The Impact of Radical Innovation on Consumer Behaviour a Case Study of Iphone

J Ö N K Ö P I N G I NTERNATIONAL B U S I N E S S S CHOOL JÖNKÖPING UNIVERSITY

The Impact of Radical Innovation on Consumer Behaviour A case study of iPhone

Master Thesis within Business Administration Author: Antika Ungsusing Phromporn Pinyotrakool Tutor: Mike Danilovic Jönköping May 2009

Abstract Master Thesis within Business Administration Title: The Impact of Radical Innovation on Consumer Behaviour Authors: Antika Ungsusing Phromporn Pinyotrakool Tutor: Mike Danilovic Date: May 2009 Subject terms: Radical Innovation, Diffusion of Innovation, Strategic Market- ing Communication, Consumer Behaviour

Introduction In most industries, innovation is the most essential driver of competitive advantage. Particular to Radical Innovation, it underlies the firm’s success in an attempt to be different and innovative leader. Undoubtedly, it requires hard-working and tough decision to launch such breakthrough and manage consumer’s uncertainty. Sometimes a very new to the world product introduces behaviour change and this is rather complicate to the unknown and unfamiliarity. How- ever, one that can successfully motivate consumer to embrace it will potentially win the battle. Purpose The purpose of this study is to investigate how a radical innovation is adopted and analyze the impact it has on consumer behaviour to understand the key influential driver of success through the case study of iPhone. Method A qualitative approach was used to fulfil the purpose of this thesis. Interviews with eighteen iPhone users in Asia, Europe and North America were made to gather different perspectives of iPhone and its relation with the behaviour changes. Two observations were later conducted in order to further explore the key findings. Secondary data such as online written document was also utilized to enhance the value of our findings. Conclusion iPhone changes the way consumers interact with the mobile phone. Particularly, it forms human bonding with the users and influences their behaviour in terms of information access and digital lifestyle. In this case, marketing communication strategy and product characteristics play the critical roles regarding uncertainty management and innovation adoption and diffusion. iPhone has now become early majority’s beloved device. It is interesting to keep an eye on its next step if it could successfully be accepted prevalently in the mass market.

Acknowledgements

We would like to sincerely thank our tutor Mike Danilovic for his dedicated guidance and support during the process of writing this thesis. In addition, we would like to thank our fellow students for their valuable feedback and comments during the review process. Last but not least, we are deeply thankful to our lovely iPhone users who voluntarily participated in our research interviews and observations - without you, this thesis and nothing else would ever have been possible.

Antika Ungsusing Phromporn Pinyotrakool

Table of Contents 1 Introduction ...... 1 1.1 Radical innovation & Incremental innovation...... 2 1.2 Telegraph: The historical radical innovation that changed consumer behaviour...... 3 2 iPhone Case Study...... 5 2.1 iPhone as a Radical innovation? ...... 6 2.2 iPhone as a design icon...... 8 3 Purpose...... 9 3.1 Hypotheses...... 9 3.2 Research Questions ...... 9 4 Frame of Reference...... 10 4.1 The diffusion of innovation and adopter categories ...... 10 4.2 Crossing the Chasm ...... 12 4.3 The Innovation Decision Process ...... 13 4.4 Consumer involvement and attitude dynamics ...... 14 4.5 Sources of influence in Attitude formation ...... 15 5 iPhone Strategy Marketing Communications...... 17 5.1 Steve Jobs, the marketing CEO ...... 17 5.2 iPhone Launching Strategy...... 18 6 Method ...... 24 6.1 Research Design ...... 24 6.2 Data Collection ...... 24 6.3 Secondary data...... 27 6.4 Trustworthiness ...... 28 6.5 Method evaluation ...... 29 6.6 Limitations...... 30 7 Empirical Findings & Analysis...... 31 7.1 The interviewees...... 31 7.2 The observations ...... 32 7.3 Attitude...... 40 7.4 Behaviour...... 46 8 Conclusion and Implication ...... 57 8.1 The impact of iPhone to consumer behaviour ...... 57 8.2 The key influential drivers of innovation diffusion ...... 58 9 Discussion ...... 64 9.1 Crossing the Chasm ...... 64 10 Final Remarks...... 67 10.1 Further Studies ...... 67 References...... 68

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Tables Table 4.1 Four Consumer Involvement/Brand Differentiation Decision-Making Models (Schiffman & Kanuk, 1987)...... 14 Table 7.1: Before using iPhone - Young Tech Savvy User ...... 32 Table 7.2: After using iPhone - Young Tech Savvy User ...... 34 Table 7.3: Before using iPhone - Professional User ...... 36 Table 7.4: After using iPhone - Professional User ...... 38 Figures Figure 1.1 Technology push model (The Open University, 2009)...... 2 Figure 1.2 A man operating an electro-magnetic telegraph (Goodrish, 1844). ... 3 Figure 2.1 iPhone components (Apple Inc., 2008a)...... 5 Figure 2.2 iPhone demonstrating a built-in accelerometer (Apple Inc., 2009b). . 5 Figure 2.3 Phone icon (Apple Inc., 2008a)...... 7 Figure 2.4 iPod icon (Apple Inc., 2008a)...... 7 Figure 2.5 Internet icon (Apple Inc., 2008a)...... 8 Figure 4.1 Diffusion of innovation (Rogers, 1983)...... 10 Figure 4.2 Adopter categories (Brown, 1992)...... 10 Figure 4.3 Crossing the chasm (Moore, 1991 & Searls, 2003)...... 12 Figure 4.4 The innovation decision process (Schiffman & Kanuk, 1987)...... 13 Figure 5.1. iPhone timeline (iPhoneGold.org, 2008) ...... 19 Figure 5.2 iPhone marketing communications and public relations (Kahney, 2008)...... 21 Figure 6.1 Research design ...... 28 Figure 7.1: Chart respondents...... 31 Figure 7.2 Personal interviews (April, 2009)...... 41 Figure 7.3 Personal interviews (April, 2009)...... 42 Figure 7.4 Personal interviews (April, 2009)...... 43 Figure 7.5: Personal interviews (April, 2009) ...... 44 Figure 7.6 Personal interviews (April, 2009)...... 45 Figure 7.7 Personal interviews (April, 2009)...... 46 Figure 7.8 Personal interviews (April, 2009)...... 47 Figure 7.9 Personal interviews (April, 2009)...... 49 Figure 7.10 Personal interviews (April, 2009)...... 50 Figure 7.11 iPhone applications (Apple Inc., 2008a & 2009b)...... 51 Figure 7.12: How the iPhone changes consumer behavior (Tesla, 2009, p.1). 52 Figure 7.13 Personal interviews (April, 2009)...... 53 Figure 7.14 Personal interviews (April, 2009)...... 55 Figure 7.15 Personal interviews (April, 2009)...... 56 Figure 8.1: iPhone vertical integrated solution (Apple Inc., 2009b, 2009f; Google Inc., 2009; Telefónica Europe plc, 2009; TeliaSonera AB, 2009; AT&T Inc., 2009)...... 62 Figure 9.1 Crossing the chasm (Moore, 1991 & Searls, 2003)...... 64 Figure 10.1 Personal interviews (April, 2009)...... 67

1 Introduction Companies everywhere are engaged in a new product wars. The battlefields are the market- places around the world. The great weapons are the thousands of great technological discovered every year in the hope of successfully being adopted and accepted by consumer. Most recently another business guru, Rosabeth Moss Kanter, concluded from a survey of 105 innovations in leading American companies that competitive advantage derives from the encouragement of ‘idea power’ (Kanter, 1987). It underlies the firm’s success in an attempt to be different and innovative leader. Significantly, the quest is for product superiority- seeking product breakthrough and differentiation in order to gain competitive advantage. It requires hard-working and tough decision to launch such radical innovation and manage consumer uncertainty. Yet, most of companies fail to launch the new product that captures consumer’s interest. Business Week states: As the consumer market for technology soars, companies that sell stuff ranging from cellular phones and computers to software and Internet services have some surprising blind spots about who their customers are and what motivates them (Judge, 1998). Most of the times, a very new to the world invention introduce behaviour change that is discontinuous from existing behaviour and sometimes this is rather complicate and cause doubt and unfamiliarity. However, one that wisely manage uncertainty and motivate consumer to embrace it will potentially win the battle. Business Week (2008a) ranks the world’s top 100 brands every year based on brand value or projected future earnings. It is interesting to note that most of the top global brands could be categorized as high-tech brands. Apple was ranked number 24 on this list in 2008. “Its products are hotter than ever, in part because of price cuts and clever advertising. Still, investors continue to fret over CEO Jobs’ health” (Business Week, 2008a, p.25). Furthermore, Once again, Apple’s design whizzes lead the list in all three key strategic regions: Asia, Europe and North America, followed by Google’s search geniuses and To- yota’s hybrid car mavens in The World’s 50 Most Innovative Companies in 2008& 2009 by Business Week (2008b, 2009). From this two significant rankings, we can see that it is about time to get much more scrutiny with the innovation and we are curious about how Apple is able to maintain the leader position in the innovation market. Apple iPhone is one of the most talk of the town innovation at the moment. It is the device that integrates a mobile phone, an iPod music player and real Internet web application with a Multi Touch user interface which allow users to fully control the phone by just a finger touch. Looking around us, only few people do not know an iPhone. Most of our friends own it and they enjoy using it with the finger touch control. “iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone” said Steve Jobs (Apple Inc., 2007a, p.1). Is it different to the wide array of devices available today? Will it have a great impact to consumer behaviour as iPod did before? The impact of radical innovation to consumer behaviour through the case study of iPhone aims to provide an understanding of innovation, diffusion and adoption process, marketing communication and consumer behaviour as ongoing processes with a range of factors affecting success. Readers will gain an understanding of the strategic process by which marketers come up with creative product idea, launch the innovative product into the competitive marketplace and what factors that motivate consumer behaviour, obstacles that have to be overcome to bring an invention to market and the key drivers that influence the successful diffusion of an innovation into widespread use.

1.1 Radical innovation & Incremental innovation According to Schilling (2008), the radicalness might be conceived as the combination of newness and the degree of differentness. A technology could be new to the world, new to an industry, new to a firm, or new merely to an adopting business unit. The most radical innovations would be new to the world and exceptionally different from existing products and processes. Some researchers refer to breakthrough innovations as revolutionary (Shanklin & Ryans, 1984). And they are developed in supply-side markets (Maney, 1999). Supply-side markets are characterized by innovation-driven practice, in which a company’s goal is to achieve profitable commercial applications for laboratory output; research & development (R&D) is the key mover behind marketing efforts, and specific commercial applications or targets are considered only after the innovation is developed. For these reasons, these markets are sometimes referred to as ‘technology-push’ situations (The Open University, 2009). The technology push model is a simple linear model which suggests that the innovation process starts with an idea or a discovery – it is sometimes called ‘idea push’ (The Open University, 2009).

Figure 1.1 Technology push model (The Open University, 2009). In his book Enabling Innovation, Douthwaite (2002) criticised this process and dubbed it the ‘over-the-wall model’. An R&D team assumes it knows enough about the users’ needs to develop a new product without involving them in its specification or design. The team simply develops the product and tosses it ‘over the wall’ to users in the belief that there’s a need for it, the technology is complete and ready to use, and users are technically skilled enough to use it without help (The Open University, 2009). On the other hand, market pull model indicates that a successful approach to innovation would be to research the market thoroughly first, assess what needs exist, how far they are met by existing products and processes and how the needs might be met more effectively by means of a new or improved innovation (The Open University, 2009). Incremental innovations often occur in this demand-side markets (Maney, 1999), in which product characteristics are well defined and customers can articulate their needs. In addition, an incremental innovation might not be particularly new or exceptional; it might have been previously known to the firm or industry and involve only minor change from existing practices (Schilling, 2008). For example, changing the configuration of a cell phone from one that has an exposed keyboard to one that has a flip cover or offering a new service plan that enables free weekend minutes more would represent continuous innovation. However, the radicalness of an innovation is relatively, and may change over time or with respect to different point of view. An innovation that was once considered radical may eventually be considered incremental as the knowledge base underlying the innovation becomes more common. Furthermore, an innovation that is radical to one firm may be incremental to another or it is viewed as continuous in the eye of innovating firm but it is a breakthrough to consumer.

1.2 Telegraph: The historical radical innovation that changed consumer behaviour. By 1830 the industrial revolution was tremendously rising. In particular to communication industry, it was radically changed between 1830 and 1899. It can be regarded as a revolution within the industrial revolution. After Michael Faraday succeeded in exploit the relationship between electricity and magnetism which could be used to instigate movement in the motor or generate electricity in the dynamo. A series of innovations followed in the wake of electricity’s mechanical liberation from the shackles of the chemical battery. The electric telegraph, fax machine, telephone and wireless radio had fundamentally shaped the new way of human socialization (Dyson & Uhlig, 2004). Prior to the electrical telegraph, all but very small amounts of information could be moved only as fast as physical transportation (historically, human or animal) could travel. The invention of telegraph had replaced the horseback messenger as the means of conveying information over long distances. The telegraph freed communication from the constraints of geography boundlessly (Carey, 1989). It isolated the message (information) from the physical movement of objects or the process (Wark, 1997). Worldwide telegraphy also changed the gathering of information for news reporting. Since the same messages and information would now travel far and wide, the telegraph demanded a language stripped of the local, the regional; and colloquial. Media language had to be standardized, which led to the gradual disappearance of different forms of speech and Figure 1.2 A man operating styles of journalism and storytelling. It is believed that an electro-magnetic tele- objective journalism finds its roots in the communicative graph (Goodrish, 1844). structures of the telegraph. This led to transmission of news without the luxury of detail and analysis (Carey, 1989). In addition, the electric telegraph revolutionized communications behaviour between individuals and nations and had far-reaching effects on society at all levels. New lifestyle found when romances blossomed over its cables, there were weddings by telegraph. On the other hand, it spawned new crimes, prompting governments to attempt with little success to regulate the medium. The telegraph also made dozens of new enterprises possible and made others redundant. The electric telegraph network not only radically refined the human connection but also laid the foundations for the mass communications technologies that followed (Dyson & Uhlig, 2004). As one of the following technology, telegraph led to radio and then mobile telephony. The work of Bell, Edison and others on improving the telegraph and transmitting sound along wires led the way to wireless transmission – Marconi was transmitting Morse code messages from ship to shore in 1897 and eventually across the Atlantic in 1901. The first commercial transatlantic radio voice service began in 1927. The first radiotelephone service for vehicles was introduced in the US in 1946 (The Open University, 2009). In 1947 microwave radio transmissions started to be used for long-distance telephony and by the early 1960s telecommunications satellites connected people around the world. The first portable cellular phone appeared in 1979. Today’s mobile phones might seem like a total different product from Bell’s early prototypes but there is a continuous line of scien-

tific discoveries and developments in technology that leads to one another (The Open Uni- versity, 2009). As with many discontinuous innovative technologies, it is difficult to claim that people were demanding its invention. Most people were satisfied with the existing means of com- municating across distances. It took a good deal of vision to foresee that the ability to speak to others at a distance offered by a mobile phone would eventually replace the telegraph in business and the letter in personal communications. On top of that, it took a greater deal of imagination to foresee that people across the world will be interconnected by just one click. And these capacities will be integrated creatively to fully function by just one finger touch on a glass surface of a small smart phone called iPhone. People are not expressing a need to be able to communicate more rapidly and what more they could do on their phones. But once the means become available to do so they willingly take advantage of the new technology. Then positive feedback takes over and the better the technology become the more people get used to its benefits and adapt themselves for it. Developments in technology can create a need that provides a ready market for improved versions of the technology. And so it goes on.

2 iPhone Case Study iPhone is a portable device that provides not only a typical phone call feature but also a fully functional web browser, an email client, a visual voicemail, a music player, a video player, and web applications. iPhone has delivered new user interface concepts, consisting of a built-in accelerometer which changes the display from movement, vibration, and shock de- tections of the phone and a multi-touch user interface which allow users to fully control the phone by tapping, flicking, or pinching the screen with one or several fingers (Apple Inc., 2008a). See figure 2.1 for the iPhone components.

Figure 2.1 iPhone components (Apple Inc., 2008a). iPhone came with state-of-the-art user interfaces and applications that suit people lifestyles and needs. “iPhone is a revolutionary and magical product that is literally five years ahead of any other mobile phone,” said Steve Jobs, Apple’s CEO. “We are all born with the ultimate pointing device—our fingers—and iPhone uses them to create the most revolutionary user interface since the mouse.” (Apple Inc., 2007a, p.1).

Figure 2.2 iPhone demonstrating a built-in accelerometer (Apple Inc., 2009b). iPhone integrated three key products—a mobile phone, a widescreen iPod with touch controls, and an Internet communications device with desktop-class email, web browsing, searching and maps—into one small and lightweight handheld device (Apple Inc., 2007a). The applications in iPhone run on the iPhone operating system (OS) which suitably work

with those innovative user interfaces (Apple, 2009a). In 2008, Apple has released the iPhone’s software development kit (SDK) which attracts group of developers to create over 35,000 applications for iPhone (Apple Inc., 2009d).

