Managing Uncertainty in the Adoption of New Products: Temporal Distance and Mental Simulations

1. Managing Uncertainty in the Adoption of New Products: Temporal Distance and Mental Simulations Largely based on forthcoming JMR paper by: Raquel Castaño Mita Sujan Manish Kacker Harish Sujan June 2008 Presentation Prepared for Old Dominion University -

2. Cognitions and Emotions in Decision Making Basic Model: Individuals process and combine attribute information Alternative Models Category-based judgments (1984 to 1989) Autobiographical memories and anticipations (1990–on) Semantic/Abstract versus concrete/episodic thinking (1997-on) Specific emotions and action (1999-on) -

3. If you don’t care for yourself, you hurt others or, “feel guilty”

5. Temporal Distance ____X___________X_________X Far Near Decision How are options construed when the decision is in the near versus distant future? And what emotions are important as temporal distance shifts?

6. The Tweel

7. Observations Re. New Products • Low adoption rates • Michelin (the company that invented the radial tire) has now developed the Tweel, a no-air combination tire and wheel technology. Prototypes have been tested with the Audi A4. • Time 1: Automobile enthusiasts are excited by the performance potential of the Tweel and/or the new Tweel look. • Time 2: Yet, when the time to make a purchase decision approaches, consumers will become concerned with the uncertainties of learning to handle cars with Tweel tires and the risk associated with giving up familiar tires.

8. Observations Re. New Products • Failures and Market Withdrawals • WASHINGTON Dec 19, 2005— A new imaging drug, the only one capable of diagnosing equivocal appendicitis was pulled off the market Monday. • At a December 15 meeting, the FDA informed companies that though there was no new data, it had reconsidered the risk/benefit assessment of NeutroSpec.

9. Core Assumptions/Starting Points for our Research on New Products • The newness creates uncertainties. • Both upside and downside uncertainties. Consider relocation. • In the time duration from initial consideration to decision point mental shifts occur. • Products are introduced on promise. Then constraints emerge. • Good marketing strategy is managing the shifting uncertaintiesduring the introduction and launch of a new product

10. Paper Objectives • What is the decision process for adopting new products and how does the process change with time horizon? (Studies 1 and 1A) • How should communication strategies for new products be adapted over time horizon? (Studies 2 and 2A) • Are these communication strategies unique to new products, i.e., does the efficacy of these strategies depend on product newness? (Study 3)

11. Decision Process for New Product Adoption: Assessing Uncertainties • Performance uncertainty: the uncertainty related to estimating the expected utility of the product or “how useful will this product be?” • Symbolic uncertainty: the uncertainty related to estimating the social desirability of the product or “how much self-esteem and status will this product confer?”

12. Uncertainties in New Product Adoption • Switching costs uncertainty: the uncertainties associated with being able to take the steps to effectively use the innovation or “how difficult will it be to learn the new product?” • Affective uncertainty: the uncertainty related to estimating the emotional attachment to old technology and traditional products or “how will I feel if I use this product and forgo the old?”

13. Study 1: Temporal Distance, Uncertainties and Emotions • Temporal distance theories: As psychological distance to events decreases, people shift towards using concrete rather than abstract mental models and concern themselves with costs (feasibility) rather than benefits (desirability) features. • Extend the theory to perceptions of uncertainty and emotions • For New Products: Shifts over time in which uncertainty dimensions and emotions dominate.

14. Study1: Hypotheses • H1: When considering adopting a new product in the near future, compared to in the distant future, there will be: • H1a: higher switching cost uncertainty, • H1b: higher affective attachment uncertainty, • H1c: lower performance uncertainty, and • H1d: lower symbolic uncertainty • H2: When considering adopting a new product in the near future, compared to in the distant future, there will be: • H2a: greater feelings of anxiety, • H2b: reduced feelings of optimism, and • H2c: lowered intentions to adopt.

