Journal of Product & Brand Management

Innovativeness and price sensitivity: managerial, theoretical and methodological issues

Ronald E. GoldsmithStephen J. Newell
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 An executive summary
for managers and
executives can be found
at the end of this article
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Decisions involving
pricing
Consumer innovations
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997 pp. 163-174 © MCB UNIVERSITY PRESS, 1061-0421
Innovativeness and price
sensitivity: managerial, theoretical
and methodological issues
Ronald E. Goldsmith and Stephen J. Newell
Introduction
This study had three objectives: managerial, theoretical, and methodological.
First, it sought to verify the negative relationship between product
innovativeness and price sensitivity (innovators seem to be less price
sensitive than later buyers) that underlies the marketing practice of
skimming the market for a new product by charging a relatively high price
(Bearden et al., 1995, p. 287; Dean, 1976; Nagle, 1987, p. 114). The second
was to contribute to diffusion theory by adding information on price
sensitivity to the profile of consumer innovators that describes them as
knowledgeable heavy users and opinion leaders (e.g. Flynn and Goldsmith,
1993a). Finally, the study sought to present a new method for measuring
price sensitivity (via self-report) for a product category that is easier and
simpler than many of the methods now available.
One of the most important decisions marketing managers make involves
pricing, and information on how consumers react to price levels or changes
in price levels is needed to guide pricing decisions. For example, Cahill
(1995) lists many questions that a typical firm’s management asks of market
research and includes the question: “What is the price elasticity of our
product?” How to price a new product may be particularly difficult. Pricing
strategy can influence not only the initial revenue so vital to the profitability
of the firm, but also the long-run success of the new product. Thus,
managers desire information describing consumer price sensitivity and how
price might affect the new product’s acceptance. This concern is particularly
important for the consumer innovators who play a crucial role in the
diffusion of new products (Foxall, 1984). They are the ones most likely to
buy the new product when it first appears in the market, and their reaction is
important not only for its own sake, but also because innovators typically
influence later buyers through their capacity as opinion leaders (Gatignon
and Robertson, 1991).
In addition to this managerial concern, consumer researchers have long been
interested in profiling the unique characteristics of consumer innovators in
order to refine theories of consumer behavior (Gatignon and Robertson,
1991). The role of price sensitivity in the adoption decision process has not
been deeply studied and could add valuable insight to this theory. As more
of this knowledge becomes available, those interested in developing
consumer theory will be able to construct more complex models, propose
more hypotheses, and provide more rigorous explanations for innovative
consumer behavior.
Although there is interest in price sensitivity as a consumer characteristic,
measuring price sensitivity among samples of consumers is often a
The authors would like to thank Dr Leisa Flynn for her helpful comments on a draft.
163
 time-consuming and difficult task for applied and theoretical researchers. If
new methods could be developed, both marketing management practice and
consumer theory would benefit. This paper presents a concise and simple
measure of price sensitivity that may open the door for more careful
empirical study of other aspects of price sensitivity, such as its impact on
coupon usage, how perceived product quality is affected, or how it is
influenced by advertising and other promotional efforts.

Background
Innovativeness
Innovative behavior Consumer innovators are the earliest buyers of new products. Their role in
the diffusion process is important because they provide revenue and
feedback to firms who launch new products; they influence the spread of the
new product to later buyers via word of mouth; and their rejection of a new
product may spell its demise (Foxall, 1984; Gatignon and Robertson, 1991;
Kotler, 1994, ch. 14). A great deal of research has been devoted to
describing and explaining innovative behavior (Rogers, 1983), and several
sound empirical generalizations have been proposed. Goldsmith and Flynn
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(1995) provide a brief summary of much of these findings. Innovativeness is

domain specific; that is, consumers tend to be innovators for specific product
categories. Innovators are thought to be not only opinion leaders, but also
more knowledgeable about new products, more involved in the product
category, have greater media exposure, and are heavier users of the product
category. This study seeks to add another characteristic to the innovator
profile: price sensitivity.