2.1 iPhone as a Radical innovation? Technological innovation can come from various sources and take many forms. Different types of innovation require different kinds of underlying knowledge and offer varying op- portunities for organizations and society, and they pose different demands upon producers, users, and regulators. This dimension is useful for understanding some key ways that one innovation may differ from another and why we might categorize iPhone as a radical innovation. The radicalness can also lead to distinctive eras of industry. Anderson and Tushman (1990) argued that a technological breakthrough, or discontinuity, initiates an era of intense technical variation and selection, culminating in a single dominate design. As mentioned by Tomi Ahonen (2007), an independent 3G strategy consultant, the mobile telecoms world would count its time in two eras. The Era BI: time before the iPhone, and the ERA AI: time after the iPhone. Ahonen (2007) analysed these two eras through the capabilities of smart phones such as handsets, mobile Internet capabilities, etc. and the effects on industries e.g. media industry, advertising, and so on. Following are three major points that we can obviously see the distinction between two eras: handsets, mobile Internet, and media industry. Firstly, the handsets capability, Ahonen (2007) pointed out that more than outwardly design, is the internal software on user interface. Since the iPhone, most reviews of smart phones compare all new high-end phones with the iPhone and try to see if they are being almost as good as the iPhone. Secondly, the mobile Internet capability, unlike most early Inter- net-capable monochrome WAP phones or modest speed GPRS phones with tiny colour screens, iPhone offers the sharp 3.5” screen and its powerful web access software. This capability has a big impact on the mobile Internet industry as well as the value-added services industry of mobile telecommunications. Thirdly, considering the media, not only the music industry that iPhone has taken a majority due to its iPod application, but also the rest of media industries such as radio, TV, newspaper, and video-gaming in which we could ultimately foresee an impact on those industries from iPhone (Ahonen, 2007). According to Derene (2007), recent smart phones in the market have several capabilities that serve not only business functions such as email and Internet but also entertainment functions such as high-resolution camera, music & movie player for non-business users. Many companies such as Palm, Research In Motion (BlackBerry) and Microsoft (Windows Mobile operating system) have created such multi-purpose smart phones but there was still slow evolution among them until the appearance of iPhone. The problem of other smart phones is that although most functionalities were fulfilled, they were frustratingly difficult to use. Hence, Popular Mechanics has conducted a comparison between iPhone and other seven competing smart phones and the result showed that iPhone received an overall ‘A’ grade due to its multimedia flexibility and ease of use as well as a superslim and buttonless appearance. They admitted that the intuitive interface of iPhone guided the testers to songs, photos, web pages and other functions in less than half the time of the nearest competitors (Derene, 2007). When Apple came out with the iPhone it was the first smart phone that rely totally on a touch screen keyboard instead of physical keys such as those used on Blackberry (Baker,

2008). Most experts and technology reviewers thought this was a serious deficiency. “Typ- ing on glass? You have to be kidding! If you did a customer survey you’d get the same reaction” Baker (2008, p.21) said. But Steve Jobs and his engineers recognized that this feature enabled the use of a large display, valuable for many of the other functions such as web browsing. In these other modes when the keyboard is not needed it simply disappears, something a real keyboard could not do. Seemingly, this product has succeeded in spite of conventional wisdom or an expert’s dislike of it. Having said that, we consider iPhone as the result of a technology-driven and also a visionary leader who looks at a different way to do something, quite apart from how it has been before. Conventional marketing testing is far less useful in this case. In the view of the radicalness characteristics in iPhone, Apple Inc. (2007a) has embedded the radical innovative technologies through its three main elements: Phone, iPod (music & video player), and Internet. These key elements will be described as following;

2.1.1 iPhone as a Mobile Phone In addition to typical mobile phone features such as making phone calls, syncing contact information from personal computers, and calendar application, iPhone was pioneering an industry first Visual Voicemail which lets users look at a list of their voicemails, decide which messages to listen to, then go directly to those messages without listening to the prior messages, just like an email system (Apple Inc., 2007a). Figure 2.3 Phone icon Considering the SMS application, iPhone makes use of its new user interface, (Apple Inc., 2008a) a full QWERTY soft keyboard, to allow users easily send and receive SMS messages in multiple sessions, similar to an instant messaging and chat style. When users type, iPhone presents them with a full soft keyboard which is predictive to prevent and correct mistakes, making it much easier and more efficient to use than the small plastic keyboards on many smart phones. Additionally, iPhone features a camera and a photo management application that allows users to browse their photo library with just a flick of a finger. Photos can be easily attached to email or synced to personal computers (Apple Inc., 2007a).

2.1.2 iPhone as a Widescreen iPod iPhone lets users enjoy all their iPod content, including music, audiobooks, audio podcasts, video podcasts, music videos, television shows and movies. These contents can be synced from personal computers to iPhone. iPhone also features touch controls which users can scroll through entire lists of Figure 2.4 songs, artists, albums and playlists with a flick of a finger as well as a Cover iPod icon Flow – an Apple’s technology that allows users to navigate music library by (Apple Inc., selecting album cover artwork. In addition, with a 3.5-inch widescreen 2008a). display, iPhone offers an ultimate way to watch TV shows and movies on a pocketable device, with touch controls for play-pause, chapter forward-backward and vol- ume (Apple Inc., 2007a).

2.1.3 iPhone as a Internet Communications Device iPhone contains a rich HTML email client which fetches email in the background from mail services and displays photos and graphics right along with the text. iPhone is compatible with most industry standard IMAP and POP based email services, such as Microsoft Exchange, Apple .Mac Mail, AOL Figure 2.5 Mail, Google Gmail and most ISP mail services (Apple Inc., 2007a). Internet icon (Apple In addition, iPhone features the most advanced web browser on a portable Inc., 2008a). device with a version of Safari web browser for iPhone. Users can see any web page in the way it is designed to be seen, and then easily zoom-in to expand any section by simply tapping on iPhone’s display with their fingers. Users can surf the web over Wi-Fi, EDGE, or 3G and can automatically sync their bookmarks from their personal computers. As partnership between Apple Inc. and Google Inc., iPhone’s Safari web browser also includes built-in Google Search so users can instantly search for information on their iPhone just like they do on their computers. Moreover, iPhone also includes Google Maps, featuring Google’s maps service application. Users can view maps, satellite images, traffic information and get directions from iPhone (Apple Inc., 2007a).

2.2 iPhone as a design icon According to Scanlon (2007), Apple products come with a minimalist aesthetic and churn- ing out shiny appearance. Every component even cords and ear buds, for example, is held to the same exacting design standards. Grossman (2007) argued that iPhone is one of a typical piece of design from Jonathan Ive, Apple’s head of design, which reflects to an aus- tere, abstract, platonic-looking form that somehow also manages to feel warm and organic and ergonomic. As a part of iconic iPhone design, Ive’s won an incredibly rare D&AD Black Pencil, which is a marker of creative genius. D&AD is one of the most important awards for creative talents of the advertising and design industries (Beale, 2008). During the interview with Ive by the Design Museum, Ive noted that Apple was re- establishing the core values which are to pursue design and innovation as an important part of the firm’s direction. In the 1970s, Apple talked about being at the intersection of technology and the arts. The defining qualities are about use: ease and simplicity. Caring beyond the functional imperative, they also acknowledge that products have a significance way beyond traditional views of function. He admitted that materials, processes, product architec- ture and construction are huge drivers in design (Design Museum, 2007). Philippe Spruch, a founder of LaCie, pointed out that “It’s not that Apple design is better or worse than the design of the Sony Vaio. But you feel that it’s part of the DNA. They are crazy about every detail, and you feel that. Today, many more companies invest in design, but they do it because they are forced to, not because they like it, and I think you can feel that in their products.” (Scanlon, 2007, p.2). Regarding Spruch’s point of view, we can see that Apple has embedded a vibrant design culture in its organization. To create such a stunning piece of art, especially for high technology devices, it requires skills, creativity, and a high commitment to deliver a better customer experience.

3 Purpose The purpose of this study is to investigate how a radical innovation is adopted and analyze the impact it has on consumer behaviour to understand the key influential driver of success through the case study of iPhone.

3.1 Hypotheses Since today we live in a time of swiftly technological advances and relative affluence, in our view, technology becomes a universal language. It connects people around the world by enabling instant communication on a global scale. Thus, we would like to investigate in three key strategic regions following The World’s 50 Most Innovative Companies 2008 survey by Business Week (2008b); Asia, Europe and North America. We hypothesize that iPhone is a radical innovation that introduces behaviour change and it will have an effect on consumer behaviour. We also assume that there will possibly be some differences in consumer attitude and reaction toward radical innovation due to diverse cultural and geo- graphical background. In addition, we anticipate that psychographics profile such as lifestyle and attitude may play an important role in innovation adoption. Differences in ages and lifestyles among the interviewees will add to diverse perspectives and insights assumedly. Youngster and business man mobile users are our main interests as we think that these two groups are the most sensitive and enthusiastic case toward technological innovation adoption in particular to iPhone technology. Based on our hypothesis, we intentionally identify the psychographic profile of these two groups as below; Youngster: They are exposed to new innovation and excited to try new things. They have resource and access to evolving and new technologies. They want and expect to have control over their media experiences. Life is all about fun and technology is mostly for their entertainment. Mobile phone for them is rather for social communication and entertaining device. We call them ‘Young tech savvy’. Business man: They have to catch up with news, trend and technological movement in the market. They have resource and access to evolving and new technologies. Life is all about work and achievement. Mobile phone is the most important device for business connection and technology serves them as work assistance. We call this group ‘Professionals’.

3.2 Research Questions All above have led us to the following research questions. • How an iPhone is adopted by consumer and what is the key influential driver of innovation diffusion? • What is the impact of iPhone on consumer behaviour? And how does it happen?

4 Frame of Reference This section examines a major aspect of consumer behaviour of the acceptance of new product and services. It is drawn from the area of research known as the diffusion of innovations. The central interests in this particular area have been to better understand how the acceptance of a new product spreads within the market and the individual consumer decision-making process that lead to the acceptance and adoption.

4.1 The diffusion of innovation and adopter categories S-curves are also often used to describe the diffusion of a technology. It is obtained by plotting the cumulative number of adopters of the technology against time. This depict processes which is initially slow when an unfamiliar technology is introduced to the market, it accelerates as the technology becomes better understood and move into fast growth when utilized by the mass market, and eventually the market is saturated so the rate of new adoptions declines.

Figure 4.1 Diffusion of innovation (Rogers, 1983). S-curves in technology diffusion are often explained as a process of different categories of consumer adopting the innovation at different times. One typology of adopter categories that gained prominence was proposed by Rogers (1983).

Figure 4.2 Adopter categories (Brown, 1992).

4.1.1 Innovators Innovators are the first individuals to adopt an innovation and are comprised of technology enthusiasts; people who appreciate technology for its own sake and are motivated by the idea of being a change agent in their reference group. They love to get their hands on the latest and greatest innovations. Extremely adventurous in their purchasing behaviour, they are comfortable with a high degree of complexity and uncertainty. Innovators typically have access to substantial financial resources (and thus can afford the losses incurred in un- successful adoption decisions). Though they are not always well integrated into a particular social system, innovators play an extremely important role in the diffusion of an innovation because they are the individuals who bring new ideas into the social system. Although not much revenue comes from this group, it is the key to accessing the next group. Rogers (1983) estimated that the first 2.5 percent of individuals to adopt a new technology are in this category.

4.1.2 Early adopters The second category of adopters is the early adopters or as visionaries. These people are attracted by high risk, high reward projects, and because they envision great gains in competitive advantage from adopting new technology, they are not very price sensitive. So they are also the first constituency who can and will bring real money to the table. Early adopters are well integrated into their social system and have the greatest potential for opinion leadership. Early adopters are respected by their peers and know that to retain that respect they must take sound innovation adoption decisions. Other potential adopters look to early adopters for information and advice, thus early adopters make excellent missionaries for new products or processes. Rogers (1983) estimated that the next 13.5 percent of individuals to adopt an innovation (after innovators) are in this category.

4.1.3 Early majority Rogers (1983) identifies the next 34 percent of individuals in a social system to adopt a new innovation as the early majority. The early majority are the pragmatists. Rather than inspired by revolutionary changes, this group is motivated by evolutionary changes to gain more productivity enhancements in their needs. They are typically not opinion leaders, but they interact frequently with their peers. Pragmatists generally want to reduce risk in the adoption of the new technology and therefore follow three principles (Moore, 1995): • When it is time to move, let us all move together. This principle is why adoption increases so rapidly at this point in the diffusion process, causing the landslide of demand. • When we pick the vendor to lead us to the new paradigm, let us all pick the same one. This obviously determines which firm will become the market leader. • Once the transition starts, the sooner we get it over with, the better. This is why this stage occurs very rapidly. From a marketing perspective, these people are not likely to buy an innovation without a reference from a trusted colleague. The question is who is considered as a trust colleague by a pragmatist. It is neither visionary nor enthusiast who has a different view of technology. How to get just one pragmatist to buy when the first will not buy without another pragmatist’s reference? Yet, pragmatists are the mainstream market.

4.1.4 Late majority The next 34 percent of the individuals in a social system to adopt an innovation are the late majority, according to Rogers (1983). They are termed as conservatives. Like the early majority, the late majority constitutes one-third of the individuals in a social system. Those in the late majority approach innovation with a skeptical air and may not adopt the innovation until they feel pressure from their peers. The late majority may have scarce resources, thus making them reluctant to invest in adoption until most of the uncertainty about the innovation has been resolved. They are motivated to buy innovation just to stay even with the competition and often rely on a single, trusted advisor to help them make sense of technology.

4.1.5 Laggards The last 16 percent of the individuals in a social system to adopt an innovation are termed laggards. They are technology skeptics who want only to maintain the status quo. They may base their decisions primarily upon past experience rather than influence from the social network, and they possess almost no opinion leadership. They are highly skeptical of innovations and innovators, and they must feel certain that a new innovation will not fail before adopting it. The almost only way they might buy is if they believe that all their other alternatives are worse and that the cost of justification is definitely valid (Rogers, 1983).

4.2 Crossing the Chasm

Figure 4.3 Crossing the chasm (Moore, 1991 & Searls, 2003). According to Moore (1991), the marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries (early adopters) and pragmatists mainstream (early majority). The chasm is derived from critical differences between these two. Vision- aries want to be the first in bringing new ideas to the market, but pragmatists want to go slow and steady. Visionaries will think and spend whereas pragmatists are prudent and want to stay within the confines of reasonable expectations and budgets. The Chasm arises because the early market is saturated but the mainstream market is not yet ready to adapt. Thus, there’s no one to sell to. The nature of firm’s marketing strategy in selling to visionaries is a very different than the marketing that is required to be successful with pragmatists. Many firms do not understand this difference and are unable to make the necessary shift in strategies to be successful (Moore, 1991). However, Moore (1991)’s theories are only applicable for disruptive or discontinuous innovations. Adoption of continuous innovations (that do not force a significant change of be-

haviour by the customer) are still best described by the original technology adoption lifecy- cle. Confusion between continuous and discontinuous innovation is a leading cause of fail- ure for high tech product (High Tech Strategies Inc., 2007).

4.3 The Innovation Decision Process This process concerns how a new product is accepted by those who will adopt it. Some researchers recommended that the focus be expanded to explore consumers’ current use behaviour, expectations for future use and level of satisfaction (Price & Ridgway, 1984). The focus of this is the stages through which an individual consumer passes in arriving at a decision to try or no try, to continue using or not continue using a new product with an update into a more general in decision-making model (Gatignon & Robertson, 1985). • Knowledge - Consumers are exposed to the innovation’s existence and gain some understanding of how it functions • Persuasion (attitude formation) - Consumers form favourable or unfavourable attitudes toward the innovation. • Decision - Consumers engage in activities that lead to a choice to adopt or reject the innovation. • Implementation - Consumer put an innovation into use. • Confirmation - Consumers seek reinforcement for their innovation decision, but may reverse this decision if exposed to conflicting messages about the product (Rogers 1983).

Figure 4.4 The innovation decision process (Schiffman & Kanuk, 1987). This model depicts in diagrammatic form the operation of the innovation decision process. Briefly, it suggests a number of prior conditions: felt needs and social system norms and characteristics of the decision making unit: socioeconomic status and personality factors that influence the reception of information about the product innovation during the knowledge stage. At the persuasion (attitude formation stage), the consumer is furthered influence by communications channels and by perceptions of the characteristics of the innovation. Additional information received during the decision stage enables the consumer to assess the innovation and decide whether to adopt it or reject it. During the implementation

stage, further communication is received as the consumer puts the innovation to use. The final stage, confirmation, is also influenced by communication sources; it is at this stage that consumers evaluate their purchase experiences, look for support for their behaviour, and decide to continue or discontinue using the product (Schiffman & Kanuk, 1987).

4.4 Consumer involvement and attitude dynamics The level of consumer involvement also influences the extent of consumer information processing and may therefore affect the direction of the attitude behaviour relationship. When consumers believe a purchase decision is highly relevant and important and are willing to exert effort to acquire information, we consider such concern to be indicative of high involvement such as luxurious or hi-tech product. In contrast, when consumers believe a purchase is unimportant and see little reason to acquire product information, we consider such concern to be indicative of low involvement for example, consumer products in the supermarket (Schiffman & Kanuk, 1987). A practical four models describes information search between high involvement and low involvement purchases is shown below.

