Factors affecting new product adoption in the consumer electronics industry.

Abstract

In light of the intense competition facing the consumer electronics industry, manufacturers are constantly engaged in the creation of new products that would hopefully win consumers' acceptance. However, against a backdrop of changing technology and sophisticated consumer wants, inventing a successful innovation is an uphill task. In this study, we chose two products, the portable MiniDisc player and the MP3 player, to represent the various innovations in the consumer electronics market. A two-stage pluralistic research was carried out; with the use of focus group discussions followed by a survey in order to gather the views and insights of consumers with regard to their adoption behaviour. From the research findings, we ranked the seven factors influencing adoption ranked according to their degrees of importance.

Keywords: new product, adoption process and behaviour, consumer behaviour, consumer electronics industry, lifestyle

**********

With the crunch in the consumer electronics industry, manufacturers are under tremendous pressure to create new products. The consumer electronics industry has seen a wave of innovation sweeping the industry, with companies experimenting with a wide range of products from handheld gadgets to portable music devices. Given the advent of new technologies and shorter product development cycles, new products are constantly making their ways to the shelves. Examples of such consumer electronic products include the MiniDisc, recordable CDs, the digital audio tapes, and the MP3 player.

The main aim of this research was to shed some light on the adoption behaviour of consumers in relation to new audio consumer electronics innovations. Specifically, we wished to find out the factors that influence adoption. This study utilised two products from the same category; comparing one that is experiencing much success, (MP3 player) and the other with limited success (MiniDisc player).

Research Objectives

Our research objective was to explore the difference in the rate of adoption of portable audio products. Specifically, the research addressed the following issues:

* Determine the length of time taken by consumers to be aware of new portable audio products.

* Assess the sources of information that result in the awareness of new portable audio products.

* Determine the factors that affect consumers' adoption of portable audio products.

* Evaluate the varying degrees of importance these factors affect consumers' adoption.

A two-phase pluralistic approach was used for this research. In the qualitative phase, two focus group discussions were conducted to obtain the views of consumers as well as to gather information for the quantitative stage. In the quantitative phase, a cross sectional survey was carried out to address the objectives of the research.

Literature Review

New products and innovations often come with high risks as most of them failed in the marketplace, (Cooper, 1993). There has been extensive research carried out to unveil and discover the critical success factors affecting adoption as well as on the process of innovation diffusion itself.

Development of Theories on Adoption

Rogers (1962) introduced five main dimensions that influenced the adoption of an innovation, namely, complexity, compatibility, observability, trialability, and relative advantage. Rogers and Shoemaker (1971) further discussed these five dimensions which formed the foundation of subsequent studies on adoption of new innovations. Ostlund (1974) built on this research by adding a sixth dimension, the perceived risk of adoption. Perceived risk and risk attitudes were further discussed in various literature. For instance, Rogers (1995) indicated that early adopters tend to be less risk averse than late adopters, hence providing an association between risk attitudes and adoption of innovation. Smith and Andrews (1995) explained that when the perceived risk of the innovation increased, it would have a negative impact on the evaluation of the product; this further correlated risk with the adoption of innovation.

The number of dimensions thought to effect adoption continued to expand through the years with Tornatzky and Klein (1982) proposing 10 dimensions. They conducted a meta-analysis of all past studies on the innovation characteristics that had an impact on innovation adoption. Of the 10 dimensions they introduced, five were those proposed by Rogers (1962). The additional five new dimensions introduced were cost, communicability, divisibility, profitability, and social approval. Of these additions, communicability tended to mirror observability; and divisibility and cost paralleled trialability; the original dimensions laid down by Rogers (1962).

Of these newly introduced dimensions, cost of innovation to consumers received much attention by researchers and as a result, various studies on prices affecting rate of adoption followed. Kalish and Lilien (1986) postulated that the price of the innovation would affect its market potential. However, Jam and Rao (1990) contended that prices affect the rate of adoption rather than the market potential. In an earlier study, Kamakura and Balasubramanian (1988) had suggested that prices of innovation affect the timing of adoption and not whether consumers would adopt the product or not. They believed that lower prices would encourage consumers to buy the product at an earlier date, but not necessarily motivate them to buy just for that reason. They also stated that prices affecting rate of adoption would be true only to products with a narrow price range. Another view of price affecting rate of adoption was by Mason (1990), who provided empirical evidence that product attributes rather than price should be the ma in impetus for adoption.

In view of the various opinions, Moore and Benbasat (1990) tried to summarise and redefine the various dimensions. After an extensive instrument development process, they arrived at a classification of seven characteristics, that included compatibility, complexity, trialability, relative advantage, result demonstrability, visibility, and image. However, they did not incorporate price as one dimension but treated it as part of trialability.

Besides exploring the factors that influence adoption, some researchers have proceeded to explore the impact of marketing mix on new product adoption. In Thomas and Hirokazu (1999), witnessed extensive coverage on how advertising could affect new product adoption and in Thomas and Charlotte (1999), we saw how product characteristics affected the rate of adoption.

Innovation Adoption Process

In addition to the dimensions that influenced adoption, the process by which individuals adopted an innovation was also crucial, as an understanding of the these two areas would be imperative for the success of an innovation. The following review highlighted the various studies on the process of the adoption of new innovations.