Price sensitivity
Marketers and researchers are familiar with the concept of price elasticity,
which describes changes in the quantity of demand for a product associated
with changes in price of the product. If demand is elastic, changes in price
level have a proportionally greater impact on demand. Inelastic demand
describes the case where changes in price have little effect on demand. The
concept of price elasticity describes the aggregate response of a market
segment to price levels. Price sensitivity is an individual difference variable
describing how individual consumers react to price levels and changes in
price levels. A consumer high in price sensitivity will manifest much less
demand as price goes up (or higher demand as price goes down), and
consumers low in price sensitivity will not react as strongly to a price
change.
Aggregate response Marketing management pricing strategies and buyers’ responses to prices
have received a great deal of scholarly attention (e.g. Monro, 1990; Nagle,
1987), but most of this research has focussed on the aggregate response of
the market, price elasticity, and not on individual consumer response
(Gatignon, 1984; Kanetkar et al., 1992). “What then is the appropriate
strategy for pricing an innovative new product?” asked Nagle (1987, p. 139).
“To answer that question,” he continued, “ it is important to recognize that
consumers’ price sensitivity when they first encounter an innovation bears
little or no relationship to their long-run price sensitivity.” Thus, it is
important to assess the level of price sensitivity among consumers,
especially for innovators, prior to and during the introduction stage of the
product life cycle (PLC). It is also important to measure price sensitivity for
the later buyers, particularly as the new product moves into the growth and
maturity stages of the PLC. Finally, consumers often use price as in indicator
of quality, especially where they have little knowledge of the product and

164 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997


Actual buying experience
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Innovativeness and price
sensitivity
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997
where they have few alternative brands to compare (Nagle, 1987, pp. 70-71,
139). How price sensitivity affects these evaluations is important to both
marketing managers and to consumer theorists interested in the product
evaluation and buying decision process.
Information about price sensitivity is difficult to acquire, however, because
measuring price sensitivity often requires actual buying experience in a test
market or a controlled experiment. Thus, both managers and consumer
theorists would like to measure price sensitivity among consumers as an
individual difference variable so that they could use this construct to
describe consumers along with other information such as demographics, life-
style, and attitudes. A concise, reliable and valid measure that is as easy to
use as other survey methods would enable researchers to expand their study
of price sensitivity and even include it in telephone and intercept interviews.
This study adds to the available information on measuring price sensitivity
in this way.
Innovativeness and price sensitivity: the present study
Conventional management wisdom suggests that a skimming price policy
may be appropriate when launching a new product both to quickly generate
the most revenue possible and because the earliest buyers of new products
are willing to pay premium prices (Bearden et al., 1995, p. 287; Kotler,
1994, p. 493). This practice provides prima-facie justification for empirically
testing the principal hypothesis of this study, that greater levels of
innovativeness are associated with lower price sensitivity. In addition, there
is some empirical evidence that directly supports the hypothesis. Goldsmith
(1996) used a survey of 70 students to ask them directly about their levels of
innovativeness and price sensitivity. The topic was new restaurants. He
reported a significant negative correlation (–0.49) between scores on two
summed scales measuring the constructs, supporting the hypothesis. The
present study was developed to overcome the shortcomings of previous
research and partially to replicate previous findings (Goldsmith, 1996).
The present study uses a larger and more diverse sample of consumers. It
also allows for direct examination of male/female differences that the
smaller sample did not. New fashionable clothing was chosen as the target
product category for this study because it is a major spending category for
both men and women; it is a product about which virtually all survey
respondents have experience and easily expressed beliefs; and there is a
large body of research on clothing consumption behavior. Finally, Goldsmith
(1996) studied innovativeness and price sensitivity for a service category
rather than for a tangible product category, so the present study extends the
scope of this research into a different product category.
In summary, the purpose of the present study is to refine and extend the
profile of consumer innovators by directly examining the relationship
between innovativeness and price sensitivity in a specific product category.
The more managers know about innovators, the better able they will be to
reach and communicate with them with the intention of informing and
persuading them to buy new products through skillfully designed marketing
strategies. The information from this study will also add to our theoretical
knowledge of innovators and their behavior, thereby improving this aspect
of diffusion theory. Finally, from the methodological prospective, the
assessment of price sensitivity is crucial to both marketing management and
consumer theory, but is underdeveloped because researchers lack a reliable,
valid, and convenient method for measuring this construct. The present
165
 study extends and supports a new approach to solving this problem via a
self-report, multi-item scale.