Table 4.1 Four Consumer Involvement/Brand Differentiation Decision-Making Models (Schiffman & Kanuk, 1987). Involvement Level

High Low

(Active Learning Model) (Low-involvement Model)

Awareness/Beliefs Awareness

High Attitudes Behaviour

Level of Behaviour Attitudes Perceived Brand Differentiation (Dissonance-Attribution Model) (Modified Low-involvement Model)

Behaviour Awareness

Low

Attitudes

Beliefs Behaviour

The model portrays consumers as progressing through a three-stage hierarchy from awareness and knowledge to the formation of attitudes, and then to behaviour. It is a classical example of Think before you act. Active learning Model The active learning model, as depicted in the upper left is based on traditional cognitive learning theory. Consumers are active learner and engage in extensive problem solving. They see the brand alternatives as quite different in their benefits and satisfaction ability. Consumers are likely to perceive decisions involving high relevance and high brand differentiation as quite risky; therefore, the acquisition of information about the product is necessary for decision making (Schiffman & Kanuk, 1987). Dissonance-Attribution Model The dissonance attribution model (lower-left) represents a decision situation that couples high relevance to the consumer with little or no perceived differences among brands. The three stages of this model correspond to the behaviour-before-attitude that characterizes post- purchase dissonance theory and attribution theory (Schiffman & Kanuk, 1987). Original Low-Involvement Model In this case, the three-stage hierarchy begins with a progression from awareness to behaviour, and then from behaviour to attitudes. The model suggests that awareness of alternatives is likely to be sufficient information for consumers to make a purchase decision under conditions of product relevance. Following from this, attitudes are depicted as an outcome of consumer’s experiences with the brand and these thoughts are formed as consumers establish preferences for the brand that provides them with the greatest amount of satisfaction (Schiffman & Kanuk, 1987). Modified Low-Involvement Model The final model (lower right) portrays a situation where consumers have little involvement and perceive little difference between brands in the market. In this case, the model consists of only two stages- brand awareness and behaviour. The consumer perceives the various brands to be so uniform that pre existing attitudes toward the overall product category are sufficient for all brands, and there is no additional need to establish brand specific attitudes (Schiffman & Kanuk, 1987).

4.5 Sources of influence in Attitude formation How consumer attitudes are formed and how they are changed are two closely related issues of considerable concern directly to behaviour change. Attitudes may be established, identification of the sources from which consumers obtain information, advice, and influence. The principal sources that affect the formation of consumer attitudes include experience, personal influence, and mass media (Schiffman & Kanuk, 1987).

4.5.1 Direct and past experience The primary means by which attitudes are formed toward goods and services are through the direct experience of trying and evaluating them. Recognizing the direct experience, marketers usually attempt to stimulate trials of new product by offering trial samples and showing demonstration. If a product proves superiority or satisfactory, it is likely that con-

sumers will form positive attitudes and possibly purchase the product and enjoy adopting it (Schiffman & Kanuk, 1987).

4.5.2 Personal Influence As we live in society, we contact with others especially family, friends and admired individuals, we acquire attitudes that influence our lives. The family is a significantly important source of influence when it comes to the establishment of attitudes. Friends and admired individuals play an important role later on. In particular to attitude toward the high-tech product, professionals and opinion leaders are the critical influential source of attitude formation. Thus, personal influences are often used as an effective tool of advertising by taking advantage of the power of contacts and shared interests to stimulate word-of-mouth (Schiffman & Kanuk, 1987).

4.5.3 Exposure to the mass media It seems inevitably that in a country where people have easy access to newspaper and an almost infinite variety of general and special interest magazines and television and cable channels, mass media advertising would be an important source of information to influence our attitudes. Particular to our study, we would like to stress how mass media communication is able to form positive attitude toward iPhone object and eventually lead to adoption process as described in the next chapter (Schiffman & Kanuk, 1987).

4.5.4 Personality factors Consumer own personality is also another source that plays a vital role in attitude formation. To illustrate, introverted individuals are likely to express their introversion in negative attitude toward flashy cars, dancing classes and public activities etc. Similarly, consumer attitudes toward new products and new consumption situations are strongly influenced by their own personality characteristics (Schiffman & Kanuk, 1987). Most discussions of both attitude formation and attitudes change stress the view that consumer develop attitudes before they act. The attitude-behaviour relationship is relevant to the prediction of consumption. In this case we concern the demand for new product such as iPhone, before they are placed on the market and the satisfaction and impact when consumers adopt it. Can we use people’s intentions to predict consumption? If attitudes affect consumption this sort of analysis may help in the modification of product design and in the choice of strategic communication strategies.

5 iPhone Strategy Marketing Communications

5.1 Steve Jobs, the marketing CEO According to Graham (2007a), Apple’s arsenal of getting public attentions holds lessons for any company: designing cool, innovative products, streamlining the product line, investing in memorable ads, working on customer base to make customers feel special and create word-of-mouth agents, and most importantly keeping the world and media surprised, to generate gobs of attention. Marketing guru Peter Sealey, a professor at Claremont Graduate University, called Steve Jobs, the CEO of Apple, “the best marketing CEO in the business.” (Graham, 2007a, p.1). Sealey expressed his reflections on the outstanding strategies that Apple and Steve Jobs could give a good example for other companies. Main strategies are described as follows:

5.1.1 Make outstanding and innovative products Apple is obsessed with design and innovation. The history of inventing and designing groundbreaking products in-house brings on the spotlight (Graham, 2007a).

5.1.2 Keep everything simple Jobs cut off the product line to make it easier for consumers to focus after his return to Apple in 1997. While rivals offer about 100 models products, often with non-memorable product names, Apple has fewer than 20 options, with simple names such as the Mac Mini, MacBook, iMac, PowerMac, iPod Classic, iPod Touch, iPod Nano, iPod Shuffle, and iPhone (Graham, 2007a).

5.1.3 Create memorable and vibrant ads Graham (2007a) stated that Apple was long time using a hip and effective advertising. Mi- chael Markman, a former director of advertising for Apple in the 1990s, highlighted that a dazzling iPod ad, with dancing hipsters set against a silhouette, is a wordless product demo. It ends with a great tag line that made the product really simple to understand for the masses, ‘One thousand songs in your pocket.’ He noted that no one really understood what an MP3 player was until that tag line. Apple introduced its first ad for the iPhone on the Academy Awards telecast, a 30-second smorgasbord of TV and movie clips, featuring actors from Lucille Ball and Dustin Hoff- man to the animated Betty Rubble from The Flintstones saying hello into a phone. Accord- ing to Sealey, despite Apple spends much less on advertising than its rivals do, the ads just standout because they were so good (Graham, 2007a).

5.1.4 Showcasing the taste-makers With a declining market share for computers, Apple had to work harder to get its products in front of the public. According to Jeffrey Cruikshank, the author of The Apple Way, Apple has been very PR-centric, pushing to get its products reviewed and used as product placement in movies and TV shows. Apple computers have appeared on screen more than 1,500 times in the past 20 years on TV shows and movies including 24, Sex and the City, Seinfeld and You’ve Got Mail (Graham, 2007a).

5.1.5 Put on a show According to Graham (2007a), unlike other technical companies such as Microsoft, Intel, Oracle and Adobe which stage events to unveil products or announcing operating system or software upgrade, Apple consistently succeeds in turning those kinds of events into headlines, because of Jobs’ endless devotion to fine-tuning. Harvard Business School professor, David Yoffie also highlighted that Steve works harder than almost any CEO at being the master showman. And according to Charles Wolf, an analyst for Needham & Co., Apple’s track record at keeping details of new products close to the vest produces a snowball effect. Steve invites the general public, and they flock to these shows. It seems that the press is a willing accomplice. An evangelist, who worked with Jobs on planning speeches, revealed that the actual setup and rehearsal takes a week, but the planning takes months. There are constant meetings about it, and they are very intense (Graham, 2007a). Regarding the publicity from the iPhone announcement, Yoffie gave an opinion that it will drive people into the stores to test the products and help sell a lot more iPods and iPhones. Think of all that publicity as a substitute for marketing costs and an opportunity for Apple to dramatically increase its market share (Graham, 2007a).

5.2 iPhone Launching Strategy Introducing an iPhone during MacWorld 2007 event was a great phenomenon in which Apple has successfully pioneered a next generation smart phone to the market. Kahney (2008) argued that the launch of iPhone in MacWorld 2007 was the biggest to date. It single-handedly eclipsed the much larger Consumer Electric Show in Las Vegas, which was happening at the same time and was more important economically than MacWorld. Be- sides, the iPhone launch also overshadowed announcements from much bigger companies, including the introduction of the consumer version of Windows Vista, and became the biggest technology story of the year (Kahney, 2008).

5.2.1 Launch timing According to Schilling (2008), instead of trying to decrease costs and increase timing of entry options by launching new products as early as possible, a firm should consider to use its product launch timing to take advantage of business cycles or seasonal effects, to position its products efficiently with respect to previous generations of related technologies, and to ensure that product capacity, and complementary goods and services are in place. In Q3 2006, Gene Munster, a senior analyst at Piper Jaffray, a U.S. research and investment firm, reckoned that Apple would launch an iPhone around December 2006 to March 2007. According to his analysis, there were already approximately 25 handsets that come with music functionality and are available to subscribers of U.S. mobile operators. Due to the in- flection point in the music-enabled handset market, Apple was looking for the perfect time to introduce its iPhone. Munster believed that an introduction of iPhone would draw more attention to the music-enabled handset market and it would contribute a significant growth expectation implied in industry analyst market forecasts. Since music-enabled handsets are being introduced by potential handset maker competitors and are being met with increasing success, he believed Apple would likely need to get in the game fairly soon to avoid missing the early adopters (Marsal, 2006).

Apple Inc. (2007a) introduced the first generation of iPhone on January 9, 2007, during the time that Munster had reckoned. Considering related technologies, iPhone came with common technologies that can be seen in typical mobile phones such as address book, SMS, build-in camera, Bluetooth, Internet browsing etc. Moreover, it has featured several technologies that were being used in previous Apple’s devices and operating systems such as iPod - a music player and a video player, Cover Flow – a user interface in OS X to navigate music library by selecting album cover artwork, Safari – a web browser in OS X with built-in Google Search (Apple Inc., 2007a). As iPod is one of the key features of iPhone (Phone, iPod, Internet), it is obviously seen that Apple has pioneered its first handset by considering the timing of entry to the music-enabled handset market.

5.2.2 New product preannouncement “How would you feel if you’d seen dozens of ads for a new product, but when you went to buy it, you discovered that the product wouldn’t be out for several months?” Or, “What if you read a glowing review of another new product, but were told by the sales person at the store that it hadn’t yet been shipped-and, in fact, would be months before it did?” (Mohr, Sengupta & Slater, 2005, p.337) Scenario such as these happen regularly in the world of hi-technology, and in that industry, it is called vaporware: products that are announced before they are ready for the market (Yo- der, 1995) or products that are not actually on the market and may not even exist but are advertised (Schilling, 2008). iPhone was first introduced to the public at the MacWorld event on January 9, 2007. How- ever, Apple had planned to start selling iPhone in the U.S. in June 2007, Europe in late 2007, and Asia in 2008 (Apple, 2007b). After the MacWorld event, it generated a big demand and many people keep waiting for its first selling day. According to Apple (2007b), iPhone went on sale at Apple retail stores nationwide on June 29, 2007 and during the first selling week, Apple could sell 270,000 iPhones throughout the United States in the first two days (Graham, 2007b). This strategy was also applied to the second generation of iPhone, iPhone 3G, which was announced on June 9, 2008 and went on sale on July 11, 2008 (Apple Inc., 2008b). For overall iPhone timeline, see Figure 5.1.

Figure 5.1. iPhone timeline (iPhoneGold.org, 2008)

5.2.2.1 Advantages and objectives of Preannouncements By pre-announcing, firms can potentially reap a pioneering advantage, creating barriers to entry to later entrants. By announcing products before they are fully available, a firm can preempt competitive behaviours. It could also stimulate demand. By helping develop word- of-mouth and opinion leader support, preannouncements can accelerate the adoption and diffusion of innovation when the product does hit the market. In addition to building interest for the product among channel members and customers, another factor related to consumer behaviour is to encourage consumer to delay purchasing until the announcing firm’s new product is available. This latter reason is primarily used for big-ticket items that are purchased rather infrequently. Ultimately, one of the key drivers of a firm’s propensity to preannounce is its pursuit of a high-profile leadership position within industry (Calan- tone & Kim, 2000). Jehoshua Eliashberg, marketing professor at the University of Pennsylvania, pointed out that in pre-announcing, a company let a competitor know what it was up to. But what matters more was a company’s position in an industry. Pre-announcing products seemed to be a practice often followed by industry leaders. And according to research by Michigan State University marketing professor Kim Schatzel and Roger Calantone, companies that preannounce products tend to be bellwether companies because they have more competitive equity. These firms announce products early to steer an industry’s direction, get support for their ideas and promote future plans. For Apple, the success of iPod also influenced the pre-announcing strategy of iPhone. Marketing professor at the University of Pennsylvania, Christophe Van den Bulte, highlighted that the strength of industry-leading products like the iPod may allow Apple to be more aggressive about its iPhone plans. Adding that lesser rivals may even scrap products based on an announcement. Had the iPod not been a tre- mendous success, the iPhone may have had a different launch strategy, he stated (Wharton, 2007). Another big advantage of pre-announcing products is to freeze the market. Kendall White- house, senior director of IT at Wharton School of the University of Pennsylvania, noted that with the pre-announcement of iPhone six months in advance, Apple clearly wanted to tell people thinking about buying a cell phone in the next few months that they should wait for the iPhone. Some consumers are obliging. Van den Bulte agreed that companies wanted to create a commitment in the consumer’s mind. By announcing in January, Apple has enticed some people to wait for the iPhone. Such scenario also happened to one of his colleagues who lost his Treo (a smart phone by Palm). Instead of buying a new one, he was using his old phone because he knew he was going to get an iPhone (Wharton, 2007). 5.2.2.2 Disadvantage of preannouncement Preannouncement can cue competitors to what is coming down the pike, allowing them the opportunity to react to the new world (Robertson, Eliasburg, & Rymon, 1995). Delays in its development turned into an advantage for firm’s competitors, which were able to beat it to market (Mohr et. al, 2005). The risk of cuing competitors is one reason why a firm’s propensity to be a pioneer is negatively related to a firm’s use of preannouncements (Calantone & Kim, 2000). Previously, touch-screen technology was an afterthought in the smart phone market but Apple has exploited it in a unique way by providing the multi-touch interface which is an easy to use and eye-catching interface. The wow factor surrounding the launch of the original iPhone in the U.S. was still hard to ignore. However, since the launch of Apple’s iconic iPhone 3G almost every mobile phone manufacturer has scrambled for a slice of the

touch-screen pie. The touch-screen mobile phone market has exploded in recent times (Catanzariti, 2009). In addition, preannouncement can result in cannibalization of the firm’s current product line, caused when customers delay purchases of current products in anticipation of the new ones (Mohr et. al, 2005). One of the key features of iPhone is iPod – a portable music and/or video player from Apple. It raised a big question that whether the iPhone will cannibalize iPod sales. Two analysts in the mobile device industry shared their opinions and predictions of the iPod and iPhone cannibalization effect. Tim Deal, a senior analyst with Pike & Fischer believed that the iPhone’s high price, along with its limited storage capacity, would probably prevent cannibalization of iPods. Similarly, Avi Greengart, principal analyst for mobile devices at Current Analysis, mentioned that there is still plenty of room in the market for both the iPhone and the iPod. There is a good chance that users might own one of each. He contended that the success of the iPod, though fuelled by many things, is based upon the item’s singular purpose. “Although the iPod offers a list of features, its primary purpose is the playback of content,” Deal noted (LeClaire, 2007, p.2).

5.2.3 Marketing communications and public relations How quickly an innovation spreads through a market depends to a great extent on communication between the marketer and the consumer and communication between consumers (Shiffman & Kanuk, 1987). For this reason, researchers interested in diffusion have paid particular attention to the transmission of product-related information through various channels of communication, and to the impact of the messages and the channels on the adoption or rejection of new products. For consumer behaviour the most obvious kind of persuasive communication comes in the form of advertising, whose primary aim is to persuade people to form or increase positive attitudes or intentions towards a particular product (Statt, 1997).

Figure 5.2 iPhone marketing communications and public relations (Kahney, 2008).

According to Kahney (2008), before official launching, there were several public relations and marketing communications activities that Apple exploited. Figure 5.2 shows that Apple has delivered messages to its consumers by controlling most communication channels. Some of its strategies are well planned as if there was no intentional planning at all. First, the Apple’s PR invited the press and VIPs to join a special event but slightly gave the information on that event. This created an explosion of blog posts and press articles specu- lating on what Apple would announce. The rumours spread through, not only limited to Mac communities but also in general. The national press such as Wall Street Journal, the New York Times, CNN, and the National Heralds Tribune are all interested in those rumours and keen on knowing what product that Apple would introduce to the public in the upcoming MacWorld event. At the same time, the Apple’s PR also offered exclusive information as a behind-the-scenes making of peek at the product to the national news and business magazines such as Time, Newsweek, Fortune, and Forbes just to make people want to know more about its product. On top of that, Apple’s PR also sent a new iPhone to three most influenced technology product reviewers, who strictly sign a non-disclosure agreement, to review the product and publish their articles on the product launch date. Those three reviewers are Walt Mossberg at the Wall Street Journal, David Pouge at the New York Times, and Edward Baig at USA Today (Kahney, 2008). With the success of rumours and sneak peek, David Yoffie, Harvard Business School professor, reckoned that it worth equivalent to 400 million dollars in free advertising from those rumours and having a high attention from the press (Graham, 2007a). After Apple announced the release date of its iPhone in June 2007, consumer traffic to the iPhone 8GB product page dramatically increased by 1,900 percent by the end of December 2007 (PriceGrabber.com, 2008) Beside the presentation of the new iPhone by Steve Jobs, the most interesting marketing activity is that all information about the new iPhone was planned to publish together at almost the same time. To be able to succeed on this part, Apple had successfully managed the company secrecy among employees and their business partners during the two-and-a- half years of development. The moment that Steve Jobs presented a new iPhone at the MacWorld event, all marketing mechanisms work in harmony: all secret advertising banners were unveiled, the Apple’s website showed off the new iPhone, the pre-coordinated news- papers, magazines, TV, and radio started publishing the information about the product. And within hours, all advertising poster and billboard were up across the country. The messages in the advertisement were so simple and direct (Kahney, 2008).

