Drivers of adoption for successive generation of high-tech products

Abstract

To understand the diffusion of high technology
products such as PCs, digital cameras and DVD
players it is necessary to consider the dynamics of
successive generations of technology. From the
consumer’s perspective, these technology changes
may manifest themselves as either a new
generation product substituting for the old (for
instance digital cameras) or as multiple generations
of a single product (for example PCs).
To date, research has been confined to aggregate level
sales models. These models consider the
demand relationship between one generation of a
product and a successor generation. However, they
do not give insights into the disaggregate-level
decisions by individual households – whether to
adopt the newer generation, and if so, when. This
paper makes two contributions. It is the first large scale
empirical study to collect household data for
successive generations of technologies in an effort
to understand the drivers of adoption. Second, in
contrast to traditional analysis in diffusion research
that conceptualizes technology substitution as an
“adoption of innovation” type process, we propose
that from a consumer’s perspective, technology
substitution combines elements of both adoption
(adopting the new generation technology) and
replacement (replacing generation I product with
generation II).

Key Propositions
In some cases, successive generations are clear
“substitutes” for the earlier generation (e.g. PCs
Pentium I to II to III ). More commonly the new
generation II technology is a “partial substitute” for
existing generation I technology (e.g. DVD players
and VCRs). Some consumers will purchase
generation II products as substitutes for their
generation I product, while other consumers will
purchase generation II products as additional
products to be used as well as their generation I
product.
We propose that substitute generation II
purchases combine elements of both adoption and
replacement, but additional generation II purchases
are solely adoption-driven process. Moreover,
drawing on adoption theory consumer
innovativeness is the most important consumer
characteristic for adoption timing of new products.

Hence, we hypothesize consumer innovativeness to
influence the timing of both additional and
substitute generation II purchases but to have a
stronger impact on additional generation II
purchases. We further propose that substitute
generation II purchases act partially as a
replacement purchase for the generation I product.
Thus, we hypothesize that households with older
generation I products will make substitute
generation II purchases earlier.
Methods
We employ Cox hazard modeling to study
factors influencing the timing of a household’s
adoption of generation II products. A separate
hazard model is conducted for additional and
substitute purchases. The age of the generation I
product is calculated based on the most recent
household purchase of that product. Control
variables include size and income of household,
age and education of decision-maker.

Results and Implications
Our preliminary results confirm both our
hypotheses. Consumer innovativeness has a strong
influence on both additional purchases and
substitute purchases. Also consistent with our
hypotheses, the age of the generation I product has
a dramatic influence for substitute purchases of
VCR/DVD players and a strong influence for
PCs/notebooks. Yet, also as hypothesized, there
was no influence on additional purchases. This
implies that there is a clear distinction between
additional and substitute purchases of generation II
products, each with different drivers. For substitute
purchases, product age is a key driver. Therefore
marketers of high technology products can utilize
data on generation I product age (e.g. from
warranty or loyalty programs) to target customers
who are more likely to make a purchase.