Method
Data collection
Sample diversity The data came from a convenience sample of 457 students at a large
university in south-eastern USA. Nine graduate students in a research
methodology class distributed the questionnaires. To increase sample
diversity, sample participants were selected based on a quota sampling plan
with the instructions to give half of the self-administered surveys to men and
half to women; and one-fifth were to be given to freshmen, sophomores,
juniors, seniors, and graduate students, respectively. Each graduate student
was instructed to obtain at least 50 completed surveys. Participants were
approached outside of classrooms and were asked to complete the survey at
the end of various class sessions. While this sample is in no way random,
this does not present a problem since it is not the goal of this study to
generalize the results to a specific population of interest (Ferber, 1977).
Rather, it is to test the hypothesized relationship between two constructs:
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innovativeness and price sensitivity.

Population parameters The final sample approximated the quota sampling plan. Usable responses
were obtained from 234 (51 percent) men and 223 (49 percent) women.
Respondent sex was evenly distributed by class standing, and there were 79
(17.3 percent) freshmen; 78 (17.1 percent) sophomores; 100 (21.9 percent)
juniors; 94 (20.6 percent) seniors; 103 (22.5 percent) graduate students; and
3 (0.7 percent) other. Participants’ ages ranged from 17 to 61, with a mean of
22.6 (SD = 5.2). There were 330 white students (72.2 percent), 50 black
students (10.9 percent), 27 Hispanic students (5.9 percent), and 48 others
(10.5 percent) who were chiefly foreign students (with two missing values).
These proportions are very close to the population parameters for this
campus. Self-reported grade-point averages (GPAs) ranged from 1.8 to 4.6,
with a mean of 3.3 (SD = 0.51).

Questionnaire
The questionnaire contained demographic questions asking respondents to
report their sex, age, class standing, ethnic group membership, and GPA.
Owing to space limitations on the questionnaire, long scales could not be
used to measure the two key constructs, and thus “modified” versions of the
measures were used as suggested by Villani and Wind (1975). Fashion
innovativeness was measured using three items from the Domain Specific
Innovativeness Scale (DSI) developed by Goldsmith and Hofacker (1991).
These are shown as the first three items in Table I. The original six-item
Likert scale has been shown to be both reliable and valid in a number of
studies (Flynn and Goldsmith, 1993a, 1993b; Goldsmith, 1996; Goldsmith
and Flynn, 1992, 1995; Link, 1995). Price sensitivity for new fashions was
measured using four items (see Table I) from a six-item Likert scale shown
in Goldsmith (1996). In addition, a single item was used to measure the
preference for purchasing American-made versus imported clothing: “In
general, I would like to buy American-made apparel products instead of
imports.” This item was used to assess the preference of fashion innovators
toward American-made clothing and for the purpose of the present study it
was used to assess discriminant validity, as will be shown below. All eight
Likert items used a five-point response format where 5 = strongly agree and
1 = strongly disagree.

166 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997

 Factor loadings
Item Factor one Factor two

(1) In general, I am among the last in my circle

of friends to buy a new fashion item when
it appearsa –0.78 0.09
(2) Compared with my friends I own few new
fashion itemsa –0.74 –0.09
(3) If I heard that a new fashion style was available
in the store, I would be interested enough to
buy it –0.69 –0.06
(4) I am less willing to buy new fashions if I
think that they will be high in pricea 0.15 0.70
(5) I know that new fashions are likely to be
more expensive than older ones, but that
doesn’t matter to me 0.23 0.54
(6) In general, the price or cost of buying new
fashions is important to mea –0.13 0.53
(7) I don’t mind paying more to try out a new
fashion item 0.37 0.50
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Eigenvalue 3.29 1.22

Percentage of variance 47.1 17.5
Factor Correlation 0.42
Note: aNegatively worded item