5.2.4 Buzz Buzz is created when cool hunters pick up on the latest fashion and start generating interest in the product or service. This is then amplified through the interest of mavens (early adopters), who persuade a large number of new consumers (early majority) to follow their lead and start spreading the buzz further afield (Lewis & Bridger, 2001). For iPhone, Apple seemed to be carving out a hybrid approach -- pre-announcing a product but also building buzz by keeping the details secret. While the company announced the iPhone in January, few outside Apple have actually seen the product in action. Leonard Lodish, marketing professor at the University of Pennsylvania agreed the iPhone launch was a theatrical production (Wharton, 2008). The product was still a part of Apple’s secrecy and this generated more interests from outsiders and created buzz.

One major stream of communication research is focused on the relative importance of certain types of information sources on early versus later adoption of new product as we will focus on this in section 9.1: Crossing the Chasm.

6 Method In this chapter, we will detail precisely how we intend to go about achieving our research objectives and how we justify our choice of method in the light of the objectives. Specifi- cally, these will explain why we conduct our research through certain methodology and how we collect the primary data during the research fieldwork. This section is divided into two parts: research design and data collection.

6.1 Research Design The aim of this thesis is to investigate how a radical innovation has an effect on consumer behaviour through the iPhone case study. As this case study strategy has considerable ability to generate answers to the question ‘what?’ as well as the ‘how?’ and ‘why?’ questions and to deepen the understanding of this phenomenon. When the focus of the research is to uncover and understand a phenomenon Ghauri, Grønhaug, and Kristianslund (1995) argue that a qualitative research method is required. Qualitative data is beneficial for this thesis since it examines and describes the situation and experience of the interviewees. Even though the different research methods have a number of smaller differences, the biggest difference lies in the fact that the quantitative research method uses few variables on many respondents to reach a result that can be generalized, while the qualitative research method uses few respondents but many variables to get a deeper understanding (Darmer & Frevtag, 1995). When it comes to qualitative research usually a lot of information and material is collected, and there are, according to Hardy and Bryman (2004), more often than seldom a surplus of material gathered. Richards (2005, p.33) supports this view and points out that “the chal- lenge is not so much making data but rather making useful, valuable data, relevant to the question being asked”. The aim of qualitative studies is to gain an in-depth understanding of a situation. In-depth understanding is based on researcher immersion in the phenomena to be studied, gathering data which provide a detailed description of events, situations and interaction between people and things, providing depth and detail (Patton, 1980). It is the most appropriate in our case where the explanation and understanding of consumer behaviour or activities matter more than specific measurements and what impact upon or influences such phenomena. Qualitative findings derive from, according to Patton (2002), three different kinds of data gathering methods: (1) interviews, (2) observations and (3) written documents. To be able to present the profound picture of the impact of iPhone as radical innovation, interviews, observations and written document were utilized. To be specific, Semi-structured and in-depth interviews are used in order to conduct discussions not only to reveal and understand the ‘what’ and the ‘how’ but also to place more emphasis on exploring the ‘why’. And participant observation enables the researchers to share their experiences by not merely observing what is happening but also feeling it (Gill & Johnson, 1997). Last but not least, written documents such as existing online iPhone users’ blog provides the researchers various aspects and makes the findings more reliable.

6.2 Data Collection

6.2.1 The interviews An interview is a purposeful discussion between two or more people (Kahn & Cannell, 1957). Undoubtedly it is also the most advantageous approach to attempt to obtain data in

the following circumstances (Easterby, Thorpe, & Lowe, 2002; Healey, 1991; Jankowicz, 2000): • Where there are a large number of questions to be answered; • Where the questions are either complex or open-ended; • Where the order and logic of questioning may need to be varied. Interviews are, according to Richards (2005), the dominating method when collecting material for qualitative research but the interviews can be accomplished and structured in various ways. Semi-structured and in-depth interviews are not only the most appropriate for the latter two types of situation above but also considered beneficial in our study as to deeply explore how and why a radical innovation can possibly impact consumer action. In this type of interview the interviewer has, according to Welman et al. (2005), an interview guide to follow which covers different topics, aspects and/or questions to be raised at the interview, hence the aspects and questions provide the interviewer with a base for the interview(s). We have a list of themes and questions to be covered, although these may vary from interview to interview. Open-ended questions is also utilized, as indicated by Ghauri et al. (1995) and Welman et al. (2005), it generates a large amount of variations in the answers since the interviewees have to formulate their responses themselves and can thus answer just as and what they like. The order of questions may also be varied depending on the flow of the conversation. Furthermore, additional questions may be required to further explore in some particular areas to address our research objectives. We believe that the great flexibility inherent in this qualitative research should be exploited. An interview discussion guide should never be a tablet of stone fixed for all respondents in a project. It should be modified ‘en route’ to the satisfaction of its objectives. As stated by Ghauri et al. (1995), interviews can be carried out via mail, phone or through a personal visit (face-to-face). The majority of the interviews for this thesis were performed face-to-face since this type of interview allows for, according to Lekvall and Wahlbin (2001), more personal reflections and the questions can be further explained to get the most fruitful answer. However, due to distant limitation, some interviews were conducted via face-to-face (Skype), chat (MSN) and telephone. Weiss (1994) argues that telephone interviews are the second best interview method, after face-to-face, since it also provides the researcher(s) useful and suitable information. On average, the time spent on the interviews was approximately 60 to 90 minutes as we found interviewees are much enjoy talking about their mobile phones. 6.2.1.1 Question guide As our objective is to understand how a new product will be accepted and adopted, we developed our question guide based on the innovation decision process (Gatignon & Robert- son, 1985) that focus on the stages through which an individual consumer passes in arriving at a decision to try and to continue using a new product or not. Along with this process, we expect to see the influential factors of an adoption and how this could affect consumer behaviour. Our focus is the possible impact after consumer put new to the world product into regular use. Step 1. Knowledge is when consumers are exposed to the innovationʼs existence and gain some understanding of how it functions. • How did you first hear or see the iPhone? How do you feel at first sight?

Step 2. Persuasion(attitude formation). Consumers form favourable or unfavourable attitudes toward the innovation. • Who do you think should use iPhone and why? Step 3. Decision is when consumers engage in activities that lead to a choice to adopt or reject the innovation. • What makes you purchase iPhone? What reasons cause you adopting an iPhone? Step 4. Implementation is when consumer put an innovation into use. • How do you feel about iPhone so far? Like or dislike and why? • What do you normally use for iPhone? • What is your favourite function or application? • In your view, does iPhone has any effect on you? If yes, please describe. Is there any change happen after using iPhone regarding to your lifestyle and behaviour? If no, is there any other recent innovation that has an effect on you? In which way? • How did this compare to previous mobile you use? Step 5. Confirmation Consumers seek reinforcement for their innovation decision, but may reverse this decision if exposed to conflicting messages about the product (Rogers, 1983). In particular to our iPhone case, we identify the confirmation stage as when consumers are using the iPhone for a while and we would like to know if they are really satisfied and there is a opportunity to re-purchase it. • How long do you plan to use it? • Would you recommend other to use iPhone? • In your view, is there any comment for iPhone improvement?

6.2.2 The Participant Observation Our Thesis is mainly concerned with what people act, so an obvious way in which to discover this is to watch them do it. This is essentially what observation involves: the system- atic observation, recording, description, analysis and interpretation of people’s behaviour (Saunders, 1959). As Delbridge and Kirkpatrick (1994, p.39) state: “in the social sciences we cannot hope to adequately explain the behaviour of social actors unless we at least try to understand their meanings”. The role we chose to play as participant observer is ‘Participant as observer’. We intentionally revealed our role as a researcher. Both observer and the subjects were aware that it is a fieldwork relationship. After interview session, we observed two different subjects closely for 12 hours during daytime. The data collection was designed to observe them in a week period before they have an iPhone and one week duration after they adopt an iPhone. However, we gave our subject around 2 weeks before we began the post-purchase fieldwork as we need the subject to be more familiar with the new technology. As our identity as a researcher is clear, we could ask questions to enhance our understanding. Robson (2002) argues that this leads to another advantage of this role. Informal discussion will be part of overall approach of asking questions. These questions are of two types (Robson,

2002): first, to informants to clarify the situations you have observed and, second, to your- self to clarify the situation and the accounts given of the situation.

6.2.3 Samplings To answer our research questions and to meet our thesis objectives we need to undertake an in-depth study that focuses on a small, perhaps one, case selected purposively. Although this might appear a contradiction, as a small sample may contain cases that are completely different, Patton (2002) argues that this is in fact a strength. The validity and understanding that you will gain from your data will be more to do with your data collection and analysis skills than with the size of your sample (Patton, 2002). Blaxter, Hughes and Tight (2001) argue that there are several different kinds of sampling strategies to use when collecting data. Non-probability sampling would provide us with an information-rich case study in which we explore our research question. Rather it depends on your research questions and objectives – in particular what you need to find out, what will be useful, what will have credibility and what can be done within your available resources (Patton, 2002). 6.2.3.1 Purposive sampling In this case, Purposive or judgmental sampling technique enables us to use our judgment to select cases that will best enable to fulfil our research questions. This form of sample is often used when working with very small samples such as in case study research and when you wish to select cases that are particularly informative (Neuman, 2000) Such samples cannot, however, be considered to be statistically representative of the total population. Patton (2002) emphasizes this point by contrasting the need to select information-rich cases in purposive sampling with the need to be statistically representative in probability sampling. Purposively, we have divided our target selection by psychographics. Refer to our hypotheses, young tech savvy and professional mobile users are our main interests as we think that these two groups are the most sensitive and enthusiastic case toward technological innovation adoption in particular to iPhone technology. We also classify our sampling geographi- cally into three key strategic regions based on The World’s 50 Most Innovative Companies 2008 survey by Business Week (2008b); Asia, Europe and North America. According to our intention above, we use our worldwide connection in an attempt to find the iPhone users in three different regions. As we both used to work in international companies and we were assigned to work and travel abroad, this gave us a good opportunity to meet some foreign colleagues and get in touch with them. Fortunately, we can ask for their support. Moreover, as we are studying at JIBS which is an international school, we can find many youngsters or connections from our friends who are iPhone users. Through these two channels, we can reach the target as our aim in sampling selection.

6.3 Secondary data Secondary data include both quantitative and qualitative data. The data you use may be raw data, where there has been little if any processing, or compiled data that have received some form of selection or summarizing (Kervin, 1999). Multiple-source data was utilized in our case. Different data sets have been combined to form more valuable findings and analysis. Documentary secondary data: diaries, iPhone blogs, related articles and Survey-based secondary data: Googles’ surveys together with primary data from interview and observation are used to best answer our research questions.

Secondary data is useful to compare data that we have collected with primary data. This means that we can triangulate our own findings with a more general context. Unlike, data that we collect by ourselves, secondary data generally provide a source of data that is both permanent and available in a form that may be checked relatively easily by others (Den- scombe, 1998). This means that the data and our research findings are more open to public scrutiny.

Figure 6.1 Research design 6.4 Trustworthiness How could we be so sure that our theory reflected the respondents’ reality? Indeed, can any qualitative research be trusted? Would the same theory be developed when replicate the study? How subjective was it? In answering these questions, it is important to consider the trustworthiness of the study. The foundation of trustworthiness is, according to Lin- coln and Guba (1985), straightforward and the bottom-line concerns how the researcher(s) should convince the audience that the study is important to consider and pay attention to. Validity is concerned with whether the findings are really about what they appear to be about (Saunders, 1959). If we consider validity of an in-depth interview first, this refers to the extent to which the researcher gains access to their participants’ knowledge and experience, and is able to infer a meaning that the participant intended from the language that used by this person. The high level of validity that is possible in relation to qualitative interviews that are conducted carefully is made clear that the main reason for the potential superiority of qualitative approaches for obtaining information is that the flexible and re- sponsive interaction which is possible between interviewer and respondents allows mean-

ings to be probed, topics to be covered from variety of angles and questions made to respondents (Sykes, 1991; Healey & Rawlinson, 1994). Participant observation is subject to the threats to validity in history and maturation matters. We had foreseen that when having a brand new mobile phone, subject might need some times to get used to all the features and applications. If the observation is conducted shortly or right after subject buy an iPhone this may have dramatic misleading to the findings. Therefore, we leave them 2 weeks to learn how to use the new technology and be familiar with it before we started second phrase when subject fully adopted the innovation. While validity focuses on the meaning and meaningfulness of data, reliability focuses on the consistency of results (Patton, 1986). The findings derived from using non-standardized research methods are not necessarily intended to be repeatable since they reflect reality at the time they were collected, in a situation which may be subject to change (Marshall & Rose- man, 1999) As Delbridge and Kirkpatrick (1994, p.43) note, “because we are part of the social world we are studying we cannot detach ourselves from it, or for that matter avoid relying on our common sense knowledge and life experiences when we try to interpret it”. Nonetheless, we have intentionally utilized the observation technique as to cross-check with interview findings and further explore the changing of consumer behaviour in the real situation due to the fact that sometimes consumer are unaware of their actions and they do not admit that something is changed. What we advocate here is that although we cannot avoid observer bias, we try to be aware of the threat to reliability it causes and try to control it. By validating findings from 2 methods, we can ensure reliability of our interpretation.

6.5 Method evaluation In certain cases, when people are asked straightforward questions they often respond at a purely cognitive level, giving reasoned, rational, socio-normative responses. They tell the investigator what they think they ought to, or what is expected. Interpretation can only be made in a cognitive way and at a superficial level. The cognitive interpretation is deficient to provide a diagnostic explanation of why people behave, think and feel as they do it. In relation to our case, some respondents are unaware of the impact and changes happen in their lifestyle and behaviour. It is necessary to explore the cognitive framework of people’s emotions and rationales. Since these cannot be fully expressed verbally by direct question, observation in real life situation is required to further explore and increase the understanding in the findings. Even observation can be very time consuming, we found it very good at explaining ‘what is going on’ in particular social situations specifically to our Thesis fieldwork. In addition, this technique have heightened our awareness of significant social behaviour processes as well as given us the opportunity to experience ‘for real’ emotions and actions of those who are being researched. However, qualitative research using semi-structured or in-depth interviews will not be able to be used to make generalizations about the entire population where this is based on a small and unrepresentative number of cases. This will be the situation in a case study approach (Yin, 1994).

6.6 Limitations The main limitation of this research is that the reflection from observation subjects and interviewees toward their iPhone’s usage might be dependent on the quality of the Internet infrastructure, such as speed and accuracy of the network since the majority of applications in iPhone is web application. Another limitation is that the level of price sensitiveness of the consumers might have an impact on the product adoption. Further research would be required to elicit the views of these dimensions.

7 Empirical Findings & Analysis We were interested in working lifestyle and personal lifestyle of interviewees and observation subjects with their iPhone. From this aspect, interviewees were asked whether iPhone has an effect on their behaviours or not. Later, we decided to observe the behaviour of the subjects by participating in their daytime activities before and after using iPhone intentionally to identify the impact in their behaviours comparing before and after using the iPhone. While we were observing the subjects we also asked some questions to explore more on the noticeable behaviour.

7.1 The interviewees The interviews were conducted with eighteen persons representing three key strategic regions: Asia, Europe and North America. Specifically, these interviewees were purposively selected under two different psychographic types: Young tech savvy and Professionals. They are all iPhone users. Differences in ages and lifestyles among the interviewees have added to diverse perspectives and insights.

Figure 7.1: Chart respondents

7.2 The observations The participant observations were conducted with 2 people in Sweden. The observation subjects were purposively selected under two different psychographic types: Young tech savvy and Professional. The young tech savvy user is a Master student at Jönköping Uni- versity and the professional user is an IT consulting company owner in Gränna. Both of them used a typical mobile phone before recently buying a new iPhone. See tables below for the result of the observations.

Table 7.1: Before using iPhone - Young Tech Savvy User

Needs & Attitude Time Behaviour

- I’m so hungry. Let me find something to eat. - Having pancakes and orange juice.

- I want to check the temperature and also to - Due to its time consuming, I’m too lazy to see if I need to bring an umbrella or not. I think check the weather on my computer so I’d better it will take about 10-15 minutes to start up my ignore it. laptop for checking the weather. 09:00 - Need to check the current time from my clock or my watch every 10 minutes to see if it is time - I have a class in the morning and I don’t to walk to school. want to be late. - I always adjust my clock and my watch to be 10 minutes earlier than normal. This is to ensure that I will make it on time.

- I have a class now but unfortunately I can’t - Arriving JIBS. remember where. 10:00 - I have to call my friends checking where the - It’s costly to call my friend just to ask where class will take place today. the class is taking place.

- It was so boring in the class. I want to chat - I start drawing pictures in a piece of paper. Al- with someone but don’t want to disturb the though, I try so hard to get a grip, I fall asleep. class. 11:00 - Sometimes I look at my watch to see how soon to get a class break.

- At lunch, I realized I do not have my note- - Ask my friend if I can get a piece of paper and book or paper with me. I need to write down borrow a pen from her. I start jotting down my some thoughts and ideas for school project! ideas on a little piece of paper.

- My friends & I want to share the bill but I’m 12:00 - I use “Calculator” in my cell phone to calculate not good at Math. I’m so upset when I’m trying the bill sharing. My cell phone runs on Symbian to use just a simple function like calculator. It’s OS. When trying to open a calculator applica- badly slow. tion, it’s very slow and sometimes I just ignore and let my friends calculate it.

- My friend and I have a meeting with my the- - We were there a little bit late. We enjoy chat- sis tutor at 1 pm sharp. ting with friends at lunch so forget to leave the café early to meet the tutor on time. - The tutor asked us for the next meeting. I need to check my availability but I forgot to - I pick up my phone just to check the calendar bring my schedule book with me …Oh, that’s 13:00 but nothing to do with it other than that. I need to bad. It seems this simple appointment should ask my tutor if I could check my available time work well and smoothly but I have to create a for the meeting date he proposed and I will con- new task just to confirm my tutor back on the firm him later on today or tomorrow. meeting date. All of us are not happy, of course, I just have to get back and force for this appointment.