Mansfield (1961) hypothesised that the proportion of individuals who adopted an innovation increased with more information available and on greater experience of the product. The population of consumers generally could be segregated into five categories with reference to their propensity to adopt a new product. The categories are innovators, early adopters, early majority, late majority, and finally laggards, (Rogers, 1995).

Late adopters normally adopted products on having more information and on greater exposure to the product. As such, late adopters were generally considered to be more risk averse. Though the risk perception among individuals were different, the decision process which lead to final adoption was fundamentally the same, and this was well summarised in Rogers' (1995) Model of Innovation Decision Process.

This model essentially encapsulated various studies on innovation adoption process (Kaplan, 1991; Van de Van, 1993; Clark and Staunton, 1994), and was used widely for explaining the adoption of information technology related products. In this model, the adoption process was demarcated into five phases, namely, knowledge of innovation, persuasion, decision, implementation, and confirmation. The process began with the acknowledgement of the presence of an innovation, which could be driven by communication and needs, among other factors. The second stage entailed the persuasion of the innovation to be adopted. This was the phase where the factors affecting the rate of adoption would fit in. The five dimensions of complexity, compatibility, observability, trialability, and relative advantage proposed by Rogers were the main driving forces of persuasion. The third stage involved the decision-making by the adopter after considering all the persuasion factors, after which he would either accept or reject the innovat ion. Implementation would only occur when the innovation was accepted, and confirmation involved the post adoption behaviour by the adopter.

In this research, the main emphasis would be the second phase of the innovation adoption process, that is the phase of adoption persuasion. In particular, this study would explore the dimensions that affected adoption and their re-levance to the consumer electronics industry; an industry which was highly driven by rapid technological changes and where its products were changing faster than end-user adoption rates.

Overview of MiniDisc and Portable MP3 Player

The MiniDisc (MD) was a compact digital audio disc developed by Sony in 1992 and it made its debut in the market in 1993. It was mainly used for listening and recording of music and designed to replace the tape cassette. In addition, the MiniDisc also offered features that compact discs (CDs) did not possess. Recordability and track labeling were some examples. Moreover, the storage capacity of the MiniDisc was almost twice as large as that of CDs.

Another new music device was the MP3 player; this is a device that could download musical selections from a Personal Computer, and be easily transported on the move just like a Walkman or a CD player. Since its introduction in 1998 by SonicBlue Inc, it has experienced a steep adoption curve and good sales. For instance, it has been postulated by International Data Corporation (IDC) that the United States market for such portable digital music players will grow from 1.3 million units to 6.7 million units by 2003. Since the MP3 player introduction, it has taken the lion's share of shelf space, advertising support, and retail sales from the MiniDisc player.

The sales of MP3 players have skyrocketed particularly in USA, due to the high rate of PC ownership and the easy availability of broadband technology, which allowed files to be downloaded at much faster speeds. Estimating a similar scenario in Singapore, companies such as Creative Technology and Philips Consumer Electronics have allocated huge investments and research and development (R&D) budgets for such products.

However, some industry experts shared the sentiment that MP3 players were in fact a replacement of MiniDisc players. After all, both were music devices with similar functions. Both were targeted mainly at music lovers who desire to enjoy the sound of music while on the move. Still, despite the many similarities, the rates of adoption for both products were vastly different. The steep adoption curve of the MP3 player clearly rivaled the gentler and jagged curve of the MD player. Market sentiments were such that MP3 players have overtaken the MiniDisc players in terms of popularity and profitability. Perhaps this sentiment can be reflected in the features that MP3 players possess. See Table 1.

Research Findings

We wish to gather some qualitative evidence of the factors affecting adoption and to obtain insights of the purchase intention of MP3 and MiniDisc from owners and potential owners before conducting a quantitative survey of respondents. This was achieved by the conduct of focus group discussions with consumers from different age groups; with one group consisting of students and the other group consisting of young working adults.

Qualitative Phase: Focus Group Discussions

The first group involved 10 participants, eight males and two females students. Of the participants, there were two MP3 player owners, a MiniDisc owner, and seven potential owners of either product. All were between 16 to 24 years and had an avid interest in MiniDisc and MP3 products.

The second focus group discussion composed of six working adults, with five males and a female participant. They were between 25 to 35 years of age. Among them, two participants owned MP3 players, one participant owned a MiniDisc player and the rest were potential owners seeking out more information on these products before making a purchase decision.

The main aim of the focus group discussions was to find the common features consumers looked for before they decide whether to make a purchase of MiniDisc andlor MP3 players. After the discussions, a generic list of product characteristics affecting the participants' purchase decisions was obtained. Information on popular and preferred brands and consumer vocabulary used when discussing MP3 players and MiniDisc players were also elicited from the participants.

Features Effecting Adoption

The generic list of product characteristics effecting the participants' purchase decisions helped to provide a comprehensive coverage of the underlying reasons that caused a difference in adoption attitudes and behaviour between MP3 players and MiniDisc players. From the focus group discussions, we noted that respondents constantly emphasised the importance of the aesthetics and appearance of the players, which in turn effected the image they portrayed to the users. As such, we concluded that image of the product was indeed one integral aspect which would impact the adoption decision of the consumer. As image was not congruous with any of the six dimensions commonly discussed in the current literature, we have included it as an additional seventh factor that would affect the adoption of an innovation instead of incorporating it into one of the existing dimensions.