Table I. Factor analysis of the scale items

Analysis and results

Price sensitivity scale
Factor analysis and reliability
One concern in this study was the discriminant validity of the items, that is,
did they measure the same construct or two different, but related constructs
as hypothesized? The seven Likert items measuring fashion innovativeness
and price sensitivity for new fashions were factor-analyzed using the
principal axis factor option of the SPSS factor program. An oblique rotation
was specified because the hypothesis was that the two constructs were
associated. The pattern matrix of factor loadings is shown in Table I. These
figures show that the seven items formed two correlated factors, with the
three innovativeness items loading on the first factor and the four price
sensitivity items loading on the second factor. With only one item (number
7) exhibiting a sizable cross-loading, the items demonstrated good
discriminant validity; they were not measuring the same construct and so
they can be summed to form two separate scales.
The internal consistency of the short innovativeness scale and of the short
price sensitivity scale was assessed by coefficient alpha. These alpha
coefficients were 0.78 for the innovativeness scale and 0.73 for the price
sensitivity scale. These values are acceptable according to Nunnally’s (1978)
recommendation and similar to the values common to much of marketing
and consumer research (Peterson, 1994). For such short multi-item scales
they suggest high internal consistency.

Correlations
The scores on the summed fashion innovativeness and price sensitivity
scales were correlated with each other and with four other variables:
respondent age, GPA, sex, and the single Likert question asking about
purchase of American-made versus imported clothing. The correlations
appear in Table II. The positive point-biserial correlation between gender

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997 167

 Correlations Innovative- Price American-
Variable Range Mean SD Age GPA ness sensitivity made Sex

Age 17-61 22.6 5.2 1.0

GPA 1.8-4.6 3.3 0.5 0.21** 1.0
Innovativeness 3-15 8.1 3.0 –0.22**–0.03 1.0
Price sensitivity 4-20 14.6 3.5 0.11* 0.10* –0.48* 1.0
American-made 1-5 3.3 1.0 0.03 0.00 –0.17** 0.15** 1.0
Sex – – – 0.05 0.16** 0.18** 0.07 –0.11* 1.0
Note: *p < 0.05; ** p < 0.01

Table II. Correlations among the variables in the study

(1 = men and 2 = women) and GPA (r = 0.16) reflects the objective fact that
on this campus women have a higher average grade point than men. The
correlations further show that women tend to be more fashion innovative
than men (r = 0.18), a finding consistent with several studies (e.g. Goldsmith
et al., 1987). These correlations also show that, as hypothesized, fashion
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innovativeness and price sensitivity were negatively correlated, –0.48,

indicating that more innovative consumers are less price sensitive. This
finding is consistent with that reported by Goldsmith (1996), where the
correlation was –0.49.
Acceptance of imported Finally, the fashion innovativeness scores were negatively correlated (r =
clothing –0.17) with the responses to the American-made clothing question,
suggesting that more innovative fashion buyers were less likely to agree that
they would rather buy American-made clothing than imports. This greater
acceptance of imported clothing by innovators seems consistent with general
descriptions of the fashionable clothing buyer, who is interested in style,
frequently a feature of imported fashions. The scores on the fashion price
sensitivity scale were also significantly correlated with the American-made
question (r = 0.15), but in the opposite direction, suggesting that greater
sensitivity to price is related to a preference for American-made clothing and
reinforcing evidence from the factor analysis for the discriminant validity of
the two scales. Further evidence for discriminant validity is discussed next.

Male/female comparisons
The correlations between fashion innovativeness, price sensitivity, as well as
the buying American-made clothing question were repeated for men and
women separately. The results were virtually identical. For men,
innovativeness was negatively correlated with price sensitivity (–0.55), and
the correlation between innovativeness and the American-made question
was –0.18, while the American-made item correlation with price sensitivity
was 0.21. For women, the innovativeness correlation with price sensitivity
was –0.44, and the respective correlations with the American-made question
were –0.12 and 0.11. Thus, with the possible exception that the relationships
were slightly stronger for men than for women, the conclusion is that sex of
respondent had little effect on the relationships among the other variables.
Gender differences To examine the mean differences between men and women on these scales
several t-tests were computed. These results mirror the correlations shown in
Table II. There was no statistically significant difference in mean scores
between men and women for age or for price sensitivity. Women scored
higher in GPA than men (3.38 versus 3.22; t = 3.38; p < 0.001) and higher in
fashion innovativeness (8.67 versus 7.56; t = 3.98; p < 0.001), and men