Needs & Attitude Time Behaviour

- There are so many things to carry in my bag. I wish I could combine them all in one, so I will never ever forget to bring my schedule book again!

- Still at the university and I didn’t bring my - Got an SMS from my sister asking me to call laptop with me. It’s not possible to call her with her back. Skype call. Even I have a special international call rate from Tele2 Comviq Amigos, I think Skype call is pretty much cheaper. - I look at my watch and plus 5 from the time here. A bit confusing and time consuming to just - Just wondering what time it is in Bangkok. I check the time in Bangkok. try to remind myself what time different be- 14:00 tween here and there. It’s 5-6 hours earlier in - While I’m talking to my sister, someone send Bangkok and this is Spring season so should SMS to me. I don’t know what it is about so I it be 5 hours earlier? need to wait until I hang up and I check it after that.

- My friend SMS to me asking me out for dinner at her home.

- Today my friend and I have to do a presenta- - I use the “clock” function in my cell phone. The tion in the workshop. We are supposed to con- screen is so small and I can hardly see the trol the time and use it wisely in the 15-minute numbers. presentation. 15:00 - The clock function in cell phone works but not well enough as I can’t see the numbers precisely when I am presenting in front of stage.

- Still in the workshop. During the break, my - Grab a snack and a cup of tea, during the friends complains me how I am so late in re- break. plying emails or comments on Facebook. - I’m pitifully searching for the piece of paper that - I forgot the ideas that I came up with during 16:00 I wrote down my ideas recently. That’s terrible, I my lunch hour. I’d better write it down on my can’t find it. notebook. My ideas are just gone with the wind. How bad it is.

- My friends and I like to listen to music we - Go to my friend’s place for dinner. I help them enjoy music during our cooking hours. cooking as well. 17:00 - I connect my iPod with my friend’s stereo to play music.

- We love taking photos together. I really like - I ask my friend to use her camera taking our taking photos with a photo sticker machine photos together. As my friend needs to import where we can make fun on our pictures by those photos from her camera to her computer, drawing some pictures. Unfortunately, those 18:00 it will take sometimes to upload to facebook and machines are not popular here. I miss my share with friends. I have to wait, then. hometown.

- Today I feel really exhausted. Need some re- - I came back home. freshments and relaxations, how about having a home spa tonight? 19:00 - I prepare my home spa by pouring bath foam and lavender sea salt in the running water. - I really do enjoy the moment but I just feel

Needs & Attitude Time Behaviour that if there were a music playing here, it would be perfect.

- It is time for self-study and my personal - I mostly use my computer to read e-books and hobby. lectures. 20:00 - I have my personal blog site. I usually write blogs about my life here and some of my travel- ling experiences.

Table 7.2: After using iPhone - Young Tech Savvy User

Needs & Attitude Time Behaviour

- Oh.. I need a quick breakfast. - Having sandwich and milk.

- I want to check the temperature and also to - Just one touch, I quickly check iPhone’s see if I need to bring an umbrella or not. “Weather” application. 09:00 - An iPhone alarm in “Calendar” application went - I have a class in the morning and I don’t off to warn me that I should leave in 15 minutes. want to be late. - I walk to school, no need to be hurried.

- I have a class now but unfortunately I can’t - Arriving JIBS. remember where. 10:00 - My life is getting easier; I check the classroom in iPhone’s “Calendar” application.

- It was so boring in the class. I want to chat - I open iPhone “App Store” and search for an in- with someone but don’t want to disturb the stant messaging application. I found a free appli- class. cation called “Fring”.

- I think my iPhone may have some applica- - I installed “Fring” application with ease and tions available for me to chatting with my 11:00 quick. It allows me, sign in with my MSN account friends online. and start chatting with my family and friends.

- Love the keyboard; it works like a computer keyboard, awesome!

- My teacher calls for an outdoor meeting - I check my availability on next Monday, and I can next Monday. It is out of the of class sched- quickly confirm my teacher that I’m fine with his ule, I have to check my availability. proposed meeting time.

- The meeting place will be at a park near Cigarren but I don’t know how to get there. 12:00 - I ask my friend for the direction. She told me that With my iPhone, I’m no longer worried about she has been there before. The best way to show it. Now I have the maps function, which not me the direction is to use iPhone’s “Maps” appli- only tells me where I am but also let me cation. My friend easily uses this application and know how to get to my destination! we enjoy seeing the place in the satellite view.

Needs & Attitude Time Behaviour

- At lunch, I realized I do not have my note- - I take a note in iPhones “Notes” application and book or paper with me. I need to write down then send the note to my email. some thoughts and idea for school project!

- With an email function in iPhone’s “Notes” application, I don’t need to re-type anything - I use “Calculator” application to calculate the bill like I used to with notebooks or paper. Feel 13:00 sharing. With a big screen calculator, it’s pretty like I have saved a tree at the same time! fast and precise when I touch the numbers.

- My friends & I want to share the bill but I’m not good at Math.

- I love this chat function. It is so easy to see - Got an SMS from my group mate asking me to what I wrote to her earlier and also what she meet her at 3pm. I reply her back with SMS, it’s so wrote to me earlier. quick and easy typing.

- While I’m waiting for my group mates, I don’t want to waste my time so I think about - I check Bangkok time with iPhone’s “Clock” ap- calling my mom in Thailand. What time is it plication. It is 7pm, not too late night. I call my there? It gets confusing with the day-life sav- 14:00 mom with iPhone’s “skype” application. ing.

- Skype call saves my money a lot. I can call my family and friends more often; it cost me less than half the normal international call rate.

- My group mates & I want to rehearsal for - Rehearsal for project presentation. the upcoming project presentation. We need to record time we use in the presentation. 15:00 - I use the “stopwatch” function in iPhone’s “Clock” application. I can also make lap times with just single clicks.

- I’m really addicted to many games on - I go back home, take a break and play games on iPhone. The user interface makes the my iPhone. games more interesting to play. It’s easy to control with great interaction. - I check emails and use “facebook” application in 16:00 iPhone to check out what’s going on with my - My friends stop complaining how I am so friends. late in replying emails or comments on Facebook.

- My friends and I like to listen to music we - My friends come to my place. We have chitchat enjoy music during fika time. together and have a fika.

- I enjoy dancing and singing with my friends. - I connect my iPhone with my stereo and use 17:00 “iPod” application to play music right away. We can even listen to the radio through iPhone’s “Ya- hoo Music” application. That’s our happy moment. I can’t stop laughing and smiling when we dance together.

- My friends and I love taking photos to- - We take a photo with iPhone and then I use gether. I really like taking photos with a 18:00 iPhone’s “Sketches” application to make fun on photo sticker machine where we can make that photo by drawing pictures over the photo. fun on our pictures by drawing some pic- Love it!

Needs & Attitude Time Behaviour tures. Well, I’m really happy that iPhone can do almost everything for me, even become a - I share this picture to my friends through photo sticker machine! iPhone’s “Email” application. I can even share it on “Facebook” through its application. What a quick and easy way to share it!

- I’m so thrilled. I need to fix it as quickly as - I came back home. possible since I have to submit my assignment before midnight today. - I accidentally did something wrong on my computer. It’s about the network setting. I can’t have - It was terrified but I feel a little bit relief be- the access to my wireless and non-wireless net- cause so far I still can connect to the net- 19:00 work. work through my iPhone and search for some helps from my friends. - During this time, I can use my iPhone to chat with my friends in “Fring” application in searching for helps.

- Feel so much relief for the quick self-fixing. - With helps from my friend, I can follow through It’s a lot quicker and easier than I ever the step-by-step instructions that my friend rec- thought of. ommended to me. I finally fix my computer by myself and I absolutely can submit my assignment on - Also, I feel thankful to my iPhone for saving 20:00 time. me today! Without iPhone, I could have had to go to the school again for submitting my assignment and I would have needed to wait for other days for fixing my computer.

Table 7.3: Before using iPhone - Professional User

Needs & Attitude Time Behaviour

- I want to quickly check some local news - I live in Gränna, it normally takes around half an today. hour driving to my office in Jönköping city so while I am driving, I listen to the radio for local news.

- I feel a bit hungry. Breakfast is an important meal for everyone. 07:00 - Having breakfast with my husband and kids. - I want to check the weather for today. I think the weather forecast in the newspaper is adequate but it would be more precise if I - Checking weather forecast in the newspaper. can check it online.

- I want to check emails to see if there are - Arriving office. I was obsessively checking any messages sending to me during outside schedules and emails from my computer. business hours or not.

- I want to check my schedules to plan my - I keen on checking off the list of things to do on works ahead by identifying what activities my todo list paper. I’m going to participate in and whom I’m 08:00 going to meet. - Ready to work. - I don’t like a bad surprise and I need to get my work organized so I usually check my list of things to do.

Needs & Attitude Time Behaviour

- There was an issue which I need to call - I search for the world clock website in Google. and speak with someone in New York. Due Then, I use a tool in that website to find out what to the fact that the U.S. has many different the exactly time difference is in New York com- time zones in a single country. I think in New pared to here. York it is 6 hours later than here, am I right? 09:00 - I write a post-it note to remind myself calling this person at 3pm and then stick this note on my computer screen.

- It is a Fika time, I want to socialize with my - I enjoy a cup of coffee and chitchat with my col- colleagues. 10:00 leagues at the same time.

- I don’t know where the restaurant is and I - My friend called me and asked me out to have need to find the direction to get there. lunch together at a restaurant that I have never been before. - The car GPS works fine to see the direction. However, while I was on a call with my 11:00 - I asked my friends how to get there but it was not friend, I would like to roughly know where clearly explained. Although I have GPS on my car, the restaurant is located. I have to re-check the map & direction from my computer, as I want to roughly know the location of the restaurant.

- I accidentally meet my old classmate at the - I have a nice lunch with my friends. I was so sur- restaurant. I’ve never seen her for long time. prised to meet my old classmate too; we ex- We’d better keep in touch! changed phone numbers then. 12:00 - I was wondering how I could jot down her email address so I asked for a piece of paper and a pen from a waiter.

- I normally read documents in English and I - I try to make a guess on some words. know that I’m not really good at it; sometimes I need to translate some difficult - If it’s too complicated to guess, I will use the words. English dictionary book or in the computer.

- Where is my dictionary book? It should be 13:00 somewhere over my desk. Although I can use the dictionary program in my computer, I would easily keep my eyes off the document and lose focus. I think the computer dictionary is good but not handy.

- Take a break. A little rest and relaxation - I was quietly reading the Dagens Industri news- can reduce my levels of anxiety. paper and playing Sudoku. I have a little chat with - It was a bit boring and I try to find some- 14:00 my colleagues. thing to entertain myself. - Continue to work.

- My colleagues asked me to have a quick - I have a discussion with my colleagues. It is discussion about work. longer than I expected.

- I should have not missed it! 15:00 - I came back to my desk at 3:30pm and found that I totally forgot to make a call to the person in New York at 3pm. I urge to call the person in New York.

Needs & Attitude Time Behaviour

- My husband sent an SMS asking me what - I check the ingredients on the Internet, call back kind of ingredients that I need for baking a my husband and ask him to write the list of ingre- cake this evening. He is at the shop now. dients down. If it is not possible, I try to tell him one by one during his shopping. - It is time consuming in telling my husband 16:00 to buy those ingredients. It could have been much quicker. I have to clear up my work before leaving office.

- On the way home, I come up with a great - I search for a piece of paper to write it on. Unfor- idea to discuss with my colleagues. I don’t tunately, I found none of it. I keep my idea and want to let it go! hope it’s not gone away when I’m home. 17:00 - Hate it! I forgot that nice idea. I have to re- - I finally arrive home and forgot what I thought of mind it hardly. on the way.

- My kids and I enjoy cooking and baking a - I try to find a cooking book where there might be cake for dinner. My recipe ingredients are all some unit conversion tables on it. in U.S. customary units, I need to convert them to metric units. - If I can’t find such information, I will search it on 18:00 the Internet. - Oh.. I really hate to open a computer during the cooking hours. It’s not convenience and my kids would probably spill water on my computer.

Table 7.4: After using iPhone - Professional User

Attitude Time Behaviour

- I feel a bit hungry. Breakfast is an import- - Having breakfast with my husband and ant meal for everyone. kids.

- I want to check my schedules early in the - I roughly check my schedules from morning as I can see if I need to prepare iPhone’s “Calendar” after breakfast. myself in advance or not, e.g. leaving home earlier than normal. - I live in Gränna, it normally takes around 07:00 half an hour driving to my office in - I want to quickly check some local news Jönköping city so while I am driving, I listen today. to the radio for local news.

- I want to check the weather for today. I be- - Checking weather from iPhone’s “Weather” lieve that the weather forecast in iPhone is application. precise as I can get the latest information from the Internet.

- I want to check emails to see if there are - Arriving office. I was obsessively checking any messages sending to me during outside emails from my computer. business hours or not. 08:00 - I keen on checking off the list of things to - I don’t like a bad surprise and I need to get do on my iPhone’s “Todo” application. my work organized so I usually check my list of things to do. - Ready to work.

- I normally read documents in English and I - I use iPhone’s “WeDict” application while know that I’m not really good at it. I need a I’m reading through a document. When I quick way to access dictionary without losing found some words that I didn’t really under- focus to the document. I found iPhone is 09:00 stand the meaning, I can instantly translate really convenient. Because of its pocketsize them without losing focus on the document. screen with dictionary application, I am still able to keep my eyes on the document.

- It is a Fika time, I want to socialize with my - I enjoy a cup of coffee and chitchat with my colleagues. colleagues at the same time.

- Due to the fact that the U.S. has many dif- - We were talking about the teleconference ferent time zones in a single country. My col- with a group in New York that is taking place leagues and I were confused what time New 10:00 at 3pm today. My colleagues threw us a York will be different from here. question: what time it should be in New York, when it is 3pm here. To clear out doubts, I was instantly checking New York time on my iPhone’s “Clock” application. I found it is 9pm there.

- I have an appointment with client at - My iPhone alarm went off to remind me 11:30pm. As far as I know, the client office is that I have to meet the client at 11:30pm. not far from here so I can walk to them. However, I don’t know exactly the location of - I use iPhone’s “Maps” application to find the client office and I need to find it out. the direction to the client office. I simply in- 11:00 put the client office’s address and click on my current location. Suddenly, the application shows me the direction how I should walk there. It takes less than 5 minutes to the direction.

- During lunch hours, I want to check emails - Out for lunch with client. to see if there are any urgent messages sending to me while I’m outside office or not. - I quickly check my emails from the “Mail” application and check my schedules from - I want to check my schedules for the after- 12:00 the “Calendar” application in iPhone. noon to plan my works ahead by identifying what activities I’m going to participate in and whom I’m going to meet.

- I think it is another smooth working day. I - Back to my office. Continue to work. feel worry free about missing schedules or 13:00 unable to accomplish my tasks.

- Take a break. A little rest and relaxation - I was roughly reading the Dagens Industri can reduce my levels of anxiety. newspaper.

14:00 - My colleagues and I enjoy seeing my pic- - With a nice screen on iPhone, I keen on tures and chatting around. showing my pictures that I took from a trip over last weekend to my colleagues.

- When we have a teleconference we need - My iPhone alarm went off to remind me to spare time 5-10 minutes earlier to set the that I have a teleconference with the group environment. With iPhone, I can do alarm in New York. setting to warn me whenever I want. 15:00 - My colleagues and I prepare the environment at the meeting room. We are now ready to make a teleconference call.

- iPhone keyboard is one of the amazing - My husband sent SMS to me asking if I features that I can find on the smart phone. I can pick him up from the gym. used Nokia N73 before and found that the keyboard did not work well. I pretty enjoy making the conversation longer through 16:00 SMS since in iPhone it is easy to type and - With ease of iPhone keyboard and SMS the SMS feature makes me feel like I’m chat feature, I quickly reply him back and I using the chat application (MSN messaging) also asked him what he wants to have for rather than just typical SMS. dinner today.

- On the way home, I come up with a great - I record my idea through voice recording idea to discuss with my colleagues. I don’t application in iPhone. A quick note in want to let it go! 17:00 “Notes” application also helps, if I’m not driving.

- My kids and I enjoy cooking and baking an - I use iPhone’s “conversion” application to apple pie for dinner. My recipe ingredients help converting recipe ingredients to metric are all in U.S. customary units, I need to units. convert them to metric units. 18:00 - Sometimes when my kids get bored, they - Usually, I’m not interested in gaming, but would borrow my iPhone to listening music after I tried so many games in iPhone. I and playing games. found it’s entertaining. I particularly like “cooking mama” and “sally’s salon” game.

Attitudes are what we feel; actions are what we do. Actions can be observed when they happen; attitudes are inferred from what people say or do. In this section, the empirical findings and analysis regarding the iPhone impact will be presented. It is divided into two main parts; attitude and behaviour.

7.3 Attitude

7.3.1 “Apple will make a mobile phone” Rumour has it spread through the eyes and the ears of consumers. According to Schiffman & Kanuk (1987), parents, peers and the roles we perform are not the only models that affect the formation of attitudes. The mass media, and in particular to advertising is another powerful source of attitudes. These findings have shown that media can initially create attitudes, curiosity and excitement. Then the message is spread out and reinforced by word of mouth of consumers themselves. Some positive attitudes of Apple have been attached in the message and that helps make the communication even more effective and sound credible. The attitude-behaviour relationship is relevant to the prediction of consumption. In this case we concern the demand for new product such as iPhone, before they are placed on the market. Can we use people’s intentions to predict consumption? If attitudes affect consumption this sort of analysis may help in the modification of product design and in the choice of promotional strategies (Schiffman & Kanuk, 1987).