Quantitative Phase: Survey

After the conclusion of the focus group discussions, the final stage of the research was to conduct a survey. Judgement sampling was administered given the fact that respondents need to have some knowledge about MiniDisc and portable MP3 players. The potential respondents have to be owners and potential owners of the MiniDisc and/or MP3 players. This criterion was based on the assumption that owners or prospective owners were aware of MP3 and MiniDisc products and they therefore possessed adequate knowledge of these players.

To facilitate the selection of respondents, we stationed ourselves near Funan the IT Mall, where most techno-savvy people were likely to frequent, and outside Heeren Shopping Centre, where HMV, one of the largest music retailers, was located. In all, the cross sectional sample consists of face to face interviews with 151 respondents (103 were owners and 48 were potential owners) over a period of two weeks, from 14 to 27 Dec 2001. The total response rate was 84 per cent. For both owners and potential owners, 63 per cent of the sample were males and the age spread was between 16 to 35 years with the majority in the 21 to 25 years (40 per cent) and 26 to 30 years (31 per cent) groups.

Research Findings

Awareness and Popularity of Players

The most preferred brand of MP3 players was Creative, (54 per cent) followed by Sony (28 per cent) with a combined percentage for these two brands of 82 per cent. As such, we could infer that Creative and Sony were the big players in the market. The rest of the brands only managed insignificant percentages, which were far lagging behind these two major brands.

As for MiniDisc players, Sony was the clear winner as it attained 78 per cent and Sharp was the distant second brand with 9 per cent. Aiwa and Panasonic were tied at 6 per cent. Overall, Sony was the indisputable and leading brand for portable audio products, as evident in these two types of players.

Generally, Sony's reputation in consumer electronic appliances implied good reliability and quality, and this has spilled over to the MiniDisc and MP3 players as well. Moreover, Sony was the innovator of the MiniDisc technology, and throughout the past decade had set the benchmark for innovative designs of the players. The most recent breakthrough for MiniDisc technology was the MiniDisc Long Play (MDLP) and MD-Link. This development had further strengthened Sony's position and perception in the minds of consumers to be the leading MiniDisc player manufacturer.

Creative, like Sony, was a reputable global brand. However, its reputation was more in the field of computer hardware and sound systems. The MP3 player, being considered as an IT-based music device, was seen as a branch-out from the arena of computers. Creative was the first company to come out with a player with a huge storage capacity of 6GB. With the company's extensive marketing efforts coupled with its early innovator status, MP3 players by Creative have since became a leader in the industry and gained the support of many techno-savvy fans who were also ardent music lovers. See Table 2.

There were 70 owners of MP3 players and 60 owners of MiniDisc players. In addition, there were 27 respondents who owned both MP3 and MiniDisc players. For MP3 players, 23 (33 percent) respondents owned Creative Players. This was in line with our earlier finding that Creative was the most preferred brand among MP3 players. Besides, Creative had a comprehensive range of MP3 players, ranging from their revolutionary hard disk-based "Jukebox", flash-ram based "Nomad II" to the recently launched MP3 CD player. This extensive range of products offered more choices and catered to the different budgets and preferences of consumers. The next commonly owned brand of MP3 player was the Jazz Piper (16 per cent). This brand of player appeared to be more of an entry-level product. Hence, consumers would not mind paying a low price to experiment with the player.

The remaining 51 per cent of the respondents owned various brands such as Philips, Apple, Samsung, Sony, Compaq, NAPA, and Diamond Rio. There appeared to be numerous manufacturers for MP3 players, in contrast to mainly a few large ones for MiniDisc players. However, it was interesting to note that Apple, a relatively new player in MP3 products, had managed to gain some market share quite rapidly.

For MiniDisc players, Sony was the most widely owned as 36 (60 per cent) out of 60 respondents have Sony players. Sharp was in second place, with 17 (28 per cent) owners. The other two brands, Panasonic and Aiwa, made up the rest of the brands.

The fact that 60 per cent of the respondents owned Sony players was in line with Sony being the most preferred brand of MiniDisc players. As explained earlier, with its innovator status of the MiniDisc technology coupled with its sound branding in the consumer electronics field, Sony has become the representative brand of MiniDisc players. See Table 3.

Factors Effecting Adoption of New Innovations

The analysis of factors that affect the adoption behaviour of consumers could be divided into two parts. The first part seeks to determine the various characteristics and factors that affect consumers' adoption tendency for a generic portable audio player. A ranking of these factors according to their degrees of importance was performed. In the second part, the factors identified earlier were operationalised by using MP3 and MiniDisc players specifically. By comparing the MP3 and MiniDisc players based on the factors identified in the first section, we will seek to explain the reasons behind the difference in adoption of these two players.

In the first part of the analysis, respondents were asked to rate the characteristics that they look for when purchasing a portable audio player. A scale of 1 to 7 was constructed, where 1 represents the least important feature and seven represents the most important feature. From the list of characteristics, factor analysis was performed to categorise them into main factors that affect their tendency to adopt a player. Cronbach alphas were also calculated in order to test the reliability of the scale.

From the factor analysis, seven different factors were extracted and they could be summarised in Table 4.