168 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997


Price of new products
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Measurement method
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997
scored higher on the American-made question (3.43 versus 3.20; t = 2.36; p
= 0.019). These results show that the women in the sample reported being
more innovative for new fashions and that men expressed a tendency to want
to buy American-made clothing more than the women. The fact that the men
and women differed in mean scores on the fashion innovativeness scale, but
not on the price sensitivity scale, further supports the discriminant validity of
these constructs and their operationalizations. Had these scale items
measured the same construct, the men and women would have differed in
their responses in the same direction.
Discussion
Summary
The central theme of the present study was to assess the relationship
between innovativeness and price sensitivity within a specific product
domain. Management practice, previous empirical studies, and consumer
theory suggested that higher levels of innovativeness would be associated
with lower price sensitivity, and the findings of this study confirmed this
hypothesis. The evidence also supported the discriminant validity of the self-
report measures used to operationalize the variables. This specific finding is
limited to the sample of consumers providing the data, to the specific
measures used to operationalize the constructs, and to the product category
of new fashions. Given the realism of the target category, the reliability of
the measures, and the consistency of the findings with other studies,
however, we may view the results with some confidence in their validity:
product innovators do seem to be less sensitive to the price of new products.
Managerial implications
From the managerial perspective, this finding supports the “skimming”
strategy sometimes advocated for introducing a new product. The lower
price sensitivity of innovators should lead them to pay more for the new
product than later buyers will. Moreover, by carefully tracking the market,
the manager may be able to lower the price of the product as it moves
through the product life cycle to match the price sensitivity of each group of
consumers (early adopters, middle-majority, laggards) as they become the
target segment. Other elements of the marketing mix can be changed as well
to coordinate with price to create an integrated strategy. Moreover, this
finding may be added to the innovators’ profile along with greater product
knowledge, involvement, usage, opinion leadership, and media exposure.
This enriches the diffusion model by providing a more complete and detailed
profile of consumer innovators. Future study in this area should seek to add
yet more characteristics to this inventory.
Another important implication of the study lies in the measurement method
for price sensitivity. Clancy and Shulman (1994, p. 201) point out that
surveys of American managers suggest that only a minority of companies,
estimates are from 12 to 15 percent, do any serious pricing research to
measure or predict price elasticity. They complain (p. 205) that: “Even after
decades of research, researchers haven’t discovered a single ‘price-
consciousness scale’ that measures price sensitivity reliably and works
equally well across different product categories.” We propose that the self-
report method presented in this paper, taken along with the limited evidence
in Goldsmith’s (1996) paper, may be a reliable and valid solution to this
problem. The scale is short, can be easily adapted to different product
categories, and could be used in mail, telephone, and personal interview
survey settings.
169
 Monroe (1990, p. 277) points out that it may be:
difficult to make unequivocal statements about how price elasticity may change
over the stages of the product life cycle. It depends on how the product is initially
priced (which should reflect buyers’ initial sensitivity), whether the product’s
price follows a decreasing or increasing trend over time (which is partly a
reflection of the introductory pricing strategy), the degree to which sellers make
quality improvements over time, and the degree to which buyers perceive real
benefits and therefore value-in-use in the product. The lesson here is that each
product will have its own unique pricing history, and the dynamics of price
elasticity over the product’s life cycle have to be monitored for each product.
Measuring the price sensitivity of individual consumers by means of a multi-
item scale may be useful way to address some of these issues. A valid and
reliable scale would allow researchers to make price sensitivity part of the
profile of specific market segments and to track changes in price sensitivity
for market segments across time. Thus, further refinement and evaluation of
the scale is warranted, based on these findings. Additional research with the
scale needs to be done with realistic consumer populations and different
product categories to further evaluate the scale’s reliability and validity as
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well as its pragmatic usefulness.