“First, the rumor among my friends that Apple will make mobile phone. It was a year before the real launch date. Then, I was so interested and started searching for more info from websites and forums (not official info from Apple). The fact that Apple is one of the best innovation companies, people thrilled with the new phone from Apple and some people started making guess and created many prototypes and features based on all info and technologies that Apple has registered for patents. It was fun to guess what kind of phone Apple would design and it turned out to be very impressive. Design is cool but I still question about its utility and reliability of phone function and touch screen function because Apple has never made a mobile phone before.” An SME business owner in U.S.

Master of Economics student in Sweden

“I first heard about the iPhone from Apple related rumour sites, months before the launch date at Macworld. When I saw and read all of its features and specification, I’d say it’s a very very unique and cool smart phone.” A Master of Economics student in Sweden.

“iPhone, firstly came to me as a rumor like “Apple will have a plan to expand their line to mobile phone business”, which quite made me surprise and get into it. Then, I saw iPhone first time through the tv ad. It’s soooo hitech and very stylish.” A Master of Marketing student in UK.

“I followed the news from Apple’s first announced that they were going to enter the mobile phone market. Until the launching of iPhone 2G (first model) that has a partnership with AT&T, many people were lined up and waiting for buying iPhone on the first selling date. My first feeling is that Steve Jobs made a phenomenon of the mobile phone industry bec. there were many people interested in iPhone and many of them were going to own one. So, I felt that this product would be very interesting and I would like to try its features.” A Master of Business Administration student in Hong Kong.

“From MacWorld Expo 2007, I watched live Keynote from Steve Jobs in Apple website and then find more info from Engadget.com My feeling? I fell in love at first sight and thought that I would definitely buy it.” Strategic & Business Development Manager at mobile operator company in Thailand.

Figure 7.2 Personal interviews (April, 2009). We investigated the immediate effect after the launching campaign and the feeling iPhone had created for consumers. We were asking iPhone users of how they first heard and saw the iPhone and how they felt at first sight. They were all excited and waiting for the opening of the new innovative device. From this point, rumour had been created and it is widely spread through the curiosity and word of mouth. Although we are also taught not to judge a book by its cover, the first impression is relatively important concerning marketing the new product. These evidence that some people do just that and in this case, Apple has succeeded in executing launch strategy in order to capture consumer’s interest.

Users thought that iPhone was cool, stylish and innovative at the very first moment they saw it. Once again Apple gains exceptional reputation in high technology and its stylish design. This also confirms that in today market, apart from functionality, design and appearance do matters.

7.3.2 iPhone is for everyone. We asked the interviewees who do you think they should use the iPhone and why as we need to check the feeling in relation to adoption and usage. Results show that from consumer’s point of view, iPhone is suitable for everyone mostly due to its simplicity.

“Definitely city dwellers. But then again, anybody can use it... it is very user-friendly and got pretty much all the applications you need (many applications can be downloaded to ca- ter to your needs)” A Master of Media Studies student in U.S.

“They might position this product for the business people who’d like to reach the Internet from everywhere… with style. But for my idea, iPhone is really practical for traveler!! Coz people who travel a lot will need nothing more than this compact phone with all around functions capability.” A Master of Marketing student in UK.

“A person who doesn’t stick with the same old things, who hates conservative style, who loves discovering new ways to make life easier.” Marketing Manager at pharmaceutical company in Thailand.

“iPhone is useful to anyone that wants to access the Internet on the move or use an iPod with extra functionality of connectivity.” Regional IT Business Manager in UK.

Figure 7.3 Personal interviews (April, 2009). Unlike any other smart phones in the market that is seen as a device for professional users only, iPhone seems to be suitable for everyone. Considering product characteristics that influence the diffusion, the complexity degree to which the innovation is easy to be understood and used is very low. The easier it is to understand and use an innovation, the greater the possibility that it will be accepted. Clearly, iPhone has a strong product association with consumers’ lifestyle. These findings have shown that with many user-friendly features integrated with various applications that were specially designed to meet everyone needs, iPhone is perceived to fit with all.

7.3.3 iPhone’s feature is a Must-have for Professionals yet design & entertainment applications make it become a trendsetter among young. After consumers were exposed to the innovation and formed some kind of favourable attitude towards the product, next we would like to know the need and desire state of how this leads to the choice to adopt in the decision process. We were asking them mainly what made you purchase the iPhone. As a result, we discovered that for Apple user who already

own iPod or Macbook they did not hesitate to buy the iPhone as they were already familiar with the Apple product and rather became loyal. Therefore, we would focus more on Non- Apple user in order to examine the need that motivates consumers’ decision making. The conclusion came into two aspects as for professionals they rather need iPhone to catch up with the technology and trend while it is the design icon and fashion trend for Young tech savvy.

“I always find Apple products innovative and intuitive to use. Being an owner of iBook and iPod myself, the experience I have had is very satisfied and meets my needs, therefore after using my old phone for already two years, I decided to own another apple product without hesitation.” A Master of Economics student in Sweden.

“It’s very attractive, simple yet beautiful. Design and feature is important as well. Touch screen and user interface are very handy. It gets along with apps perfectly, especially the apps that utilize user interface of iPhone. For example, in Safari, it will zoom-in the textbox area to allow you enter username and password easily. I think iPhone UI changes all theories of touch screen. It was never the same as other touch screen devices such as tablet pc, touchscreen phones, palm, pocket pc which do not work well. It makes my palm and pocket pc look very old and outdate overnight.” An SME business owner in U.S.

“Fashion, seems like teenagers are having iPhone.” An international high school student in Thai- land.

“Feature e.g. Multitouch, iPod , Safari , Email. I'm thrilled to use Internet on mobile phone for long time ago. At that time I used windows mobile but it did not really work for me.” Strategic & Business Development Manager at mobile operator company in Thailand.

“Reputation of Apple. The design. Look and feel.” A high school student in U.S.

Figure 7.4 Personal interviews (April, 2009). Based on the findings, both rational and emotional motives are the key influences for iPhone adoption. In a marketing context, the term rationality implies that the consumer se- lects goals based on totally objective criteria, such as size, weight, price, or functionality. At the other side of spectrum, Emotional motives imply the selection of goals according to personal or subjective criteria (the desire of individuality, pride, fear, affection, status) (Schiff- man & Kanuk, 1987). For Professionals, iPhone’s superior technology and innovative application underlie the rational motivation. They also need to maintain their image as an up-to-date innovative leader and catch up with modern trends. On the other hand, iPhone is perceived as a design icon and trendsetter among young. They tend to buy it because of the fashion and en-

tertainment function from iPhone. The emotional reactions to the phone outweigh rational considerations for young.

7.3.4 iPhone is my beloved ones. After the adoption process, we would like to know if consumers satisfied with the product or not. What have they felt so far and why?

“I still love it, even though there is Palm Pre coming out this year but I still hold on to my iPhone.” A Master of Economics student in Sweden.

“Love it as my girl” A Master of Marketing student in UK.

“Lots of passion. It can do everything as a human can think a phone can do.” Strategic & Business Development Manager at mobile operator company in Thailand.

“Like Design, Touch screen UI because it totally changes the way we work with a mobile phone.” A Master of Business Administration student in Hong Kong.

Figure 7.5: Personal interviews (April, 2009) After using the iPhone for a while, affection has been developed. In this case, the causal relationship works reversely as behaviour precede attitude. iPhone satisfaction is described beyond liking, instead it creates stronger emotional bonding as love. This can not only confirm that consumers are very satisfied but also indicate that iPhone becomes an important thing in their lives.

7.3.5 iPhone becomes my work& life companion. Leveraging on previous question, consumers were showing that they really have a positive feeling towards the iPhone especially through their happy facial expression when talking. They pretty much like their little hi-tech gadget or even fall in love with it. Therefore, we dug further and asked the interviewees to describe the relationship between them and their iPhone. What does the iPhone mean to you? It is very interesting that iPhone user sees this device to be more than a mobile phone but everything. Moreover, they have developed some kind of emotional bonding as human relationship.

“One of my close friend for everytime and everywhere.” A high school student in Thailand.

“It acts like a secretary for business approach and like a friend for entertainment approach.” Master of Business Administration student in Hong Kong.

“We passed through good and bad times together, sometime she fool me down with “system error”, sometime she trick me out with “cannot make a call”, but most of the time she is good. Once, we broke up and I turned back to my ex (Nokia), not for long I ran back to her again with a very miss and never change from her again.” A Master of Marketing student in UK.

“My personal assistant that make my life easier.” IT Consultant at news & financial information company in France.

“Work & Life Companion.” Marketing Communication Director at telecommunication company in U.S.

“Obama (Change & Revolutionary) + Paula (Design, Pretty, Good looking).” Strategic & Busi- ness Development Manager at mobile operator company in Thailand.

“Doraemon, it has everything I want. It will be wearing a suit, because it looks formal.” An international high school student in Thailand.

Figure 7.6 Personal interviews (April, 2009). iPhone has changed consumer’s attitude toward mobile phone. The experience of postpur- chase formed new attitude. Based on the findings after using, iPhone is perceived as butler, secretary, friends and even girlfriend to some people, as a result this has reflected and led to the change on how users treat their phones (the behaviour findings will be revealed in the next section). Fazio (1985) also found evidence generally supports the view that direct experience of an object leads to more strongly learned associations between attitude and behaviour. Thought and feeling seem interwoven with behaviour so that any change in one component is likely to affect the other components of the system. We found that the relationship between behaviour and attitude cannot be detached. Especially in our case, it is actively dynamic.

The feeling towards iPhone is not just an attitude towards object, due to the fact that the relationship between users and their iPhones is demonstrated to be relatively close. It is interesting that this feeling grows deeper as in human relationship. The buddy gadget is en- tailed in every activity consumers do all day since they open their eyes in the morning (see observation findings). Due to iPhone’s capability that is designed to answer consumer’s unmet need, obviously it becomes an important part that helps make their lives easier.

7.3.6 iPhone will be with me until it breaks down. We were asking the respondents how long they plan to use the iPhone as we would like to confirm the satisfaction whether they really appreciate it and if loyalty has been developed. We found out that iPhone users were willing to use it until it breaks down.

“Untill I can’t use it anymore.” An international high school student in Thailand.

“Ever After.” IT Consultant at news & financial information company in France.

“Until it dies. If it dies, I will buy a same new iPhone.” Strategic & Business Development Man- ager at mobile operator company in Thailand.

“Until it breaks down.” Senior IT project manager in U.S.

Figure 7.7 Personal interviews (April, 2009). Once the relationship between an iPhone and user is like human bonding, so they will be together until the day it cannot be used.

7.4 Behaviour Consumer behaviour is dynamic because the thinking, feelings and actions of individual consumer, targeted consumers groups, and society at large are constantly changing over time. Studying the behaviour is a critical component of consumer analysis since the success marketing strategies depend on maintaining and changing behaviour, not just influencing affect and cognition (Peter & Olson, 2008). To understand behaviour of iPhone users, we have not only gathered written information from blog and conducted personal interviews but also participant observed real consumers since behaviour refers to the physical actions of consumers that can be directly observed and measured by others (Peter & Olson, 2008). When we conducted interviews with iPhone users and made detailed observations about their behaviours, we found that interviewees and observation subjects habitually interact with their iPhones. Even when we

made an appointment for interviews and observations, most of them instantly checked the schedules from their iPhones.

7.4.1 I do just about everything with my iPhone. Beyond smart phone capabilities, iPhone serves as a multi-purpose tool and a mobile In- ternet device that favourably impress users. We asked with the question in which activities or applications that interviewees normally interact with their iPhones. This question allowed interviewees to recall their normal activities in related with their iPhone usages. This finding helps us exploring users’ activities with iPhone’s main features: phone, portable music player, and mobile Internet device.

“Besides making calls and sending SMS, I use it to check emails, classroom, appointments, weather, currencies, news, facebook, twitter, listen to music, take pictures, notes, and play games.” A Master of Economics student in Sweden

“Check email, read RSS Feed, make todo list, jotting note and expenses, voice recorder, play lots of games…” Strategic & Business Development Manager at mobile operator company in Thailand

“Phone, Internet search (Google), dictionary, read news, organizer, expenditure record, map, traffic checking, podcast viewing, Youtube, gaming and camera, facebook, etc.” IT consultant at news & financial information company in France

“Telephone 70% send sms, mms 10% take photo and others 20%; check appointment in calendar, use alarm clock, Internet searching, dictionary, convert measurements, games, browse website” A Trading company owner in Thailand.

Figure 7.8 Personal interviews (April, 2009). Together with observation, obviously, the major activities were to make phone calls. In similar to other smart phones, the activities like checking emails, taking photos, listening to music, and managing appointments are also shown. On top of that, the interviewees used iPhone as a multi-purpose tool such as an instant virtual map, a translator, a voice recorder, a scientific calculator, and a portable game device. Most of them greatly made use of the Internet features and participated in Internet activities such as checking weather, participating social network (e.g. facebook), checking maps and directions, reading news feed, checking traffic, and browsing websites. In general, those activities are in related to iPhone main features, even though there are different degrees of participation in certain features. Additionally, iPhone provides consumers an Internet access anywhere and anytime. Some evidences support that the usage of Internet from Apple iPhone has been dramatically rising in comparison to other mobile users. Google said it has seen 50 times more search re-

quests coming from Apple iPhones than any other mobile handset - a revelation so aston- ishing that the company originally suspected it had made an error culling its own data (Apple Insider, 2008). The Apple iPhone was the source of more mobile web searches in February than all other mobile and wireless devices combined, according to a report from Net Applications. While phones running the Google Android operating system and Research In Motion’s Black- Berry devices have made some gains, iPhones dominated the marketplace with 66 percent of all searches, according the report. Java ME, which is installed in a number of handsets, including those from Nokia, ranked a deep second, with 9.11 percent of searches Putra, 2009).

7.4.2 Just a swipe of my finger helps me through all of my activities. We would like to streamline interviewees’ activities in order to identify the key features or applications of iPhone that are their most favourite and being used frequently. Identifying these key features or applications could help us understand why interviewees use their iPhone more often and in which way. With a certain level of product knowledge and personal usages, it could have a significant impact on interviewees’ behaviours due to the fact that these elements tend to generate a high involvement between the product and consumer (Peter & Olson, 2008). Involvement refers to consumers’ perceptions of importance or personal relevance for an object, event, or activity (Krugman, 1965). Consumers who perceive that a product has personally relevant consequences are said to be involved with the product and to have a personal relationship with it. Moreover, involvement is a motivational state that energizes and directs consumers’ cognitive and affective processes and behaviours as they make decisions (Cohen, 1982). We observed that interviewees treat their iPhone differently in comparison to their previous mobile phones due to the difference levels of product involvement.

“Safari browser. It makes sense to view the fully functional browser not just the reduced mobile version.” A Master of Economics student in Sweden.

“GAMES!! iPhone’s game is brilliant!! And they keep developing it; we will be overwhelmed with many good games from iPhone someday.” A Master of Marketing student in UK.

“I like the weather and map application a lot.” A Master of Media Studies student in U.S.

“User interfaces e.g. keyboard; it’s a lot easier and more convenience than other phones such as Nokia, I still remembered the day that I have to click three times on the same but- ton to get only one character.” Marketing Manager at pharmaceutical company in Thailand

“Multi-touch screen. SOOO easy to use!” Regional IT Business manager in UK.

“Touch screen UI, it totally changes the way we work with a mobile phone.” A Master of Bu- siness Administration student in Hong Kong.

Figure 7.9 Personal interviews (April, 2009). According to our interviews, consumers agreed that the Multi-Touch user interface made everything so easy to use and made them want to use iPhone more often. Additionally, the Safari browser on iPhone also highlighted the real web surfing tool over the mobile handset. Other features, like phone, photo management, music & video player, map & global positioning system (GPS), and games were also mentioned as their key favourite features since they worked very well with the user interfaces and made it more enjoyable to use.

7.4.3 I become addicted to my customized iPhone. During the interviews, interviewees loved to pick their iPhone up and showed us the wall- paper, pictures, and videos inside as they were deeply impressed its bright wide screen. When applications and games were mentioned, interviewees did not hesitate to demon- strate us how to use it and we observed that they used those applications and games skil- fully. Besides, some of them proudly showed us the iPhone’s case and other accessories.

“If I don’t have anything to do, I normally pick up my iphone and find something to do there. It’s bounded to my life almost a whole day. In the morning, I take it with me while I’m in a toilet for playing games, instead of reading magazines. After meals, especially dinner, I play games for relaxation.” Marketing Manager at Pharmaceutical company in Thailand

“umm.. it's kinda like i'm an "owner" but kind of I addicted to it, use it every 10mins. It's a part of my life now, can't live without -- same as my wallet and car key.” Strategic & Busi- ness Development Manager at mobile operator company in Thailand.

Figure 7.10 Personal interviews (April, 2009). Overall, they admitted that iPhone may look similar in technology but they could easily dress them up with accessories, make a configuration inside, and install different applications so that it is unique, meets their requirements, and reflects their individual styles. An empirical research made by Crow and Shanteau (2005) showed that customization has the potential to offer many benefits to the consumer and the producer. Customized products offer the benefits of products that fit their needs. In addition, once a consumer has customized his or her product, the process builds in a repeat purchase. That is, the consumer as well as the producer know what he or she wants. Producers of customizable products will have a competitive advantage over producers who do not customize. Consider- ing the customization attribute, iPhone allows consumers to customize their iPhone by installing applications based on their interests, additional to its main applications.

Figure 7.11 iPhone applications (Apple Inc., 2008a & 2009b). Major iPhone applications were based on how information flows between users and environment, especially through Internet, and how users can interact with digital media. A wide variety of applications and the right format of information presentation have created an opportunity for users to customize their products, which will help them fulfil their individual lifestyles.