The seven factors could be named as follows: relative advantage, perceived risk, complexity, compatibility, observability, image and trialability. The factor means were calculated as well as Cronbach alphas in order to test for the reliability of the scale. See Table 5.

All the seven factors had Cronbach alpha greater than 0.7, hence certifying the reliability of the scales. The mean values of the various characteristics that constituted a single factor were averaged to obtain the mean value of that factor. Equal weightage is used as each of these characteristics measures a different aspect of the factor, and were of equal importance in defining the factor. Furthermore, the high correlation among these characteristics further supports the application of an even weight computation.

Comparison between MP3 and MiniDisc Players

In this second part of the analysis, respondents were asked to compare MP3 and MiniDisc players based on a similar list of characteristics generated in the first section.

On a scale of 1 to 7, 1 indicates that the MiniDisc player fares much better in that particular characteristic, and 7 indicates that the MP3 player fares much better for that characteristic. The value 4 indicates that both players fare equally for that characteristic. See Table 6.

Similarly, factor analysis was performed for this list of comparison characteristics and seven-factors were extracted. The Cronbach alphas for these seven factors were all above 0.7, indicating reasonable reliability of the scale. See Table 7.

Analysis of the Results

From the above findings, it was discernable that the seven factors that effected consumers' adoption of an audio player were of varying degrees of importance. As such, we have classified these factors into three different levels.

Very High Importance (Mean values greater than 6)

Factors that fell under this category include relative advantage and perceived risk of adoption.

Relative Advantage (Mean: 6.37)

Consumers rated relative advantage as the most important factor affecting their adoption tendency. The characteristics that form this factor include sound quality, storage capacity of player, battery life, functions of player, and skip protection (anti-shock mechanism that ensure uninterrupted playback). On the whole, each of these characteristics has a minimum rating of at Least 6 (where 1 is least important and 7 is most important).

Results show that in terms of relative advantage, consumers felt that the level of relative advantage in adopting an MP3 player is moderately lower than a MiniDisc player (comparison mean 4.64). In evaluating whether to purchase a portable audio product, consumers will generally look at the advantages that the product offers. For music devices, it is imperative that sound quality, the capacity of the player to store songs etc are the top priority of consumers. Specifically, MP3 players fare very much better than MiniDisc player in terms of skip protection (a high comparison mean value of 6.68) due to the absence of moving mechanical parts in MP3 player. Hence, users can enjoy uninterrupted playback even when jogging.

Perceived Risk of Adoption (Mean. 6.14)

Consumers ranked perceived risk as the second most important factor that affects their adoption tendency. The characteristics that comprise this factor include prices of the player (mean 6.3), costs of obtaining music (mean 6.1) and the warranty period of the player (mean 6.1). It is observed that consumers place a high emphasis on the costs of the player and its music. This result is not surprising due to the rapid development of consumer electronics where new gadgets come and go. As such, consumers perceive the monetary costs of adoption to be crucial. Furthermore, consumers of such portable audio gadgets are mainly teenagers and young adults who may have limited spending power and will give the prices a second thought.

Results show that in terms of perceived risk, consumers felt that the level of risk in adopting an MP3 player is moderately lower than a MiniDisc player (comparison mean 4.86). They perceived the prices of players and the prices of obtaining music for MP3 players are lower than MiniDisc, hence lowering the risk level. There were no significant differences in perception in terms of warranty and prices of accessories for both products.

High Importance (Mean value between 5 and 6)

Factors that belonged to this category include complexity and compatibility.

Complexity (Mean: 5.59)

Complexity of the player was ranked the third most important factor that could effect the adoption tendency. Consumers felt that the user friendliness of the player was important (mean 5.9). With the development of more advanced audio players with multiple functions, consumers hope to be able to operate and navigate through the songs with ease; which could be a challenge especially for players with very advanced features.

Another characteristic under complexity was the learning time required to operate the player (mean 5.3). Consumers felt that the players should be designed such that owners could easily master the knowledge of using the player without needing to plough through scores of user manuals.

Complexity was the only factor out of the seven factors which MP3 player fared worse than the MiniDisc player. On the whole, consumers rated MP3 player as fairly more complex than MiniDisc (with a comparison mean of 3.33 favouring the MiniDisc player). The respondents felt that MP3 player was less user friendly (comparison mean 3.40) and required more learning time to operate the player (comparison mean 3.59). Furthermore, more technical knowledge was required to operate the MP3 player, compared to the MiniDisc player (mean 2.99).

All these findings could be attributed to the fact that the main source of MP3 music was from the Internet. Basic literacy in IT was required to use the player. For users who wished to use the more advanced features such as converting normal CD songs into MP3 format, they will need to acquire the IT knowledge in order to do so.

Compatibility (Mean 5.25)

Compatibility was the fourth most important factor rated in the survey. Consumers felt that the availability of compatible existing music tracks for the player (mean 5.6), the player's ability to link up with the PC (mean 5.2), compatibility with one's lifestyle (mean 5.2), and player's compatibility with other home entertainment system were moderately important characteristics to consider before adoption.

Compatibility with past investments and lifestyles of the respondents would lower the switching costs incurred by the consumers, hence motivating them to adopt. For instance, if the consumer's home Hi-Fi system could play songs in MP3 format, this compatibility will motivate him to purchase a portable MP3 player without incurring any extra cost of obtaining MP3 music tracks.

