The Impact of Reference Group on the new product adoption

doi:10.21203/rs.3.rs-3426123/v1

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The Impact of Reference Group on the new product adoption

https://doi.org/10.21203/rs.3.rs-3426123/v1

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The purpose of this study is to determine what specifically the reference groups are, and what the new product adoption is and what the social factors that can affect it are. And to figure out whether there’s a direct relationship between formal and informal reference groups and the new product adoption. Then, the two major types of reference groups, formal and informal, will be identified. Finally, the theoretical framework will make its way toward investigating the variant reference groups sub-types’, and how they can influence the new product adoption. A survey-based research strategy has been adopted a survey of 411 respondent. The sample’s majority aged less than 40 years with post-graduates’ education and worked in private organizations. The findings of this study supported the hypotheses if there is a relationship between opinion leaders, celebrities (formal reference groups) and family members and friends (informal reference groups)on the new product adoption. Finally, it was concluded that opinion leaders had the highest significant influence when it comes to product adoption. Celebrities as well as friends had also a significant impact on product adoption. Family on the other hand had an insignificant impact on product adoption.. This study was done to understand the impact of reference groups influence on the product adoption. It observed the effect of reference group influence improve the adoption of new products.

Marketing

Management

New product adoption

reference group

informal reference group

formal reference group

celebrity endorsement

brand communities

opinion leaders

The new product adoption is impacted by a multitude of internal and external factors. The internal influential variables encompass various elements that contribute to the formation of the buyer's personality, including perception, perceived value, motivation towards a specific product, self-esteem, and learning ability. Conversely, external variables that exert influence can encompass classmates, family members, opinion leaders, and celebrities, so contributing to the formation of reference groups. Over time, scholars in the fields of psychology and sociology have placed increasing emphasis on the notion that individuals within a society are affiliated with distinct social groupings, known as reference groups, which exert influence on their attitudes and consumer behaviors. Reference groups play a significant role in shaping individuals' preferences towards specific brands or sets of products. For example, consumers who are making shopping decisions often look for products or brands that align with their sense of belonging to a certain group. The influence of reference groups can be classified into three distinct types: informational influence, normative influence, and value expressive influence. This phenomenon is contingent upon the inclination of the customer to imitate others within their own social reference group, or individuals within an aspirational group they aspire to join, or individuals who lead a similar lifestyle. In the context of the home appliances market, it is observed that customers are significantly impacted by their reference groups. Household appliances are conspicuous commodities that are readily observable by the general population. According to El‑Sharkawy, Nafea and Hassan (2023) since the participants of the this study were people working in private organization when they adopt a new a product it will bring happiness to them and this will lead to happiness at work (HAW)which will help in their progress at work .This study examines the impact of reference groups on the adoption of new products and explores the extent to which reference groups continue to exert influence on new product adoption in Egypt in the present day.

Theoretical framework and hypotheses development

New product adoption

According to Kotler (1986), adoption is a person's decision to regularly use or acquire a product. Nevertheless, adoption is just one step in the process. The innovation-decision process, according to Rogers (2017), is the path that an individual or group follows from learning about an innovation to developing an attitude towards it to deciding whether to adopt or reject it, followed by putting the new idea into practice and receiving confirmation of the decision. Adoption research has produced a number of valuable instruments for marketing theory and practice studies. Innovation may play a significant role in modern businesses. (Frambach et al., 2019) Environmental concerns are placing pressure on businesses to innovate and offer new products and services. With more similar products, shorter product life cycles, and more informed and savvy consumers, there is a growing demand for successful, distinctive products. The long-term success of many businesses is contingent on their constant pursuance of product and operational innovation. Because only a small percentage of new product ideas are adopted, it is essential for potential adopters to comprehend the variables involved. Evidence suggests that, in addition to adopter-side factors, supply-side factors have a significant impact on innovation. Individual adoption decisions are influenced by personal characteristics, perceived innovative characteristics, personal influence, marketing and competitive actions, and personal influence. Consequently, both the characteristics of the adopter (expertise, risk-taking, and general and product-category-specific innovativeness) and the characteristics of the invention impact the likelihood of adoption of new products or innovations. (Image provided by the coalition.) This review will present research from both pro-adoption and pro-adoption perspectives.