15. Study 1: Method • The Context: Adopting a newly offered virtual class in a Mexican university. Participants read a description of a virtual course, which explained the satellite transmission process, the formation of virtual teams and briefly described the benefits and challenges of the new technology. • The Experimental Conditions: Students were told to imagine themselves in a situation having to make the decision to register either tomorrow or a year from now. • The Longitudinal Study: Wave 1 data were collected three months from the registration date, and wave 2 data were collected the week of the registration deadline. • Dependent Measures: Cognitive Responses (coded), measured emotions, BIs and checks.

17. Major Findings 1 • Uncertainties from Longitudinal Study

18. Study 2: Managing Uncertainty to Increase New Product Adoption Two routes • Marketers can heighten the initial feelings of consumer optimism associated with the promises of new product benefits. • Second, Marketers can help alleviate the growing anxiety and feelings of uncertainty associated with new product costs as the buying decision nears?

19. Mental Simulation and Uncertainty Reduction • Mental simulations make things real – one way to deal with uncertainties. • Two types of mental simulations • Outcome-focused or Why-thinking • Process-focused or How-thinking • Past research argues for superiority of process simulation via planning and emotional regulation • Different types of simulation naturally fit with cost and benefit thoughts. • Why-thinking=>reasons/benefits • How-thinking=>procedures/costs • Efficacy contingent on temporal distance to decision

20. Study 2: Hypotheses • H3: When considering adopting a new product in the near future, relative to the distant future, how-thinking compared to why-thinking will: • H3a: alleviate switching cost uncertainty, • H3b: alleviate affective attachment uncertainty, • H3c: alleviate feelings of anxiety, and • H3d: increase adoption intentions • H4: When considering adopting a new product in the distant future, relative to the near future, why-thinking compared to how-thinking will: • H4a: alleviate performance uncertainty, • H4b: alleviate symbolic uncertainty, and • H4c: increase feelings of optimism, and • H4d: increase adoption intentions

21. Mental Simulation and Actual Adoption Rates and Post Purchase Satisfaction • For actual adoption, as the decision nears, individuals must overcoming constraints. • H5: For new products, when the adoption is perceived to be in the near rather than in the distant future, how-thinking compared to why-thinking will: • H5a: increase adoption, and • H5b: increase post-purchase satisfaction emotions

22. Study 2: Design • 2(near v. distant future) X 2(how v. why simulation) • Imagine that you have to make the decision tomorrow (in a year from now) whether or not to enrol in a virtual course… • Now, please imagine the process of taking a virtual course….Imagine logging on to the course site, reading the manual and step by step instructions…Imagine using technology to continuously interact with your professor and classmates rather than going to a classroom or going to their offices.” OR • Now, please imagine the end benefits of taking a virtual course… Imagine why the new technology of a virtual course will help you increase your professional performance… Imagine why working in virtual teams will allow you to be in contact with students from other countries and cultures.

23. Measures • Measures of uncertainty, affect and behavioural intentions • Actual enrolment data were observed for all participants 25 to 28 days later. Post-consumption satisfaction was observed two weeks after the start of classes.

24. Expected Interactions • Nature of Interaction? • Fanning interaction on uncertainties and emotions • Simple main effect comparisons for how-why significant under one time frame, but not the other • Cross-over for BIs • Simple main effect comparisons significant under both time frames • Fanning interaction on adoption and satisfaction • Simple main effect comparisons for how-why significant under near, with near-how highest

26. Paper Submitted to JMR • Reviewer concerns?

27. Paper Submitted to JMR • Reviewer concerns? Round 1: This a phenomenon for RNPs, test that. Simulation instructions too complicated. Replication with different product. Rewrite; move from theory to RNPs. Added Study 3 Round2: How do we know that matched simulations help? Long-term effects valuable, need strengthening. Added Study 2A Round 3: Don’t limit to RNPs, instead relate to degrees of newness. Add more marketplace examples. Rewriting

28. Study 2A: Additional Support for Matching Process and Outcome Simulations to Near and Distant Futures • The need for a control condition. • For example, does process help in the near time horizon (hypothesized) or outcome simulation hurt? • Another measure of long-term effects. • Delayed Intentions • Retested H3 and H4 with a replication of Study 2 design with a no simulation control, BIs collected over two time periods and a different product, i.e., an automatic car.