Compatibility was one factor in which the MP3 player scored much higher than the MiniDisc player (comparison mean 6.36). The vast availability of compatible music in MP3 format in the cyberspace was one big attraction. Furthermore, there were various software for computers that enable them to easily transform normal CD music into MP3 music. As such, the ability to link with the PC was another selling point for MP3 players.

Moderate Importance (Mean value below 5)

Factors that were categorised into this category include observability, image and trialability.

Observability (Mean 4.5)

Consumers felt that observability of the results of an innovation were moderately important. The major characteristics comprising this factor were the weight of the player (mean 5.1), portability of the player (mean 5.1), and amount of product information available (mean 5.0). Generally, consumers would prefer to go for players that are small, light and packed with features.

MP3 players have advantages that are fairly more observable than the MiniDisc (comparison mean 4.5). The major characteristics which MP3 fare better were sise and portability. The sises of MP3 players, unlike MiniDisc players, are not constrained by the sise of the removable discs. Therefore, MP3 players, for instance the Sony Network Walkman could be as small as a cigarette lighter.

Consumers also perceived that there was more product information on MP3 players than MiniDisc players. This further enhanced the observability of the benefits of adoption. The wide coverage of product information could be attributed to the widespread of internet-based information of the MP3 player and marketers' efforts in promoting consumer awareness.

Image (Mean 4.1)

Consumers felt that the image the product portrays will have an impact on their purchase decision. The design of the player (mean 4.6), its accessories (mean 4.0), presence of ergonomic features (mean 4.0), and image of the player (mean 3.8) were various characteristics that will affect consumers' adoption.

For this factor, MP3 was again the winner, with a comparison mean of 5.4. Consumers generally felt that the design of MP3 players was more appealing (comparison mean 6.8) and this stems from the fact that most MP3 players were more flexible in terms of shape and size. This provided designers with more room for new designs and innovations. Henceforth, the aesthetic appeal of the player enhanced its image portrayed and improves the adoption process.

Trialability (Mean 3.5)

Trialability was rated as the least important factor that would affect the tendency of adoption. Consumers felt that the availability of trial before purchase (mean 3.4) and testing before purchase (mean 3.6) were fairly less important considerations. As prices of both MP3 and MiniDisc players were generally not very expensive, trial before purchase does not really enhance trialability.

For trialability, MP3 player fared only marginally better than MiniDisc players. For testing before purchase, consumers felt that it was slightly easier to test a MP3 player than a MiniDisc player. This might be because MP3 players require more knowledge in operating, and therefore sales personnel tend to allow more testing of MP3 players.

Conclusions and Managerial Implications

The adoption of a portable consumer electronics innovation could be explained as a function of seven factors, namely, trialability, compatibility, relative advantage, observability, complexity, image, and perceived risk of adoption. These factors were developed as a result of an extensive literature review; in-depth interviews conducted with manufacturers and retailers, and focus group discussions with owners and potential owners of MP3 and MiniDisc products. Furthermore, the factor analyses conducted in the quantitative research further supports the presence of the seven factors. Therefore, in developing new innovations, managers should take into account these factors to ensure a higher chance of success.

However, it is impossible to develop an innovation that will fare extremely well for all the seven factors as some of these factors may have antagonistic relationships. For example, to develop an innovation rich in functions to boost relative advantage may result in increased complexity of operating the product. Furthermore, with limited resources, managers may encounter difficulty in satisfying all of these factors.

As such, we conducted statistical analysis to reveal the varying degrees of influence and importance these factors possessed in the adoption process. The seven factors were statistically segregated into three different levels of importance. Relative advantage and perceived risk fell under the category of very high importance, while complexity, compatibility came under the category of high importance. Lastly, observability and image and trialability of adoption were classified under the moderate to low importance category. By classifying these seven factors according to their relative importance, managers could better manage and utilise their resources in order to maximise the possible payoffs from their products and innovations.

From the findings, marketers should recognise that consumers value relative advantage of the player as the factor of utmost importance. Hence, in developing new portable audio products, marketers should ensure that key features such as sound quality, storage capacity for songs, battery life, functions of player and skip protection feature surpass the standards of currently available products.

While having the relative advantages in mind, marketers should also be aware that the perceived risk of adoption is also crucial. This factor was ranked second among all factors, and could be decomposed into the cost of adoption and risk of non-performance of the player. Consumers are generally concerned about sinking funds into a new portable player without knowing if its performance can match their expectations. As such, in order to minimise such risks, marketers will have to ensure that in the process of providing relative advantages of the new innovation, research and development costs, manufacturing costs etc should be optimised. Effective and efficient use of resources for product development will help to cast a lower price tag for the products. This will promote adoption, which in the long run benefits the manufacturers.

Lowering the level of complexity of operating audio players will help to enhance the adoption process too. This aspect is particularly important as with the advancement of technology, products are usually developed with multiple capabilities. Furthermore, the convergence of IT and entertainment system may result in increased complexity of new innovations. This could pose a challenge in the operation of such technological gadgets by laypersons. Marketers should always ensure high levels of user friendliness of their innovations be maintained. Producing a highly technical gadget without consumers' knowledge of usage is unlikely to gain much market share.

