Consumer Behavior on New Technologies Term Paper

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diffusion and adoption of new personal electronic devices. Specifically, the marketing efforts, market penetration for DVDs and Palm Pilots in addition, the use of DVDs and Personal Data Assistants will be reviewed, and a brief analysis of early, middle, and late users will be undertaken. For the purpose of this paper, the terms PDA and Palm Pilot will be used interchangeably.

New technologies are anticipated to revolutionize how we spend our work and leisure time. Dr. Ellen Wartella, Dean of the University of Texas College of Communication notes, "In the 1970's, TV became the technology that colonized America's leisure time" (Microsoft.com). Wartella then goes on to predict that digital technologies and computers will quickly fill that gap in the years to come, and that young people will be at the forefront of that trend. This trend is expected to grow, and Wartella notes, "While desktops, notebooks, cell phones and hand-helds are standard digital fare these days, this survey clearly shows consumers want even more of their lifestyles to be digital" (Microsoft.com).

Internet usage gives us an interesting look at consumer behavior in new technologies. In a Datamonitor IMPACT survey which sampled consumers in Sweden, the UK, the U.S., Italy, France, Germany and Spain, the Internet had nearly a 90% penetration rate in the United States, and over 90% in Sweden. The same survey noted that new growth in Internet penetration is among seniors, with the UK showing a 35% increase in penetration in two quarters in 2001 (Research and Markets.com).

Studies of mobile phone usage offer some interesting insights into how consumers use this new technology. In a Datamonitor IMPACT survey that sampled consumers in Sweden, the UK, the U.S., Italy, France, Germany and Spain noted that most consumers (less than 10%) use phones for purposes other than text messaging. Interestingly, this phenomenon was noted across all age groups (Research and Markets.com).

Market Penetration and Consumer Characteristics

Consumers have largely been quick to adopt new personal electronic devices like DVD players and Palm Pilots. As a result, these devices have been rapidly diffused into popular culture, and are enjoyed by a wide range of individuals across the socioeconomic spectrum, and by people of different ages.

As of 2002, a Personal Data Assistant (PDA) or Palm Pilot was used in only 8% of American households. In contrast, close to 70% of American households had a personal computer (PC). Households that own both a PC and cellular phone are considered to be likely markets for Palm Pilots. In the U.S., this market included 104 million households in 2002. Of these 104 million households, 26 million were likely targets for personal information management (PIM) tools like Palm Pilots (Kalyanam).

Market penetration for both DVDs and Palm Pilots is expected to be extensive. Today, the PDA market is faced by competition from smart phones and converged devices. These provide many features of the PDA, including calendars, address books, and Internet access, color screens, and light weights of close to five ounces. Research from Gartner notes that the 2004 sales forecast for smart phones is close to 19 million units (Kalyanam).

The growth of smart phones dramatically hurts the forecasted growth for hand-held computers. Research firm Gartner predicts that hand-held computers will sell 15.7 units in 2004 (Kalyanam).

DVD player market penetration has increased dramatically in the past few years, largely as a result of decreasing prices. However, the sales of DVD players are expected to decrease in the next few years as the cost of DVD recorders and Network and Internet-enabled DVD players is reduced. Sales of DVD Players in 2003 was close to 60 million, and is expected to be under 65 million for 2003, and decreasing to 35 million by 2008. In contrast, sales of DVD recorders was under three million in 2003, and is expected to come close to five million in 2003, but reach about 45 million in 2004 (Allied Business Intelligence).

The adoption patterns of new technologies like DVDs and Palm Pilots is dependent on a number of factors. Older people tend to be resistant to new technologies, often out of a fear of feeling foolish, or simply out of unfamiliarity with these technologies.

People who are early adapters of new technologies often share several important characteristics. They are overwhelmingly young and often educated. Importantly, they are often comfortable with technology, and also feel confident in the use of this technology (Millet).

Those who are in the middle of the trend of adopting technologies like DVDs and Palm Pilots tend to be slightly older than the first consumers. Price point is an important consideration for these individuals.

In the U.S. market, 20 million households have no potential interest in PDAs, and are outside the potential market for PDAs (Kalyanam). People who never adapt to new technologies tend to be older, and unfamiliar and uncomfortable with technology.

Marketing

Marketing efforts have played a key role in how successful electronic devices have been in penetrating the marketplace. In addition, these marketing efforts have also affected how consumers use these new devices.

Palm Computing, the grandfather of Personal Data Assistants was founded in 1992. The Palm Pilot was the company's first product, and contained a calendar, address book, and could synchronize with a personal computer. The first Palm Pilots were targeted at technology adept PC users that currently used a paper organizer. Marketing involved three steps. First, industry influencers were targeted through tradeshows. Second, the trade press was targeted. Third, the consumer press was targeted. Retail distribution was initially limited, and allowed Palm to effectively market these chains. By 1996 Palm had 70% of the market share (Kalyanam).

In a study of the introduction of a Palm Pilot named The Zire, which retailed for under $100, marketers noticed several trends. Women were typically they buyers, and interest in the product was usually generated through advertising in a women's magazine, while price point played an important role. A single person, who often used multiple shopping trips to make the decision, made purchase decisions. In store merchandising and packaging were also important (Kalyanam).

In 2003, The Zire was the number one handheld in the United States, as well as several European Countries. Interestingly, the majority of Zire users did not work, were female homemakers, and were not in college. Of those who purchased a Zire, 72% purchased a hand-held for the first time (Kalyanam).

The Internet has played an important part in marketing new technologies, including Palm Pilots and DVDs. The importance of this marketing medium can hardly be overstated. Windham and Orton note, "In effect, the Web site experience becomes the primary vehicle for building and reinforcing brand identity and preferences."

Certainly, the relatively new emergence of the lack of consumer loyalty makes ongoing marketing crucial for new technologies. Windham and Orton note that many purchasers of new technologies are quick to change brands, for factors as diverse as brand name, price, and product features. As a result, Palm Pilot and DVD marketers must continually market their products aggressively, and are not allowed the "luxury" of consumer loyalty, once a major factor in marketing old technologies.

Marketers across a variety of sectors commonly target new products and services toward specific age markets. Certainly, new technologies like the Internet, mobile phones, and hand-held devices are commonly targeted toward younger consumers (Research and Markets.com).

The business of tracking consumer behavior has, in and of itself, become big business. Software companies like Blue Martini and Siebel have become major players in creating computer programs that allow companies to track sales and consumer usage patterns. These programs are largely created to allow retailers to respond swiftly and effectively to rapid changes in consumer patterns (Tedschi).

Palm pilots represent a major change in how consumers complete many familiar tasks. Palm Pilots allow individuals to access to…[continue]

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