7.4.4 iPhone introduces new different things and I like it. Consumers can have knowledge about two types of product consequences: functional and psychosocial. Functional consequences are tangible outcomes of using a product that consumers experience rather directly. Psychosocial consequences refer to the psychological and social outcomes of product use. Most psychological consequences have an affective quality since they are rather internal. However, consumers can think about or experience the positive and negatives consequences of product use as possible benefits or potential risks. Ben- efits are the desirable consequences consumers seek when buying and using products and brands. Through the findings, iPhone has created positive outcomes on both functional consequences and psychological consequences (as detail shown earlier in attitude part). These positive outcomes generate the benefits on the product which could have an impact on the level of product usages. The high level of usages can lead to the high involvement between product and users. Cognitive and affective aspects were also related through these relations and it eventually affect to the behaviour. In conclusion, it is possible to say that iPhone af- fects the way consumers normally interact with the mobile phone in many interesting ways as following: 7.4.4.1 iPhone keep me informed and connected. iPhone presents a perfect example of technology making its mark on consumer behaviour. A recent article in the LA Times discusses the overwhelming accessibility of information for iPhone users (Tesla, 2009).

Have you ever suspected you were being had by a used car salesman? Hand your iPhone over to your buddy to pull up Kelly Blue Book while you test drive. Not sure that first edition at the Rare Books Emporium is actually all that rare? Hop on Amazon and see if copies are going for three cents plus shipping. Can’t understand why on earth your friend would pay $80 for those shoes? Hop on Facebook and read her review, detailing her five years in the same pair. Indeed, some say that social networking - the ability to see what people you trust think about something before you shell out cash - is the most powerful aspect of the iPhone. Jared Kelley-Hudgins, a design student from the Atlanta area, says the phone has opened up a “huge opportunity for people to check on a certain product, be it a pair of jeans, a computer, or car, with their peers.”

Figure 7.12: How the iPhone changes consumer behavior (Tesla, 2009, p.1).

7.4.4.2 iPhone changes the way I interact with the media. According to Henry (2005), we are living in a world where we often have to pack more activities into less time – we are busier than ever. This has contributed to the perception that modern life is associated with greater stress. Another complication comes into play with the observation that affluence and modern life presents us with a continuing expansion of personal choice. Consumers also have a greater range of media and content options, together with an increase in recreation and entertainment alternatives.

“It changes how you interact with people and especially media such as books, film, audio it’s a near complete box.” Vice President of Marketing, media and publishing company in UK.

“I like Apple products more (bought an Apple TV and considering an iMAC) – this is due to the ease of use. I have more access to music – love the music download facility. I like the Apple TV/iPhone video sync function – keeps my little boy happy watching ‘Kun Fu Panda’ when on long journeys! ” Regional IT Business manager in UK.

“Play more games. Listen to more musics.” A high school student in U.S.

“Normally I carry a pocket book with me everywhere I go because when I’m free I can pick it up for reading. But today no need to carry anything, just pick up my iPhone and check the news update, I’m enjoyed and that’s enough for everyday.…My main work needs to catch up new trend IT updates, so RSS feed subscription is very helpful for me because I can easily access to news headlines and read more details if I’m interested.” Strategic & Business Development Manager at mobile operator company in Thailand

Figure 7.13 Personal interviews (April, 2009). Considering the explosion of media in modern life, interviewees also mentioned that they could reach more entertaining activities especially watching movies, reading books, playing games at anywhere and anytime they want to. Even though some admitted that they prefer to read from the actual paper, in particular to professionals, they quite enjoyed updating news or reading e-book from their iPhone. Significantly, iPhone has played an important role of on-the-go device as it could somewhat reduce the use of paper such as newspaper, books and notebooks. Furthermore, Marissa Mayer, Google’s vice president of search products & user experience said that Google Maps usage shot up sharply after the release of Apple’s iPhone back in July. “Maps usage hasn’t stopped rising,” (Malik, 2007, p.1) She was a fellow judge at the TechCrunch 40 conference in San Francisco and came on The GigaOM Show as a guest for one of future episodes. Steve Jobs had bragged about Google Maps for iPhone as the best map application, and the usage patterns bear that out (Malik, 2007). Besides, during observations, we found that the young tech savvy subject is more interested in media, such as music and games, than the professional subject. However, if we compare behaviour before and after using iPhone, we found that the young tech savvy subject was barely changing toward music. This reflects the fact that Apple has possessed the success through its iPod portable music device which most young tech savvy users have already owned it and were interacting with it before using iPhone. Thus the behaviour to access the music for young tech savvy subject was not much different because the only thing that changed is the device itself, not the behaviour.

On the other hand, the professional subject was rather changing her behaviour toward games, according to the observation. She admitted that she has never interested in playing game in handset or any portable game device before. But when she first tried to play games on iPhone, she felt that it was easy to control and it was not too complicated to play. In addition, iPhone stays with her almost the whole day, so she could plays games more often. 7.4.4.3 iPhone organizes my life. Everyday life reveals itself as complex and processual rather than simple and reified. As it relates to consumption, it is now obvious that a large number of both conscious and un- conscious processes take place in what was previously considered a routine or banal activity, and these actions and processes reveal very complex dialogues and transactions to do with identity, status, aspirations, cultural capital, and position within a social group (Pater- son, 2006). Lifestyle, the exercise of judgements of taste and our choice of products, is a mechanism for expressing identity. According to Bourdieu (1979/1986)’s observations about the role of lifestyle and taste in the formation of the body and its habits, shape and attitudes, it reveals a more expanded notion of lifestyle, no longer based in class structures but more readily reflecting the shifts and transformations of identity and consumption occurring within the social sphere. In addition, Featherstone (1991) argued that the notion of lifestyle is not fixed to certain class or fixed social groups, but is indicative of a more fluid notion of style of life, the aestheticisation of everyday life through the consumption of certain com- modities over others (Paterson, 2006).

“iPhone can help you for increasing your productivity. Due to a lot of activities to do in each day, I usually forget something to get it done. I had been using Window mobile as an organizer for a while before I changed to iPhone. I found that only iPhone could cover it all. Another thing is it helps me to control my expense. I can easily calculate weekly/monthly expense and check if it’s in my budget limitation.” A Master of Business administration student in Hong Kong

“Yes, I don’t have to worry about my schedule or lecture room or meeting place anymore. Also I don’t feel bored while waiting because I can have something to listen to or read or play with. Previous mobile phones cannot offer me full connectivity but iPhone does and does a pretty good job at it.” A Master of Economics student in Sweden

“It helps me organize my tasks and being on schedule. Quick and convenient to send & receive messages. It’s just like a toolbox with many tools inside such as converter, dictionary, weather forecast, etc.” Marketing Manager at pharmaceutical company in Thailand

“I use a todo list to manage tasks and record my voice when I come up with a new idea.” Strategic & Business Development Manager at mobile operator company in Thailand

“Yes, after using iPhone, I have never seek or take a look at any other brands. I’m not interested in other brand mobile advertisements; not paying attention anymore to other mobiles. (I save time when reading magazine or newspaper by not reading other mobile phone advertisement.) Compare to old mobile, iPhone is easier to handle… I have changed the way that I manage and organize my schedule. The alarm clock and calendar functions work very well. When I need to call a person or have a meeting, my iPhone alerts me to prepare for those activities. It's very effective for planning things ahead.” A trading company owner in Thailand

Figure 7.14 Personal interviews (April, 2009). The finding shows that iPhone has become a part of consumer’s life in terms of work and personal. iPhone helps consumers increase their working productivities as well as being an entertaining device such as music/video player and games when consumers merely seek for amusement.

7.4.5 All in one iPhone and one iPhone fits all. In term of ways of adapting the goods imposed on us through consumer capitalism, or ways of using imposed systems, De Certeau (1980/1984) introduces the term of appropriation. We appropriate mass produced consumer goods or alter their meaning through use; we do different things with them, make them mean different things. In this way we negoti- ate our cultural identity and our politics through this use (or misuse) of standardized, mass- products, as Lunt and Livingstone (1992) explains the process of negotiation is one in

which the consumer transforms or appropriates the mass-produced object. They do not necessarily take on the meanings which are publicly associated with the object but work symbolically on the object’s meaning, bringing objects into the home and under control, giving them local meanings, translating the object from an alienable to an inalienable condi- tion (Paterson, 2006). iPhone was once shown that it worked well on the features that Apple publicly demonstrated but after more applications were developed, it eventually exploited the appropriation concept by turning an ordinary iPhone to have different meanings as one can think of such as a digital organizer, a musical instrument, an entertainment hub, and so on.

“I used to carry many gadgets with me such as PDA+Notebook+Mobile Phone+Mp3 player. Now I have only one iPhone. It can serve every function of those gadgets. Even though it’s not the best but it can provide acceptable function. I start to switch other devices which compatible with iPhone such as my loudspeakers, car stereo system, and hometheater. Everything is centralized to my iPhone.” An SME business owner in U.S.

“iPhone would be like a rucksack full of useful tools all the time, e.g. a swiss knife, pens, notebook, newspaper, etc. it’s easy to talk to and speaks the same language, you can listen to the any music style, watch the movies, and so on. Also, it’s always ready to hang out with you, just turn the switch on and it’s good to go.” A Master of Economics student in Sweden

Figure 7.15 Personal interviews (April, 2009). Due to the fact that iPhone could transform itself into almost anything users want, iPhone changes the way consumers carry their devices and gadgets. By comparing with the past, they agreed that it was more comfortable and convenience to carry only one iPhone instead of carrying their phone, camera, mp3 player, personal digital assistant (PDA), and notebook with them. Also based on the observation, one common thing we could notice on both subjects is that they carried less devices and accessories after using an iPhone. The observation finding shows that the subjects actively took part of the usage creativity and they merely adopt it to their lifestyles. We observed the young tech savvy subject during the classroom and found that when she was thinking about chatting with her family and friends online, she tried to find out what iPhone could do for her to achieve it. The new way of usage was apparently discovered. Although iPhone came out with the main features which suit for smart phone handsets, the ability to install a variety of applications stimulates a number of different usages among iPhone consumers. This based on the creativity that one could do with the phone. We will analyse how iPhone could give a creativity space for its users later in section 9.1: Crossing the Chasm. According to our interviews and observations, the iPhone usages of young tech savvy users and professional users are fairly unlike. They found the appropriation of usages by alter their meaning through use; doing different things with them and making them mean different things. This resulted in the process of product adoption where iPhone consumers can shape up their identity of usages to reflect their lifestyles.

8 Conclusion and Implication The value of any technological innovation is only partly determined by what the technology can do. A large part of the value of an innovation is determined by the degree to which people can understand it, access it, and integrate it to their lifestyles. The purpose of this thesis is to examine how individual consumers adopt the radical innovation in relation to diffusion of innovation process and the impact it has on consumer behaviour. To meet this purpose we have collected multi-source of data by conducting interview, observation and gathering relevant online information. Through the case study of iPhone and our empirical findings and analysis, these led us to the following main conclusion & implication.

8.1 The impact of iPhone to consumer behaviour At first we assumed that there would be some differences across the cultural and geo- graphical background. However, the findings show that for both young tech savvy and professional, consumers reaction toward innovation are quite similar in all regions due to the informational globalization and the advance global telecommunications infrastructure and greater transborder data flow, using such technologies as the Internet, communication satellites and wireless telephone. However, the impact that iPhone has on consumer behaviours vary by their individual lifestyles. Previously, we anticipated that findings would reveal consumers category as heavy, medium and light users regarding to usage behaviour. We found out that when it comes to iPhone, consumers became heavy users. They interact with it all the times and are addicted to it. Moreover, we notice that interviewees very much enjoy talking about their iPhone. They felt so proud of being the owner and loved to show off the capacity of what their little innovative device can do. After experiencing it for a while, the emotional bonding between users and their iPhone had been gradually developed. From the findings, iPhone introduces behaviour change and this has an impact on consumer behaviour significantly when they adopt it and integrate it to their lifestyles. We discover two critical impacts in terms of how they access and make use of the information flow and how they react to the digital lifestyle brought by iPhone ability.

8.1.1 The Flow of Information One of the key capacities of iPhone is that it can bring Internet to life on mobile phone. With all integrated user interface and advanced web browser, users enjoy accessing Internet on this portable device anywhere and anytime refer to the findings. The Internet allows greater communication and information flow than has ever been possible before especially when it comes down to small portable device that stick with the user all the time. We cannot deny that information flow on the Internet is an important topic for our generation. Easy access to information via the iPhone together with all those relevant applications af- fects consumer behaviour directly. This innovation makes it all too easy for consumers to communicate, receive the news and check email as soon as they hit your inbox. Consumers like to catch up with the news while they are on-the-go whether it is the football result or daily news update. As a result, this has important and interesting economic consequences (Tesla, 2009). To be more specific, we are talking about asymmetric information- a well-

known problem in economics. In economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry (Akerlof, 1970). In theory, this information would either cause the seller to demand a higher price for the item or the buyer to offer less (Tesla, 2009). In a typical exchange of goods or services, one party will usually have more information than the other. The impact is that iPhone can influence one party to reach the information faster and easier and this could balance the information during transaction. This accessibility could possibly become a social liability – the phone can “in seconds change a lighthearted conversation into the Pursuit of Truth” (Tesla, 2009, p.1).

8.1.2 The Digital Lifestyle As we always see in many science fiction movies, the producers imagine and visualize how the future would be. It seems like they foresee that everything will become digital and cyber in the time ahead. Based on the findings, iPhone may be one of the technological innovations that has an impact on consumer lifestyle. iPhone has evolved to a level where content of all forms is digitally delivered according to highly personalized specifications along with Internet service in one box. It can transform itself into almost anything for example, an instant virtual map, a personal translator, a unit converter, a book, a movie player or even a music instrument that looks and sounds like a real one. One explicit example is that it changes the way consumers interact with the media. To illustrate, the role of paper is clearly reduced as users are now reading news and e-book, writing a note and looking for a map with iPhone. Consumers agreed that it is more convenient to catch up with the news, find a direction and write a note while they are on-the-go. Additionally, they enjoy watching movie or playing music on iPhone. It is all fit into one small device claimed by users. Con- sumers adapted themselves to the innovation while they think that it helped make their life easier. Once they were familiar and satisfied with it, some kind of human bonding has been developed between users and the technology refer to the findings that users feel their iPhone as their friends, assistants and even girlfriends etc. Initially, iPhone may create certain impacts to primary target while they view this as a beloved toy& friends that they enjoy interacting with it. We assume that iPhone could likely be considered as the future indicator or trendsetter. It is interesting to see whether consumer will eventually change their behaviour from using the actual thing to becoming digital lifestyle in the coming future as in the movies or not. Starting from the idea and technology driven, iPhone has been developed and integrated user interfaces design and technological application concept that makes it different from other smart phones. Findings show that consumers view it as the newness and differentness that brings new idea to the market and impact consumer’s lifestyle. From our investi- gation, iPhone can be seen as the radical innovation.

8.2 The key influential drivers of innovation diffusion After analysing the impact of iPhone, we discover the key influential drivers of the diffusion process which influences consumer acceptance. We have learned the Apple strategy of how to market the innovation when launching to create interests and excitement and what factor that generates the innovation adoption. Despite iPhone was produced from technology side, it was successfully delivered to meet consumer’s unmet need in a very interesting way. Based on our findings, brand attitude and product characteristics play the critical role to stimulate innovation diffusion.

8.2.1 Building brand attitude in innovation market From a customer’s perspective, strong brands stand out as a beacon to the harried customer, a safe haven from the daily cacophony of technologies, new products, and media clutter around them (Morris, 1996) Strong brands help customers simplify their choices, providing a safe shortcut in their decision making. A sizable segment of customers tends to migrate to the familiar in a cluttered and confusing world. Some believe that in high-tech markets, in which products change rapidly, a strong brand name is even more important than in the consumer packaged goods industry (Morris, 1996). As iPhone is classified as high-tech product and Apple is perceived as a leading innovative company, this creates considerable attention and automatically enhances positive brand attitude in the marketplace. Obviously, Strong brands possess superior advantages in a competitive market. Thought and feeling can produce change in action directly. This is cognitivism; in its strongest form attitudes control behaviour, and reinforcement only acts by changing attitudes. Behaviours may also be affected when communication directly modifies attitudes. Without such a process it’s difficult to see how advertising can affect the more involved consumer choices. Advertising can affect the way consumers interpret the benefits received from a product and it can inform people about product advantages about which they were unaware. In both cases it may operate through thought and feeling to product an impact on behaviour. The attitude-behaviour relationship is relevant to the prediction of consumption. In a study of firms in the computer industry, Aaker and Jacobson (2001) documented that brand attitude was positively related to return on equity and changes in brand attitude were also positively related to abnormal stock returns. One possible drivers of change in brand attitude is major new product introductions (dramatic and visible) with strong advertising support, like the IBM Thinkpad or the Apple iMac, this were associated with positive changes in brand attitude as they identified. Significantly, Apple did a great job when launching iPhone by its strategic communication plan that created a big demand and strong positive attitude toward the innovative product, even before they were placed on the market. The level of involvement also influences the extent of consumer information processing and may therefore affect the direction of attitude behaviour relationship. iPhone is the case in which consumers exert effort to acquire information due to its high relevance and importance, we consider this as high involvement product. Regarding section 4.4 Four Consumer Involvement/ Brand Differentiation Decision-Making Models (Schiffman& Kanuk, 1987), iPhone can be depicted in Active learning model where consumers are likely to perceive decisions involving relatively high relevance and high brand differentiation as quite risky by reason of its new technology and consumers’ unfamiliarity. Therefore the acquisition of information and attitude formation about this kind of product is necessary for decision making. However, this relationship has two dynamic aspects: the causal priority between attitude and action and the strength of any relationship between the two. A number of studies illustrate the attitude-behaviour relationship in different fields. Kahle and Berman (1979) used a panel to explore the causal order of attitude and behaviour and found out that pre- cedence in the attitude-behaviour relationship varies with the subject matter. Based on the findings, new attitude has been developed after consumer put the iPhone into regular use. Surprisingly, emotional feeling as human relationship has been built between iPhone and

users. This new attitude formation derived from direct experience of product usage and benefit. Mostly, positive attitude will be formed if consumers feel satisfied with the product and this may lead to repeat purchase and loyalty. In this case, behaviour precedes attitude. Thought and feeling seem interwoven with behaviour so that any change in one component is likely to affect the other components of the system. Hence, building positive brand attitude can be used as an effective communication tool to reduce risks a company faces especially in introducing new innovative products, because customers may be less vigilant about examining the specifics and eager to try and adopt it eventually.