The main selling point of MP3 player is its ability to ride on the development of the Internet. Being compatible with existing infrastructure and lifestyles of consumers contributes to its success. Hence, compatibility of a new innovation is also crucial. Being backward compatible (for example, MP3 players can play normal CD music tracks) and being compatible with a wide array of complementary products help enhance the chances of success through increased adoption.

The remaining three factors, observability, image and trialability, though rated to be of moderate to low importance, nevertheless should not be ignored by marketers. In instances of limited resources, their priority may be lower but should not be ignored. Marketers should make use of any opportunity to improve on these factors and to justify their new products.

Observability can be enhanced by increasing consumer awareness through promotional efforts. The external characteristics of players are often the main areas that can enhance observability. Weight and size of players are distinctive features that capture consumers' attention. Similarly, marketers could enhance image of the player through the design of the player. As for trialability, marketers can offer more product demonstrations and testing to generate' greater consumer interest and desire. In all, by classifying these seven factors according to their relative importance, managers can better manage and utilise their resources in order to maximise the possible payoffs from their innovations.

In addition, our research has revealed that the target group for MP3 players and MiniDisc players are basically the same. Therefore, product positioning is important for marketers who want to differentiate their products to enlarge the sise of the market. One suggestion could be differentiating along the line of usage. For instance, instead of positioning the MiniDisc solely as music device, companies can focus on other uses such as its recording capabilities, like using it for recording of lectures and interviews.

Table 1

Features of MiniDisc and MP3 players

Features                           MiniDisc    MP3
                                   Players   Players

Digital format of music              Yes       Yes
Recording capability                 Yes       Yes
Voice recording                      Yes       No
Skip protection (Anti-shock
mechanism that ensures
uninterrupted playback)              Yes       Yes
Designed to be more portable than
conventional CD players              Yes       Yes
Higher potential for further
reduction in size of player           No       Yes
Compatibility with computers          No       Yes
Able to download music from           No       Yes
Internet
Able to record music from            Yes       Yes
conventional CDs
Rapid adoption by consumers           No       Yes
Higher capacity storage               No       Yes
Cheaper storage medium               Yes       No
Higher priced compared to CD         Yes       Yes
players
Compatibility with home
entertainment units, for example,
Hi-Fi                                Yes       Yes

Table 2

Brand Preference for MP3 and MiniDisc Players

Brand       MP3 Player     MiniDisc Player
            No (Per cent)  No (Per cent)

Creative    82(54.30)      NA
Sony        42(27.81)      118(78.15)
Samsung      6 (3.97)      NA
Philips      5 (3.31)      NA
Jazz Piper   3 (1.99)      NA
Sharp       NA              13 (8.61)
Aiwa        NA               9 (5.96)
Panasonic   NA               9 (5.96)
Others      13 (8.61)        2 (1.32)
            151 (100)      151 (100)

Table 3

Brands Owned by Respondents

Brand          MP3 Player    MinDisc Player
              No (Per cent)  No (Per cent)

Creative        23(32.86)    NA
Jazz Piper      11(15.71)    NA
Philips         7(10.00)     NA
Apple           6 (8.57)     NA
Samsung Yepp    6 (8.57)     NA
Sony            6 (8.57)     36 (60.00)
Compaq          5 (7.14)     NA
NAPA            2 (2.86)     NA
Diamond Rio     1 (1.43)     NA
Panasonic       1 (1.43)     NA
Siemens hp      1 (1.43)     NA
Zappee          1 (1.43)     NA
Sharp           NA           17 (28.33)
Panasonic       NA           4  (6.67)
Aiwa            NA           3  (5.00)
Total           70 (100)     60 (100)

Note N = 103 owners, Figures include 27 respondents who own both MP3
players and MiniDisc players.

Table 4

Factor Analysis Rotated Component Matrix

Variables                                      Component

                                       1         2         3

Prices of player                     -0.06     -0.10     -0.03
Costs of obtaining music             -0.02      0.08      0.05
Warranty period                       0.09     -0.05     -0.05
User friendliness of player           0.05     -0.10      0.02
Learning time required to operate
 player                              -0.01     -0.02      0.01
Testing before purchase               0.01     -0.02     -0.16
Availability of trial period before
 purchase                            -0.12     -0.05     -0.02
Portability of player                 0.85      0.01      0.08
Weight of player                      0.89      0.04     -0.02
Availability of accessories           0.73     -0.08      0.01
Product information                   0.82     -0.01     -0.05
Number of retailers                   0.80     -0.02      0.00
Product advertisements                0.84      0.06     -0.05
Sound quality of player              -0.03      0.72     -0.07
Functions of player                   0.01      0.84      0.09
Storage capacity of player           -0.05      0.86     -0.06
Battery life                          0.01      0.77      0.03
Skip protection                       0.05      0.83      0.10
Design of player                      0.13      0.00      0.86
Image of player                       0.02      0.06      0.85
Design of accessories                -0.21      0.05      0.77
Ergonomic Features                    0.01     -0.05      0.85
Availability of music tracks          0.01      0.10     -0.03
Ability to link up with computer     -0.02     -0.01     -0.01
Compatible with home entertainment
 systems                              0.03      0.06     -0.02
Compatible with one's lifestyle       0.08      0.10      0.02