The best course of action, according to Rogers (2017), is to thoroughly implement an idea. Gatignon and Robertson (2019) state that adopter-side variables that influence product acceptability include cognitive processing level, ambiguity, and pattern of priority acquisition. The variables proposed by Frambrach & Co. et al. (2019) are information, network participation, competitive environment, and perceived innovation characteristics. Rogers' (2017) description of innovations served as the basis for the perceived qualities of innovation. Age and openness are characteristics of an adopter. Participation in a network is the interaction between individuals within a social system. The competitive environment is affected by both the level of competition and the level of innovation. Lastly, it is reasonable to assume that the extent to which prospective adopters have assimilated information about the innovation will impact the likelihood of adoption (Webster, 2015).

Reference Groups

Reference groups are individuals or groups that are contrasted and imitated by others and are generally accepted as reliable in a particular subject (Bapna & Umyarov, 2015). In recent years, individuals have had more direct and convenient access to the reference group depicted in numerous identities due to the proliferation of social networking programs and information access routes (Bilgicer et al., 2015). Personalities, idols, internet personalities, and opinion leaders exert a significant amount of influence on the public. People's reference groups significantly influence their beliefs, attitudes, and choices. Individuals will use the group as a reference and comparison object in self-evaluation to ensure their behavior results are consistent with those of the reference group (Risselada, Verhoef, & Bijmolt, 2014). Individual behaviors are influenced by the reference group in two ways: informational influence and normative influence. (Van den Bulte & Wuyts, 2007) Informative influence occurs when individuals receive information about themselves or others in two ways from the reference group.

When communicating with the reference group, individuals obtain direct information. The second is that individuals receive indirect information from the actions of the reference group through the use of judgement. By receiving information from the reference group, informative impact improves an individual's knowledge. Internalization is the simultaneous transfer and assimilation of knowledge (Goel & Goldstein, 2014). Individuals who do not perceive something in its entirety and who detect latent dangers will actively seek the assistance of a reference group and will acquire the necessary knowledge directly or indirectly. The informative influence will be effective if the knowledge gained from the reference group improves people's understanding, reduces ambiguity, or increases their ability to deal with latent risks.

When the reference group provides individuals with substantial rewards or punishments, normative influence occurs. Individuals positively heed the reference group's expectations in order to receive praise or avoid punishment (Hu & Van den Bulte, 2014). The most prevalent instance of normative impact is observed in social interaction. Individuals will sense the need to adhere to group standards and actively build identification with other members during the process of interpersonal engagement. Individuals frequently compare themselves to the reference group, engage in extensive self-evaluation, and make adjustments that mirror the reference group (Harmeling et al., 2017). Utility influence and value influence are the two categories of normative influence. Individuals are under pressure to adhere to group norms to ensure that their actions are "correct," that they meet the group's expectations, that they receive praise and acclaim, or that they avoid being punished. Compliance produces utility influence. Individuals are obedient when they are rewarded for meeting the group's expectations or spared punishment for adhering to group norms. Individuals who adhere to the reference group on purpose in order to be identified are considered influential. Influence operates via identification. Individuals distinguish themselves when they actively conform to social norms. In essence, normative influence is a value judgement and emotive reaction that leads to and sustains the reference group's expected behavior.

Despite the fact that attitudes and cognition dominate consumer decision-making, the reference group has a substantial impact on consumers' purchase behavior. As a consequence of the reference group's product knowledge and group norms, consumers' purchasing intentions are increased. Lee, Bachrach, and Lewis (2014) found that the reference group has a greater impact on consumer behavior the greater the degree of socialization of consumers and the greater the interpersonal interaction.

Types of reference groups

Formal reference groups

Formal reference groups are those that were formally constituted and can be governed by a particular organization. Formal reference groups include opinion leaders who can influence the psychological and behavioral state of the consumer due to their extensive knowledge, specialized expertise, or other qualities. Additionally, Brand communities and celebrity endorsements can influence the psychological state of the consumer. Therefore, these formal reference groups have a direct impact on the adoption of novel products (Escala & Bettman, 2013). According to Opoku (2012), primary formal organizations have a more formal structure. Typically, the consumer is exposed to these categories. Promoters present membership in such organizations as a means of gaining product approbation. The buyer is not concerned with secondary formal organizations, as they meet infrequently, are organized, and are nearly cohesive.

