The Impact of Innovation on Consumers’ Behavior

Introduction

As innovation is becoming a competitive necessity for marketers, and it is having an important role on modern organizations; all the companies worldwide are promoting it on their business operations. In this paper I will explain what marketing strategy organizations use to make changes in order to survive in this high competitive environment. My intention on this topic is to see how a specific marketing strategy, like innovation, influences on consumers’ behaviour. Innovation is one of the main tools that organizations use in order to positively influence consumers’ buying behaviour and attract more customers. To better understand innovation and the role that it has on a company I will first define it and then bring a real example from a well-known company and explain the ways that this company uses in order to promote innovation. The company I choose to analyze is Google since it is consider as being both a successful and innovative company in a short period of time. By many researches and surveys conducted the world’s most innovative companies today are considered to be Apple Computer, Google, Toyota Motor, and Microsoft with Apple the top leader. (James P. Andrew, 2006, p.4)

Brief Description of the Topic and the Position I have taken

Nowadays organizations are operating in a strong economic crisis. Competition is becoming intense from day to day and companies are hardly trying to attract new customers and also retain the existing once. Economic crisis leads to uncertainty of the employees and employers and in this situation the companies are requiring a high resistance of change in order to survive. The marketing department and consumers are the main tools in the process of organizational change, collaborating with customers will be the key for their success. According to Peter and Olson 2010, “understanding consumers is a critical element in developing successful marketing strategies.” (p.13)

The position that I take in this paper is supporting the use of innovation in companies. I think that innovation influences positively to consumers, and I am in favor of promoting innovation in companies as it will have a strong influence on consumers’ buying behavior. Innovation will make the products more attractive for consumers, and they will be more curious to try them. According to James P. Andrew, 2006, innovation today remains the top strategic focus for many companies where 72% of the executives have ranked it as the top-three strategic priority in the company importance for influencing consumers’ behaviour. The same percentage of executives said that they will increase spending on innovation in the coming years as they perceive it as the most important tool for surviving in this turbulent business environment that is created today. Promotion of innovation in a company should be developed in a way that it supports marketing strategies and consumers’ needs and wants.

Innovation as a Marketing Strategy

Traditionally innovation is defined as the creation of new products and services for new customers or also for existing once, it also refers to the improvement of existing products in order to achieve cost reduction. In his article for innovation, Buxton, 2005, explains that the levels of innovation and creativity in a company can be improved with the appropriate management and organization as they are not born with people but are developed through the work experience that people make. For Buxton innovation in a company “is far more about prospecting, mining, refining and adding value to ‘gold’ than it is about alchemy. Rather than focusing on the invention of the ‘brand new’, one might better strive for creative insights on how to combine, develop and leverage what is already out there, but hidden, or not understood.” (William Buxton, 2005, p.1) Rogers, 1998, p.6 explains that the highly innovative firms would be expected to have higher percentage of sales compared with firms that make new or improve products.

It is very important that executives in a company have innovative ideas and explain to others how important innovation is to the future of the company. The complexity and crisis of today’s business needs a strong focus on innovation and also in the way of thinking differently in order for companies to be different from others and try to survive on the market by attracting new customers. As a company innovator Buxton says that “it is not enough to simply have great ideas. If you wanted the ideas to come to fruition, you had to spend as much time directing your innovation and creativity to fostering a culture of creativity and receptiveness to innovation within the company, as you spend on the ideas themselves.” (William Buxton, 2005, p.2)

So, we can say that innovative activity requires a strong collaboration from all the elements of the firm. In order to promote innovation for a company it is very important the use of new technology, which allows the company to be more competitive in the market and respond in a faster way to the market needs.

Defence of my Position: Why Companies Should Invest on Innovation?

As it is explained on James P. Andrew article 2006, and as we have learned on MBA courses, companies all over the world practice innovation with a main and primary objective which is a fast growth and success in the industry. Other companies say that investing on innovation is the best practice to eliminate the risk of the company. “There is no single best organizational structure for innovation. Indeed, almost any company, regardless of size, shape, culture, or hierarchical structure, can be innovative.” (James P. Andrew, 2006, p.22)

There are different marketing tactics that marketers can influence consumer behavior and increase their probability of purchase. According to Peter and Olson (2010) the first tactic used by marketers is “obtaining information on consumers’ affect, cognition, and behavior relative to the product, service, store, brand or model of concern through consumer research.” (pg.232) Based on the information received from the consumer research data marketers design different marketing mix stimuli, one of which is innovation. Research and Development is considered as the most important innovative tool for companies, and most of the companies all over the world are spending most of their moneys on R&D as they believe that it is the best way on helping the companies on cost savings and enhances their ability to develop products and services which will be attractive for customers. (James P. Andrew, 2006, p.3) Product design and idea generation are very important in maintaining customer loyalty and having higher sales than when companies are focusing only on the financial side.

I support the investment on innovation because from the articles I read on this topic, the top innovative companies mentioned above, which have highly invested on innovation; have gained customer trust, better quality, a better organizational culture, and a long-term customer relationship. These features that the companies gain from the innovation strategy are the most important once for the positive influence on consumer behaviour and for the economic growth of the company. According to Muller et. al. 2004, today investment in innovation projects is more than ever important because it helps the companies to develop new businesses, create new customers and maintain the old once, creates new market entrants, shortens product life cycle and helps the companies to maintain competitive advantage. So, even if companies spend some money on promoting the innovation, for them should not be considered as a problem because they will gain this money in a short period of time, and beside this they will also gain a good reputation which is considered as the most important asset that a company can have.