Variables                                      Component

                                       4         5         6

Prices of player                     -0.01      0.87      0.06
Costs of obtaining music             -0.01      0.75     -0.02
Warranty period                       0.03      0.86      0.06
User friendliness of player          -0.13      0.03      0.01
Learning time required to operate
 player                              -0.04      0.05     -0.13
Testing before purchase               0.01      0.06      0.87
Availability of trial period before
 purchase                            -0.05      0.04      0.90
Portability of player                 0.08     -0.05      0.02
Weight of player                      0.01      0.05      0.02
Availability of accessories           0.10      0.03     -0.12
Product information                  -0.04     -0.03      0.01
Number of retailers                   0.04      0.00     -0.06
Product advertisements               -0.06      0.00      0.01
Sound quality of player               0.01      0.02     -0.04
Functions of player                   0.08     -0.08     -0.01
Storage capacity of player            0.07      0.03     -0.05
Battery life                          0.18     -0.14      0.01
Skip protection                      -0.04      0.09      0.02
Design of player                      0.02     -0.03      0.04
Image of player                      -0.04     -0.07      0.01
Design of accessories                -0.01      0.04     -0.17
Ergonomic Features                   -0.01      0.04     -0.11
Availability of music tracks          0.72     -0.02      0.14
Ability to link up with computer      0.86      0.05     -0.04
Compatible with home entertainment
 systems                              0.79     -0.02     -0.06
Compatible with one's lifestyle       0.83      0.00     -0.09

Variables                            Component

                                       7

Prices of player                      0.05
Costs of obtaining music              0.02
Warranty period                       0.00
User friendliness of player           0.89
Learning time required to operate
 player                               0.90
Testing before purchase              -0.10
Availability of trial period before
 purchase                            -0.02
Portability of player                 0.05
Weight of player                      0.01
Availability of accessories          -0.01
Product information                   0.01
Number of retailers                   0.01
Product advertisements               -0.02
Sound quality of player               0.00
Functions of player                  -0.08
Storage capacity of player           -0.03
Battery life                          0.00
Skip protection                      -0.04
Design of player                      0.04
Image of player                      -0.08
Design of accessories                -0.01
Ergonomic Features                    0.09
Availability of music tracks         -0.09
Ability to link up with computer     -0.02
Compatible with home entertainment
 systems                             -0.02
Compatible with one's lifestyle      -0.05

Table 5

Factors Affecting Adoption of Portable Audio Players

Category            Responses  Mean  Std Deviation  Cronbach
                                                     Alpha

Relative Advantage     151     6.37      0.94         0.87
Risk                   151     6.14      0.83         0.77
Complexity             151     5.59      1.15         0.78
Compatibility          151     5.25      1.16         0.82
Observability          151     4.45      1.37         0.91
Image                  151     4.11      1.21         0.86
Trialability           151     3.53      1.28         0.77

Table 6

Comparison between MP3 and MiniDisc Players

Characteristics of Player      Category from       Comparison     Std
                               Factor Analysis        Mean     Deviation

Design of player               Image                  6.80       0.50
Image of player                Image                  6.70       0.64
Skip protection                Relative Advantage     6.68       0.50
Availability of music
 tracks                        Compatibility          6.39       0.97
Compatible with one's
 lifestyle                     Compatibility          6.36       0.85
Ability to link up             Compatibility          6.32       0.99
Storage capacity of player     Relative Advantage     5.89       0.84
Prices of player               Perceived Risk         5.64       0.97
Costs of obtaining music       Perceived Risk         5.63       0.92
Weight of player               Observability          5.50       1.43
Portability of player          Observability          5.50       1.44
Ergonomic features             Image                  5.48       1.07
Availability of accessories    Observability          4.94       1.41
Testing before purchase        Trialability           4.90       1.22
Functions of player            Relative Advantage     4.81       0.74
Product information            Observability          4.81       1.64
Design of accessories          Image                  4.63       0.94
Warranty period                Perceived Risk         4.46       0.95
Availability of trial before
 purchase                      Trialability           4.08       1.04
Number of retailers            Observability          4.03       1.65
Price of accessories           Perceived Risk         3.71       0.92
Learning time required         Complexity             3.59       1.30
User friendliness of player    Complexity             3.40       1.28
Product advertisements         Relative Advantage     3.17       1.11
Battery life                   Relative Advantage     2.99       0.86
Technology knowledge required  Complexity             2.99       1.16
Sound quality of player        Relative Advantage     2.83       0.81

Table 7

Comparison of Factors Affecting Adoption of Portable Audio Players

                                             Cronbach  Better
Category        Responses  Comparison  Std    Alpha    Player

Compatibility      151        6.36     0.77    0.76    MP3
Image              151        5.90     0.60    0.70    MP3
Perceived Risk     151        4.86     0.77    0.84    MP3
Observability      151        4.66     1.18    0.89    MP3
Relative
Advantage          151        4.64     0.63    0.89    MP3
Trialability       151        4.49     1.02    0.77    MP3
Complexity         151        3.33     1.00    0.86    MiniDisc

References

Bill R (2001), "An Unfinished Symphony", Electronics Business, Vol. 27, Issue 10, pp 76-82.

Bruce F and F Marty (2000), The MP3 and Internet, first edition, TeamCom Books; Burtonsville.

Charles B (2001), "Try Me, Buy Me", Far Eastern Economic Review, Hong Kong, Vol 164, Issue 44, pp 40-42.