Opinion Leaders

According to Chaudhry and Irshad (2013), an opinion leader is a person whose opinion is highly regarded, and individuals incorporate the opinion leader's views into their decision-making process in a variety of situations. Nearly every group has its own set of opinion leaders. On the other hand, it is not necessary to identify opinion leaders in every social group; however, people may follow a person whose information is credible and trustworthy, such as experts in the automobile industry who exist as influencers on social media networks. The primary function of opinion leaders is to monitor and analyze the media, investigate the information they receive, and then communicate this information to their peers or respondents. Opinion leaders are not only viewed as information conduits between the media and target segments, but also as highly influential influencers due to their substantial social compression. Opinion leaders steer consumers towards a particular option, and then bolster that option with their social support in order to reinforce it.

Brand Communities

Brand communities have a significant impact on consumer purchase intentions, perceptions, and attitudes towards a brand. Brand communities are physical or virtual locations where admirers of a particular brand can communicate with one another and share their daily experiences with the brand. Gradually, marketing researchers and specialists began to accord brand communities more attention. Deep within brand communities, consumers function as brand advocates. Consumers discuss their daily interactions with the brand, as well as their interpersonal activities, lifestyle, and spending habits. Thus, brand communities enrich marketers with a fundamental, investigative spectrum that aids and unwraps consumer purchase intentions (Habibi, Laroche, & Richard, 2014)

Celebrity Endorsement

Promotions play an essential role in achieving the organization's missions and long-term objectives, particularly in the automotive market. Employing a celebrity as a marketing instrument is the greatest advancement in the field of promotion. This, in turn, increases the buyer's intent to purchase and motivates purchasers and consumers to develop brand loyalty. (Ahmed, Farooq, & Iqbal, 2014) Marketers affirm that using celebrities in their advertisements will establish a connection and unique link in consumers' minds between the celebrity used and the endorsed brand.

People view celebrities as a reference group that influences their purchase intentions and the entire buying process. People believe that buying a product endorsed by a likeable celebrity will cause them to adopt the same lifestyle and values as the celebrity.

Informal Reference Groups

Informal group is referred to as the primary group, which does not have a specific mission or structure and consists primarily of face-to-face interactions, as with family and peer influencer groups, which have a significant impact on consumer behavior. The Formal group is a secondary group that has little or no face-to-face interaction and consists primarily of individuals who are well-known in society (Evangelista and Dioko, 2011).

Family

The family is the most significant influence on virtually every individual. A family creates a socialization climate in which an individual will incubate, form his identity, and acquire values. Within the context of the family, a person will form attributes and opinions on a variety of topics, including social attachment, family interests, and his own desires (Rani, 2014). He highlighted that the family element strongly influences consumer behavior. 'Marketers regard this as a critical issue because more effort must be expended to persuade and influence the buyer's immediate family members who influence his purchasing decisions. For example, if a wife may influence the purchase of a particular product, marketers will attempt to indirectly target women in their promotional messages. One of the primary objectives of marketers is to influence influencers in order to attract a larger pool of potential consumers to their products (Reza & Valeecha, 2013).

Peer Influence

Peer influence is defined as the extent to which peers can influence the behavior, attitudes, beliefs, and actions of an individual. The impact of peer influence on product purchase decisions varies by product type; a publicly consumed necessity is a product that is observed while being consumed but is not commonly owned (Opoku, 2012). The impact of colleagues as a reference group varies across various brands and products. In recent years, evidences and experiments have confirmed that the peer influence on the buyer is more potent and significant when purchasing publicly used products than for privately consumed necessities (Makgosa & Mohube, 2007). In the mid-1990s, researchers discovered that there is a considerable equal peer influence on products whether they are consumed privately or publicly. Beginning in the twenty-first century, however, these findings and classic hypotheses were disproven. It has been determined that the buyer's adoption of a product is influenced by mild peer pressure. Peer influence was found to be significantly more influential on consumer behavior when it came to purchasing publicly consumed products such as mobile devices, hand watches, clothing, and vehicles.

Research Hypothesis

1- There is a relationship between opinion leaders and new product adoption.

2-There is a relationship between brand community and new product adoption

3-There is a relationship between celebrity endorsement and new product adoption

4- There is a relationship between family members and new product adoption

5- There is a relationship between friends’ effect and new product adoption

6- There is a relationship between aspirational groups and new product adoption

7- There is an impact of formal reference groups on the new product adoption.

8-There is an impact of informal reference groups on the new product adoption.

