion of Innovation," Journal of Marketing, 31 (January),14-19.

Rogers, Everett, M. (1983), Diffusion of Innovations, 3rd edn.,New York: The Free Press.

Shaw, Robin N. (1977), Universal Product Code Scanning Systems: The Retail Experience 1974-76, Ithaca, New York: Department of Agricultural Economics, Cornell University.

Sheth, Jagdish N. and S. Prakash Sethi (1977), "A Theory of Cross-Cultural Buyer Behavior," in Consumer and Industrial Buying Behavior, eds. Arch G. Woodside, Jagdish N. Sheth, and Peter D. Bennett, New York: Elsevier North-Holland, 369386.

Stevens, Robert E. (1975), "Retail Innovations: A Tehnological Model of Change iii Retailing," Marquette Business Review, Winter, 164-168.

Tornatzky, Louis G. and Katherine J. Klein (1982), "Innovation Characteristics and Innovation Adoption - Implementation: A Meta-Analysis of Findings," IEEE Transactions on Engineering Management, EM-29 (February) , 28-45.

Verhallen, Theo M.M. and Gert Jan De Jooij (1982), "Retail Attribute Sensitivity and Shopping Patronage," Journal of Economic Psychology, 2, 39 -55.

Zeithaml, Valarie A. (1982), "Consumer Response to In-Store Price Information Environments," Journal of Consumer Research, 8 (March), 357-369.

----------------------------------------

Authors

Robin N. Shaw, Monash University
Frederick W. Langrehr, Brigham Young University
Virginia B. Langrehr, Brigham Young University



Volume

SV - Historical Perspective in Consumer Research: National and International Perspectives | 1985



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