How Google Promotes Innovation

“Google’s mission is to organize the world’s information and make it universally accessible and useful.” (Iyer, 2008, p.3) Google is considered to be a company which is very successful and at the same time is ranked the second company after Apple on the world’s most innovative companies. But how does this leader company in its industry promote innovation as the key of its success? Iyer 2008, on his article has considered Google as being an “innovation machine” as it has been considered as the creator of new approaches to business and management innovation by using the best technology and investing a huge amount of money, a strategy that allowed the company to develop innovation in a short period of time. What mostly matters for this company, are the new ideas and new products that Google announces every day and not the financial profits that it makes. Iyer, 2008, further explains that this innovation strategy that Google has used allowed it to have a rapid growth in the market, a huge product development, to be more satisfied and motivated and also to have better customer relationships.

The key success for the company’s innovation strategy are its creators, independent software vendors, Google engineers and open source community who by collaborating together “make up a diverse product development network, develop new offerings that keep consumers engage, generate revenue and extend value of Google’s tools and technology.” (Iyer, 2008, p.5) The strategy on innovation promotion has worked perfectly on Google, and it has produced many new products and features that have positively influenced on consumer behaviour. Another strategy that Google has used on promoting innovation is the estimation on time of market changes and the offer of the new products and services quickly than other firms. So, we can see that Google’s strategies to innovation are unique, and they have allowed the company to attract the most talented employees and engineers and a lot of satisfied consumers. So, looking how consumers respond to innovation from the above examples, I strongly defend my position on using innovation as a positive marketing strategy.

The Other Side of the Coin: People who don’t Accept Investing in Innovation

Different companies will use different methods and tools to promote innovation, and with the passing of time all companies improve their methods of innovating as new things come out very quickly. But not all companies accept innovation as a marketing strategy to attract more customers. Some think that it is costly while other don’t have the right resources to promote it. As we can see on the article of Muller et. al. 2004, some companies that cannot innovate by themselves have invested more by buying innovation in order to survive, Coca-Cola acquired Mad River Traders, which is a market of alternative beverage, but this is a strategy that costs more to the companies than when innovating alone, and they don’t prefer using it. For a company it is very important to have money and to invest in order to promote innovation. Rogers’s article explains that investment in new machines, marketing expenditures, investment in training and the purchase of new technology are considered as the most important field of investment which help the company to promote innovation. Many companies don’t have the money, and many others don’t have the right employees to push the company promote innovation. Muller et. al explains that the most important things that promote innovation in a company are the amount of capital invested on it, the talent which are the employees, and the time that is dedicated to innovation strategies. May companies don’t support the investment on innovation because of the lack of capital.

In order to succeed in an innovation project it is very important that executives and employees of the company should make a training and research in innovation. They should be able to estimate the potential market for the new idea, what innovation tools are needed for an innovation strategy and what methodologies should be available to the employees. Especially in todays’ economic crisis, most of the companies don’t spend money on training and R&D for innovation; they prefer to spend them in other fields. Other challenges that companies face when they try to become innovative are, “globalization, organizational issues (such as metrics and measurement, structure, and people), and leadership remain three of the biggest challenges facing companies that are seeking to become more innovative.” (James P. Andrew, 2006:4) But, based on the data and example I gave above I think that their position on this topic is not good. Comparing the positive and negative sides of innovation it has more positive once as it satisfies more its customers and positively influences on their buying behaviour.

Conclusions

Concluding my paper I can say that based on what I researched on innovation, and the knowledge’s I had on Consumer Behaviour and Marketing Strategy lessons, I have learned that innovation and its promotion in a company improves a lot business processes by giving to the company cost advantages, quality advantages, and consumer satisfaction which are the key performance objectives that allow a good operation strategy in any organization. Today all the companies are taking advantage from the new technologies and innovation in order to be the leaders of the market and to gain the highest market share by attracting more customers.

So, as the result of this intensive business climate and high availability of information system, the company should frequently redesign and innovate in order to achieve improvement for their future operations and to be at top levels in the market where it operates. Before starting to implement an efficient innovation promotion in a company it is very important for people who will guide it to consider it from the financial point of view, users view and also from opportunities that the innovation system will give for development in the future. I have also learned that after the implementation of the innovation system for further succeeds it is very important for the firm to make continuous control and improvements of it and also to have a higher collaboration between the innovation promotion and all other departments of the company where innovation will be promoted. A good customer relationship is also very important for the implementation of the best marketing strategy, as customers are the once whose need will be satisfied with the creation of the product.

When developing innovation a firm should start by analyzing the behavior of its consumers and designing the best marketing strategies that fits their needs. As explained by Peter and Olson (2010) “marketers have to analyze and understand not only consumers of their products and brands but also consumers of competitive offerings and the reason they purchase competitive products.” (p.13) Through consumer research, marketers obtain information on consumers’ affect, cognition and behavior based on the product or service they are going to produce. Understanding consumers help in developing successful marketing strategies, while the implementation of the right marketing strategies makes possible the increase of chances that consumers will have positive feelings about the product or service, and will repeatedly purchase them.