The research in hand is a quantitative research. According to Babbie (2010), quantitative research includes procedures that emphasize topical measurements and the numerical, mathematical, or statistical analysis of the data collected via questionnaires and computerized mechanisms. In order to develop this conclusive research, the researcher will undertake three significant steps. Initially, the researcher will gather data using confirmatory methods and explore secondary data sources in order to investigate the concept at hand and gain additional insight. The literature review has helped the researcher comprehend the topic under investigation by shedding light on how different types of reference groups can influence the purchase intentions of consumers, as well as the various types of influence that reference groups can emit. In order to acquire precise, factual, and systematic data that can provide an accurate depiction of the reviewed concept, as well as describe the characteristics of sampling units, it is necessary to conduct sampling. The research methods will be descriptive. There are three primary objectives of descriptive research: to describe, to explain, and to validate findings. The purpose of description is to organize the findings so that they can be matched with explanations, and then to test or validate those explanations. As acquiring evidence of cause and effect (causal) relationships is regarded as the central objective of this study, the researchers will employ a causal research approach. In addition, Causality research designs help researchers understand why the world functions as it does by establishing a causal link between variables and excluding other possibilities.

Methods of data collection

First, the researcher made a secondary research by exploring academic articles that are studying the same concept in hand, in order to expand her insight boundaries about the research topic. Moreover, Secondary data are used to get an initial understanding of the market of Home appliances. It is often faster to analyze than primary data because, in many cases, someone else may have already started analyzing it. Then, the researcher will gather primary data in order to insure fineness and reliability by using online Questionnaires done on google form. In gathering quantitative data, self-administered questionnaire will be the major tool used by the researchers. Kim, et al., (2010) stated that a self-administered questionnaire (SAQ) refers to a questionnaire that has been designed specifically to be completed by a respondent without intervention of the researchers collecting the data. A SAQ is usually a stand-alone questionnaire though it can also be used in conjunction with other data collection modalities directed by a trained interviewer. Within the self-administered questionnaire forum, nominal and Likert scale will be used as major forms of tools to collect data from respondents. Moreover, Likert scales are survey questions that offer a range of answer options from one extreme attitude to another, like “Strongly agree” to “Strongly disagree.” Typically, they include a moderate or neutral midpoint. The questionnaire will originally be established in English Language. However, the questionnaire will be also translated into Arabic language because it is targeted toward Egyptian consumers who possess Arabic language as their main reading and writing language.

Research Structure

Data Cleaning and Manipulation

The dataset had no missing. However, the questionnaire was set to be Likert scale so the responses were transformed to 5 representing strongly agree, 4 representing agree, 3 representing neutral, 2 representing disagree and 1 representing strongly disagree.
Around 20–30 respondents mentioned that they don’t have any home appliances which was obviously misleading or a data entry error, therefore their responses were eliminated.
For questions as influence of formal and informal groups it had categorized the answers into 3 dummy variables. Each dummy variable represented how can a group influence. There will be 3 dummy variables; willingness to buy, evaluation of product and brand preference. The benefits of the brand communities are also categorized into 5 dummy variables; as knowledge sharing, socialization, activities, economic value and daily experience.
The statements were grouped for each influence group. Then an average of statements was computed for each observation to form a composite measure for each group.

The dataset didn’t suffer from outliers. Therefore, no elimination of responses was necessary.

Correlation Analysis

1 Table (.1): Spearman Correlation coefficient

The previous table shows that there is a significant positive relationship between product adoption and all the reference groups. However, it is noticed that family has a very weak relationship with product adoption while the others are considered moderately related to the product adoption.

Reliability and Validity Analysis

2 Table (.2): Reliability and validity of variables based on Confirmatory factor analysis

CFA is applied to observe reliability and validity of factors obtained from the application of EFA. The reliability was measured by Cronbach alpha. All of the variables had a Cronbach alpha higher than 0.7. Therefore, all the statements are reliable to represent the factors in the study. To approach the validity of the statements in expressing the factors, both the composite reliability and the average variance extracted were computed. The AVE of each factor were above 0.5 and the CR was above 0.7. This shows how the statements was valid to be used for the factors.

4.2. Model Building

3 Table (.3): Descriptive statistics for variables

4 Table (.4): The excluded variables from each iteration of the stepwise model

The step wise regression concluded that after 3 steps, the variables included in the model shall be opinion leader, celebrity and friends. Family was found to have insignificant impact on product adoption.

5 Table (.5): Model summary for the stepwise model

32% of the variation explained in product adoption was based on model including the opinion leaders, celebrities and friends’ influence.

6 Table (.6): Analysis of variance of the stepwise model

The above Anova table shows that the model is adequate and significant, since p-value is less than 0.05.