8.2.2 Product characteristics generates diffusion According to Shiffman and Kanuk (1987), all products that are ‘new’ do not have equal potential for consumer acceptance. Some products seem to catch on almost overnight while others take a very long time to gain acceptance. It would reduce the uncertainties of product marketing if marketers could anticipate how consumers will react to their products. While there is no precise formula by which marketers can evaluate a new product’s acceptance and diffusion, researchers have identified five product characteristics that influence consumer acceptance of new products: relative advantage, compatibility, complexity, trialability, and observability (Rogers, 1983). 8.2.2.1 Relative advantage Relative advantage is the degree of which potential customers perceive a new product as superior to existing substitutes. The unique product features as well as a promotional program may lead to increased acceptance (Shiffman & Kanuk, 1987). A relative advantage might be obtained through technological developments (Peter & Olson, 2008). iPhone has possessed the relative advantage over other smart phone makers since it contains capabilities to access media and Internet through its user interface technologies. These capabilities are well observed by consumers. As seen in our empirical finding, most interviewees shared their experiences toward iPhone by pointing out the benefits that they got from iPhone comparing what they did not get from other smart phones. However, Peter and Olson (2008) believed that a technological advantage is often difficult to maintain. They believed that one of the most important sources of a sustainable competitive advantage comes from product symbolism rather than technological changes or functional differences in products. Although several patents have been registered to protect the intellectual property, (MacNN, 2008) Apple made use of its brand heritage in support- ing and building the iconic iPhone and gain competitive advantage of its product symbolism. 8.2.2.2 Compatibility Compatibility is the degree to which potential customers feel a new product is consistent with their personal needs, values, and practices (Shiffman & Kanuk, 1987). Peter and Ol- son (2008) also stated that the compatibility refers to the degree to which a product is consistent with customers’ current affect, cognition, and behaviour. A product that does not require an important change in consumer values and beliefs or purchase and use behaviours is more likely to be tried by consumers. The heavy usage of mobile Internet devices brings more focus on the online social network trend. According to our empirical findings, the use of online social network tools like twitter

and facebook were significantly growing after users can easily manage it on their iPhones. Be- fore the iPhone era, those activities were limited to personal computers and computer network. iPhone gave an ability to those who highly demands on participating in the online social networks with the easily accessible of the 3G mobile network or wireless network. Similar to the online social network trend, the pursuit of truth lifestyle was greatly influenced people recently. The use of Google search engine is the best example to describe that. People tend to clear up their confusion by getting a confirmation from some sources in the Internet. According to Quinn (2008), most of the Internet companies have noticed that iPhone’s users use their handsets differently from other owners of mobile phones. They search the Internet more, particularly for movies, restaurants and news, according to market researchers, and they watch more videos on YouTube and do more online banking. 8.2.2.3 Complexity Complexity is the degree to which a new product is difficult to understand or use. The easier it is to understand and use a new product, the greater the likelihood that it will be accepted (Shiffman & Kanuk, 1987). The simplicity of how users can control the user interfaces was one of the good examples to show how easier it is for product adoption. The majority of users in the research study that we conducted showed the impression on how easy the functions captivated their interests. The remarkable expression in the study is for in- stance, one iPhone’s user told us the functions of iPhone was easy as even his 2-year-old kid can use it. Another user mentioned that he could learn how to use it without opening a manual. Another complexity factor is not only how simply the functions is but also the simplicity of users in making the product choice. Apple offered only one smart phone product that is iPhone, with only few models. The different between the models is just the colour and the memory storage (Apple Inc., 2007a). Unlike any mobile phone producers, for example No- kia, LG, etc., iPhone provides a limited range of model options yet still meet users’ re- quirement in giving the various choices of applications instead of various physical models where it was hardly changed and leaded to the high complexity of buying decisions. 8.2.2.4 Trialability Trialability is the degree to which a new product is capable of being tried on a limited basis. The greater the opportunity to try a new product, the easier it will be for consumers to evaluate it (Shiffman & Kanuk, 1987). According to the case study on the Apple retail stores by Kahney (2008), unlike other computers stores, Apple wanted to create a ‘lifestyle’ store where customer could get a taste of the Apple digital lifestyle – and hopefully leaves with a machine. They decided customers should be encouraged to test-drive all the products. At the Apple stores, customers would be free to test all aspects of a machine before buying it. Obviously this strategic eventually applied to iPhone where customers can try to experience how they would use the products and see the possibility to match it with their lifestyles. Concerning the high level of the consumer involvement for iPhone, a purchase decision is highly relevant and important. It is crucial to exploit the trialability strategy in order to give adequate information and experience of the product to customers. Another aspect is that customers could get a trial version before buying some iPhone applications at the App Store - an online service that allows users to browse and download applications that were developed and published on the store (Apple Inc., 2009b). The trial version might give limited functions but it still be interested to customers in order to minimize their perceived risks.

8.2.2.5 Observability Observability or communicability is the ease with which a product’s benefits or attributes can be observed, imagined, or described to potential consumers (Shiffman & Kanuk, 1987). New products that are public and frequently discussed are more likely to be adopted rapidly (Peter & Olson, 2008). The iPhone launching strategy has played a crucial role in publicly creating a buzz among potential customers. Together with Apple PR plan, they were trying to push the product to product reviewed and product placement in an attempt to stimulate discussion and generate visibility. iPhone became a talk of the town story over a night after the pre-launching which make it sounds interesting to public. Many users in our case study believed that iPhone was a trend of the future smart phones and one young tech savvy user admitted that he decided to use it because of fashion. 8.2.2.6 Integration Apart from above characteristics, Apple has also applied the vertical integration strategy to deliver the solutions or customer experiences to consumers. According to Kahney (2008), in this era, the growth market is now the digital entertainments, communication, and creativity. Consumers in this market want devices that are well-designed, easy to use, and work in harmony. That is the reason why hardware companies must get into software and vice versa. Apple has potentially demonstrated its strengths in this area. It has controlled and blended the overall components including hardware, software, and online services for people who want the ease of use from a vertical integrated solution.

Figure 8.1: iPhone vertical integrated solution (Apple Inc., 2009b, 2009f; Google Inc., 2009; Tele- fónica Europe plc, 2009; TeliaSonera AB, 2009; AT&T Inc., 2009).

Regarding to our study (see figure 8.1), the users’ perspectives on the iPhone is not only toward the product itself, but also the overall solution that Apple and its business partners provided. This includes the availability of the App Store - the online store offers a number of applications directly to iPhone, the iTunes software, which allows an easy synchronization to personal computers, the accessibility to the 3G network, which provides a fast mobile Internet network, the use of Google search engine, maps, and GPS, which gives a capability to find information and directions to particular locations, and the Apple Retail Store which provides support and consultancy for iPhone product enquiries. In analyzing consumer-product relationships, a number of these characteristics have been found to influence the success of new products and brands (Rogers, 1983). Peter and Ol- son (2008) also emphasized that products and product attributes are major stimuli that influence consumer affect, cognition, and behaviour. Consumers may evaluate these attributes in terms of their own values, beliefs, and past experiences. According to our research study, we have learnt that in order to successfully implement and stimulate diffusion of the radically innovative product like iPhone, it is required to possess such characteristics and integrate creative marketing communication. The deep understanding of the role of each product characteristic together with the consumer behaviours toward the innovative product adoption would benefit future breakthrough products or other innovative companies to enhance their launching strategy and encourage adoption and diffusion among target consumers. Although these characteristics were mostly beneficial to the first adoption to the early market, it is necessary for the firm to consider entering the mainstream market since it represents the majority of all potential revenues for the firm (Schilling, 2008). In section 9.1: Crossing the Chasm, we will further discuss about how the radical innovation product like iPhone can crossing the big scary gap between the early market and the mainstream market to successfully conquer the market as a whole.

9 Discussion

9.1 Crossing the Chasm The largest gap between categories of adopters is between the early market (innovators/early adopters) and the mainstream market (early majority, late majority, and laggards). This deep and dividing schism is the most formidable and unforgiving transition in the adoption and diffusion process (Schilling, 2008). According to Moore (1991), the chasm is the gulf between the visionaries (early adopters) and the pragmatists (early majority and mainstream market) and derives from critical differences between the two.

Figure 9.1 Crossing the chasm (Moore, 1991 & Searls, 2003).

9.1.1 The early market Visionaries (early adopters) are looking to adopt and use new technology to achieve a revolutionary breakthrough to gain dramatic competitive advantage in their industries. Custom- ers in the early market typically demand personalized solutions and quick-response, highly qualified sales and support. Hence, visionaries require customized products and technical support. Due to the fact that visionaries can be a costly group of customers to support since such customization for several visionaries can pull a firm in multiple market directions, early release of a product can backfire if it has not been adequately tested. The goal of the marketer’s firm at this point is to establish its reputation. The product is often the focus; engineering and R&D folks play a critical role, and brilliance and vision are em- braced. Firms try to develop the best possible technology for the market they pursue (Mohr et al., 2005). Through the case study, we believe that the reputation of iPhone was established based on two approaches: best possible technology and problem minimization. iPhone introduced outstanding user interfaces and best possible technologies in the market that suit well to its main functions: phone, video/music player, and mobile Internet device (Apple Inc., 2007a). Without doubt, iPhone successfully utilized a built-in accelerometer and a Multi-Touch™ user interface to enrich the customer experience via its main functions. iPhone has proved success to the market, as we can claim that it was one of the top smart phones in the U.S. that can overcome the difficulties in the usage of Internet via mobile handsets. The metric report from AdMob recently shows that iPhone dominated overall smart phone web traffic in the U.S. It was on the top rank with 49.5% share, followed by BlackBerry which could do only 9.1% (Schonfeld, 2009). Another approach is to minimize the problems that would occur and to ensure that product and service would run smoothly as they expect. Apple released iPhone under two

conditions. Firstly, the original release of iPhone came with hardware, OS, and applications that were all produced by Apple as well as using Apple’s iTunes software to control the synchronization of music, video, photos, contacts, and calendars between iPhone and personal computer (Apple Inc., 2009e). Although visionaries demand customized products, Apple scarcely allowed users to modify and customize their iPhones because they wanted to control the overall environment to minimize problems that could happen from external sources such as bugs (software defects) and viruses. The defects of the product would eventually create a horrific reputation, even though visionaries were willing to tolerate some incompleteness (Mohr et al., 2005). Secondly, Apple released iPhone in a certain location, to precise - in the United States only (Apple Inc., 2007b). This strategy allows Apple to control other factors that could affect to iPhone usages such as the quality of network and after sales service. Apple has developed a partnership with the U.S. mobile network operator, AT&T to ensure that the quality of mobile network is still under control. In addition, Apple has provided the after sales support for iPhone at Apple stores to ensure that the service covers most parts in the U.S. since the visionaries particularly demand for technical support from vendors, according to Mohr et al. (2005).

9.1.2 The chasm and the mainstream market While early adopters may be enthusiastic about the innovation’s technological features, the early majority may find the product too complex, expensive, or uncertain (Schilling, 2008). The chasm arises because the early market is saturated but the mainstream market is not yet ready to adopt. Hence, there is no one to sell to. The goal of the high-tech marketer should be to minimize the time in the chasm. The longer the firm spends in the chasm, the more likely it is that it will never get out (Mohr et. al., 2005). Marketing to the mainstream market requires that the vendor assume total responsibility for system integration. This need demands the development of a complete, end-to-end solution for the customer’s needs or the whole product. The whole product includes hardware, software, peripherals, interfaces and connectivity, installation and training, and service and support. The job of the firm in the chasm is either to develop or to partner with firms to provide the whole solution to the initial customers in the mainstream market. Ra- ther than developing the best possible solution, the goal here is to develop the best solution possible (Mohr et al., 2005). The release of iPhone 3G and the SDK for iPhone was a great example of how iPhone tried to cross the big scary chasm to the mainstream market. According to Mohr et al. (2005), pragmatists typically demand some sort of industry standard to minimize their perceived risk. Since the 3G network becomes a mobile network trend nowadays and Apple has planned to reach international market - especially in Europe, it was necessary to consider the standard and trend of the mobile network in those countries. The release of iPhone 3G offered a new iPhone mobile which can be working with the 3G network. Not only to make the product become more standardize, a strong partnership with local network operators in those countries was also an important factor for iPhone to manipulate its sounds reputation among pragmatists for the overall product quality. This includes the network and service quality of the local network operators to give a best solution possible to customers (Apple Inc., 2008b). The SDK gave several advantages to both visionaries and pragmatists where visionaries got ability to customize their iPhones and pragmatists were attracted by many applications in

which they delivered its best solution possible to them. The original iPhone came with the applications that were all controlled by Apple. This gave a limitation for visionaries to customize their iPhones e.g. installing new applications. After launching, many developers were long-awaiting for the SDK to create new applications but Apple claimed that the SDK was not yet released because they wanted to protect iPhone users from viruses, mal- ware, privacy attacks, etc. (Apple Insider, 2007). Later with the new OS updated, Apple has released the iPhone SDK in which it allows independent developers to develop new applications for iPhone. The SDK is a set of development tools that allows software developers to create applications from a certain software package, framework, hardware platform, etc. According to Mohr et al. (2005), in order to prepare the product crossing the chasm, R&D team, rather than base development on engineering solutions, they must work closely with partners and allies on a project-oriented approach. For many, it requires painstaking work on compatibility, standards, and so forth. Apple worked on the SDK to create such standards for iPhone’s developers. The iPhone developer program provides a complete and integrated process for developing, debugging, and distributing free, commercial, or in-house applications for iPhone and iPod touch (Apple Inc., 2009c). This program not only attracted 3rd party software companies but also opened an opportunity to individual developers to participate in developing iPhone applications. Apple has developed the strong relationship with partners through this program. And it is obviously seen that most individual developers are the technical visionaries, which could help to stimulate a wide and variety of applications to serve the mainstream market. Apple reported that there are more than 35,000 applications available for download and currently they reached more than 1 billion downloads in just 9 months since the availability of the SDK and the App Store (Apple Inc., 2009d). Another crucial strategy in crossing the chasm and speaking to the needs of the mainstream market is simplifying, rather than adding additional features (Mohr et al., 2005). In order to simplify the process to download and install applications on iPhone, Apple has announced the App Store, an online service that allows users to browse and download applications that were developed with the iPhone SDK and published on the store. According to our study from the customer’s point of view, it was a simply and fast way for iPhone users to download and install new applications which giving the whole solution to iPhone users. According to the research by Jacob, Libai, and Muller (2002), it shows that higher levels of communication between the early market adopters and the main market adopters is a key factor in mitigating the sales slump of the chasm. A number of iPhone users’ communities and blogs have played an important role for communication, especially between visionaries and pragmatists as these people can easily exchange information about the iPhone or help each other when they get through the difficulties. In summary, since the mainstream market represents the majority of the total market which holding potential revenues for the firms, the understanding of the chasm between the early market and the mainstream market and the efforts and focuses that firms spending on minimizing the time of the chasm would prepare the firm to smoothly and successfully crossing the chasm and generated the sounds reputation of the product (Mohr et al., 2005). Together with our study, these certain factors, the release of iPhone 3G and the SDK, gave the significant impact to consumers since their attitudes and behaviours toward iPhone were influenced by the product and service, resulting in the popularity among international countries and the impression on a huge variety of applications that available in iPhone.

10 Final Remarks

10.1 Further Studies While this thesis has progressed, many questions have been answered, yet some issues have been raised. This yields the basis for the recommendations for further research. To begin with, a radical innovation not only introduces new behaviour to individual consumers but also to the industry as one interviewee mentioned below.

“1) iPhone - from a company that making computers step into the mobile phone industry at first time, Apple acts like a Game Changer who makes a whole mobile phone industry has touchscreen feature on mobile phone.

2) App Store for iPhone is a tricky strategy that pull mobile carriers/service providers out of the value chain of mobile contents. Customers no longer need to buy contents or apps from carriers/service providers.

3) App Store then also acts as a Game Changer as well because many mobile phone makers try to imitate and build their own app store.”

Strategic & Business Development Manager at mobile operator company in Thailand

Figure 10.1 Personal interviews (April, 2009). Based on the findings, we can see that iPhone has an impact on consumers, hence it would be interesting to further study in order to investigate if the birth of iPhone has an significant impact on the telecommunication or mobile phone industry as well. Additionally, we assume that iPhone will have a tendency to affect on entertainment such as games, music, computer industry as well. Moreover, iPhone is now trying to invade mass market. It would also be very fascinating to conduct the quantitative research as a mean to quantify the result of our study with larger consumers if these outcomes will generally be happened among majority. This would give the big picture of how to market the innovative product to early adopters and later majority. The infrastructure network and price sensitiveness should be included in the decision factors within this target group. In the light of consumer behaviour study, an extensive study on consumer trend would provide a deeper understanding of how an innovation is adopted. Consumer trends may be another critical factor that effect innovation adoption when a product tries to reach mass consumers. Some said that actually consumers change their behaviour toward digital and portable trend, an iPhone is only one innovative product in the market that followed the trend. Or iPhone could potentially be a trendsetter.

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