30. Major Findings 2 • Behavioral Intentions- Delayed

31. Study 3: Degree of Product Newness • The role of mental simulation is reducing uncertainty. Are the result contingent on degree of newness? • Stimuli: 2 levels of innovativeness on driving ease for a new automobile introduction X type of simulation. • New Product: Fully automatic car (responds to lane markers, road signs, other cars, obstructions). • Incrementally/Less New Product: Active cruise control (speeds and slows with traffic).

33. Major Findings 3 • Impact of Product Newness on BIs

34. Conclusions: Implications and Future Research • For new products, reducing uncertainty effective for adoption. • Impacting belief means versus certainty or another dimension • Immediate and longer-term effects, on BIs (pre-adoption), B (adoption) and satisfaction (post-adoption). Process may include impact on product usage. • Contingent on degree of product innovativeness • Temporal Distance • Communication strategies need to be modified to fit closeness to launch/adoption. • Public Policy Initiatives - National Health Care System. • Products and Services - BMW hydrogen fuel cars. iPhone. • Temporal distances to commitment (down payment) versus adoption may be different, or temporal distance to benefits (buy now) and costs (pay later). Investigate these decisions that unfold over time. • Mental Simulations. Review paper on types, methods, effects? • Why versus How • Problem versus Solution Oriented • Anticipations versus retrospections • Guided versus free flowing • Alleviate versus Change dominant thought

35. Launching the iPhone

36. Apple Reinvents the Phone with iPhone: Benefits Communicated MACWORLD SAN FRANCISCO—January 9, 2007—Apple® today introduced iPhone, combining three products—a revolutionary mobile phone, a widescreen iPod® with touch controls, and a breakthrough Internet communications device with desktop-class email, web browsing, searching and maps—into one small and lightweight handheld device.

37. Costs and Constraints at Launch iPhone requires a Mac with a USB 2.0 port, Mac OS® X v10.4.8 or later and iTunes 7; or a Windows PC with a USB 2.0 port and Windows 2000 (Service Pack 4), Windows XP Home or Professional (Service Pack 2). Internet access is required and a broadband connection is recommended. Apple and Cingular will announce service plans for iPhone before it begins shipping in June.

38. If Hydrogen Cars are to become a reality will see a shift from whys to hows… • BMW Hydrogen Cars Whys Communicated via Oscar Winning, “An Inconvenient Truth” • Run on water using hydrogen made from sunlight • Emit water vapor at the tailpipe Hows • Fill automatically with robot operated filling stations • Cooling tanks to keep hydrogen liquid

39. Hillside Recent Introduction

40. Ontech Home Page 11/04/05

41. Ontech Home Page 2/28/07

42. Future Research: Some approaches we’re considering to communicate about health • Change consumers mental models of time to favor the future • Two ways individuals consider time: snaps shots versus a video (Baumgartner, Sujan and Padgett, 1997) • Manipulate tests as in the near vs. distant future and separate commitment (sign-up) from action • Change perceptions of vulnerability • Individuals believe they better at managing market-place communication (With Amna Kirmani) • More finely match emotions and contexts of needed action • Consider multiple appraisals of emotions (with Kirsten Payssn)

43. Perceptions of How Persuaded You/Other College Student are by: (with Amna Kirmani, unpublished data) Tactic Self/ Self/ Other/ Other/ No Motive Motive No Motive Motive FDA Argument 4.69 3.79 3.75 4.35 Samsung Celebrity 4.25 4.21 4.52 5.33 Merck Emotion 4.79 4.71 4.35 5.60

44. Advice that’s worked for me • Old problem (hook), new approach (contribution). • Do everything the reviewer (advisor) asks. • Work on a few things and get them done. • Network. • Show your work often and to many. • Be a real friend to those who surround you now – they are among your truest friends in the academy.