7 Table (.6): Coefficients of stepwise model

At 99% of confidence level, there is a positive significant impact of opinion leaders, celebrities and friends on the product adoption. The model is presented as below

$$Product adoption=0.97+0.274*Opinion leader+0.177*Celebrity+0.19*Friends$$

The model showed that, opinion leaders had the highest influence when it comes to product adoption. Family on the other hand had an insignificant impact on product adoption, thus it was removed from the model. The model showed that formal reference influence had a significant impact on new product adoption. The model showed that informal reference model had also significant impact on product adoption.

The findings of this study shows that, the majority of sample were females. The sample’s majority aged less than 40 years with post-graduates’ education and worked in private organizations. Most of them didn’t intend to buy home appliances in the next four months. The sample represented equal shares from each income level. However, those with income less than 7000 were still dominating the sample. They were described to be influenced the most in their evaluation for the product by external factors. Their willingness to buy was on the other hand not easily affected. The brand communities were described to have advantages as economic value since it informs them about promotions and sale. It was also used as knowledge sharing and socialization opportunities. Some used them for activities and knowing the daily experiences of former owners of home appliance brand.

In addition to that, after collecting 411 respondents a stepwise regression model was built. It showed that formal reference influence as celebrities and opinion leaders had a significant impact on product adoption. Opinion leaders were also found to be having the highest influence on product adoption by individuals. Concerning the informal reference influence, only friends had a significant impact on product adoption. There was no enough evidence to prove that family had a significant impact on product adoption. Thus, it was eliminated by stepwise method.

In conclusion, the model showed that, opinion leaders had the highest significant influence when it comes to product adoption. Celebrities as well as friend had also a significant impact on product adoption. Family on the other hand had an insignificant impact on product adoption. The model showed that formal reference influence had a significant impact on new product adoption. The model showed that informal reference model had also significant impact on product adoption.

Limitations

This study was limited by

The research was conducted using online surveys. Therefore, the sampling technique was convenient non probabilistic sampling technique
The research only took into consideration the home appliances sector disregarding any other sectors.
Only celebrities, opinion leaders, family and friends’ influences were taken into consideration by model.

Recommendations

There is a number of recommendations resulted from the results. A number of managerial implications and further research is offered by this study.

Practical Recommendations

Companies should depend in their marketing on opinion leaders’ and ads by Tik-Tok influencers or other Instagram influencers. This showed to have the highest impact on product adoption of individuals.
Companies should also look into using ads by celebrities. Celebrities mentioning that they use a certain product influence other individuals to adopt the new product

Academic Recommendations

Product adoption and being influenced by formal or informal groups should be repeated on other sectors not just home appliances.
The research should be repeated on males to focus on the effect of the relationships. The number of male individuals were relatively lower and under presented in the sample. Therefore, repeating it on males could amplify the pattern for the different gender.
In further research, other models should be used to explain the phenomenon as the structural equation modelling and the confirmatory factor analysis to deal with Likert scale questions and understand the loadings for each statement.
Not only product adoption should be studied. Other variables as brand switching, brand loyalty, customer attitude towards products should be the main focus for future research.

In conclusion, this study was done to understand the impact of reference groups influence on the product adoption. It observed the effect of reference group influence improve the adoption of new products. The reference groups were divided into formal and informal groups. Concerning the product adoption, it was measured by number of statements.

Upon applying the descriptive statistics, the majority prefer listening to opinion leaders. For them opinion leaders are more trustworthy and know all the hype of new brands. Celebrities also were trusted due to being role models to general public. The friends and the peers had also been recognized as a significant strong influence on the individuals regarding product adoption in the home appliances industry. The family had an insignificant impact on their product adoption patterns. Observing brand communities, it was found to have many advantages. Mainly it was agreed to be used for the economic value, sharing daily experiences of owners and knowledge sharing.

After modelling, it turned out that the family had indeed insignificant impact on new product adoption while friends, celebrities and opinion leaders had a significant impact on product adoption. In accordance formal and informal reference influence was found to have an impact on product adoption and can improve the product adoption patters regarding the house hold industry.

Not applicable

Competing interests: The author declares no competing interests.

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The Impact of Reference Group on the new product adoption

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Abstract

Introduction

Theoretical framework and hypotheses development

Research Hypothesis

Research Methodology

Methods of data collection

Results

Discussion

Limitations

Recommendations

Conclusion

List of Abbreviations

Declarations

References

Tables

Supplementary Files

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