Chris WJ, CT Lisa and GR Nicholas (2000), "The Role of Slotting Fees and Introductory Allowance in Retail Buyers' New-Product Acceptance Decisions", Academy of Marketing Science Journal, Vol 28, Issue 2, pp 291-8.

Clark P and N Staunton (1994), Innovation in Technology and Organization, London: Routledge.

Cooper RG (1993), Winning at New Products: Accelerating the Process from Idea to Launch, MA: Addison-Wesley.

Craig D (1998), "Beyond Incentives and Demo Days", MC Technology Marketing Intelligence, Vol 18, Issue 2, pp 51-52.

David D (1999), "Look Out! Here Comes the MP3 Explosion", Dealerscope Consumer Electronics Marketplace; Vol 41, Issue 12, December, p 28.

_____, (2001), "MP3 still going strong", Dealerscope, Vol 43, Issue 5, May, p 23.

Denver Post, Denver, (1998), "Hear this! New Home-Recording Options are Coming on the Market, but the Venerable Audiocassette Still Holds Center Stage", 13 July.

Frank D (1999), "Portable CD, MD Players Make Some Noise", Dealerscope Consumer Electronics Marketplace, Vol 41, Issue 10, October, p 26.

Guntis M (2001); "New Technology Takes Time", Oil & Gas Journal, Vol 99, Issue 39, p 19.

Jain, C Dipak and RC Rao (1990) "Effect of Price on the Demand for Durables: Modeling, Estimation and Findings", Journal of Business And Economic Statistics, April, p 163-170.

Jerry LS and B Jennings (1989), Media Use in the Information Age: Emerging Patterns of Adoption and Consumer Use, Lawrence Erlbaum Associates Publishers, Hillsdale, New Jersey.

Kalish S and GL Lilien (1986), "A Market Entry Timing Model for New Technologies", Management Science, Vol 32, February, pp 194-205.

Kamakura WA and SK Balasubramanian (1988), "Long-Term View of the Diffusion of Durables", International Journal of Research in Marketing, Vol 5, pp 1-13

Kaplan B (1991), Models of Change and Information Research, Information Systems Research: Contempory Approaches and Emergent Tradition, Elsevier Science, Amsterdam, Netherlands.

Laura H (2001), "Download Reveal Upside to Minidisc Potential", DSN Retailing Today; Vol 40, Issue 9, pp 22-23.

Mansfield E (1961), "Technical Change and the Rate of Inflation", Econometrics, Vol 29, Issue 4, pp 741-65.

Mason CH (1990), "New Product Entries and Product Class Demand", Marketing Science, March, pp 58-73.

Moore CC and I Benbasat (1990), "Development of an Instrument to Measure the Perceived Characteristics of Adopting and Information Technology Innovation", University of Calgary Working Paper Management, pp 90-05.

Ostlund LE (1974), "Perceived Innovation Attributes as Predictors of Innovativeness", Journal of Consumer Research, Vol 1, Issue 2, pp 23-29.

Padmanabhan V, R Surendra and S Kannan (1997), "New Products, Upgrades and New Releases: A Rationale for Sequential Product Introduction", Journal of Marketing Research, Vol 34, Issue 4, pp 456-472.

Paul S (2001), "Powerful Portable: A Report from Inside the Consumer-Electronics Pipeline", Christian Science Monitor, Boston, Mass, p 17.

Richard RK and CS Daniel (2001), "Threats to the External Validity of Brand Extension Research", Journal of Marketing Research, Vol 38, Issue 3, pp 326-335.

Rogers EM (1962), Diffusion of Innovation, edition, Free Press, New York.

_____, (1995), Diffusion of Innovation, 4th edition, Free Press, New York.

Rogers EM and FF Shoemaker (1971) Communication of Innovations, The Free Press, New York.

Sillup OP (1992), "Forecasting the Adoption of New Medical Technology Using the Bass Model", Journal of Health Care Marketing, Vol 12, Issue 4, p 42.

Smith DC and J Andrew (1995), "Rethinking the Effect of Perceived Fit on Customers' Evaluations of New Products", Journal of the Academy of Marketing Science, Issue 23 Winter, pp 115-24.

Stephen LP and CP Edward (1994), "Barriers to Technology Adoption and Development", The Journal of Political Economy, Vol 102, Issue 2, pp 298-322.

Suh-KY (2000), "More Muscle for Your Money", Far Eastern Economic Review, Hong Kong, Vol 163, Issue 46, p 52.

Thomas CB and HM Charlotte (1999), "The Link Between Attractiveness of 'Extraband' Attributes and the Adoption of Innovations", Journal of Academy of Marketing Science, Vol 27, No 3, pp 306-319.

Thomas T and T Hirokazu (1999), "The Relationship between Mass Media Availability and the Multicountry Diffusion of Consumer Products", Journal of International Marketing, Vol 7, No 1, pp 77-96.

Tornatzky LO and KJ Klein (1982), "Innovation Characteristics and Innovation Adoption-Implementation: A Meta-Analysis of Findings", IEEE Transactions on Engineering Management, Vol 29, Issue 1, pp 28-46.

Van De Ven AR (1993), "Managing the Process of Organizational Innovation", Organizational Change and Redesign: Ideas and Insights for Improving Performance, Oxford University Press, New York.