Managerial concern Cahill (1995) presents several examples of managerial concern, including
the assessment of customer satisfaction and customer reaction to changes in
the marketing mix. Among these concerns is assessing the price sensitivity
of customers and how price changes affect customer product perceptions and
customer satisfaction. If the self-report of price sensitivity described here
helps answer some of these questions it could become a useful tool for
researchers seeking to answer managerial questions simply and easily.
Moreover, some product categories feature wide ranges in price, such as
fashionable clothing, while others seem to have narrower price spreads, such
as CDs. The influence of price sensitivity on buyer behavior may vary as we
move from product fields with wide variability to those with little variability.

Theoretical implications
Product category Key questions remain to be answered. For example, why are innovators less
innovators sensitive to price than later buyers? One possible answer is that product
category innovators are likely to be more involved in the product category
(Bloch, 1986; Flynn and Goldsmith, 1993c; Goldsmith and Flynn, 1995).
Their greater enthusiasm and interest in the product field, as the fashion
innovators in the present study likely have high interest in new fashions and
are excited by them, leads them to demand the new products in the category
regardless of higher price. This is most likely because the satisfaction of
owning and consuming the new products yield greater psychological and
social satisfaction (“greater utility”) to the innovators than they do for later
buyers. This hypothesis should be investigated in future research. This
information would be valuable for both consumer theorists and marketing
managers in their quest to gain a better understanding of the relationship
between innovativeness and price sensitivity. Clancy and Shulman (1994)
argue that heavy users are price sensitive. But innovators are both heavy
users and price insensitive. How can we explain this contradiction? It may
be that for new products, where there are few substitutes, and little available
knowledge, consumers become price insensitive, but for older products,
where there are substitutes and a wider experience base, they become more
price sensitive. Research with the proposed self-report scale and a variety of
products could help resolve this apparent contradiction and provide an
empirical basis for more veridical models of buyer behavior.

170 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997


Determinants of price
sensitivity
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JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997
Methodological implications
The self-report scale of price sensitivity presented here should be further
evaluated for its reliability and validity using other product fields, old as
well as new products, using more diverse samples of consumers. The
findings of the present study, when combined with those reported by
Goldsmith (1996), suggest that it is a psychometrically sound instrument that
could be used in a variety of survey settings to measure price sensitivity.
Conclusion
There are important questions, of both theoretical and managerial interest,
concerning the determinants of price sensitivity and its relation to other
consumer behaviors. How are product knowledge and price sensitivity
related? Can providing more information to consumers via advertising and
promotion make them less sensitive to price? Also, the price-quality issue
remains ambiguous. Sometimes consumers use price as an indicator of
quality and sometimes they do not. Different levels of product knowledge
may account for this divergent pattern, and price sensitivity may also play a
role, with consumers low in price sensitivity less likely to make the price-
quality inference. Finally, how is price sensitivity related to coupon usage?
A reliable and valid self-report scale of price sensitivity could be used to
help answer this question for various product categories and lead to a sound
empirical generalization. Further research with the scale can bear this out.
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(Ronald E. Goldsmith is Professor of Marketing, Florida State University, Tallahassee, Florida,

USA. Stephen J. Newell is Assistant Professor of Marketing, Bowling Green State University,
Bowling Green, Ohio, USA.)

172 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997

 This summary has been Executive summary and implications for managers and
provided to allow executives
managers and executives
Identifying early adopters using price sensitivity measures
a rapid appreciation of
It is almost an article of faith among marketers that innovators are less
the content of this
bothered about price. Such a belief justifies high early prices as a way of
article. Those with a
generating larger early profits to offset development costs. However, there is
particular interest in the
a challenge to be faced in establishing when it is appropriate to reduce
topic covered may then
prices so as to pull in the less committed. If the high price premium
read the article in toto to
continues then you may end up being trumped by a later entrant or finding
take advantage of the
yourself tied to a restricted and fickle market of early adopters.
more comprehensive
description of the
Goldsmith and Newell look at this vexed question and establish that early
research undertaken
adopters are indeed less price sensitive than others, thereby reinforcing the
and its results to get
price-skimming strategy for new products. However, they also identify the
the full benefit of the
pricing issue facing marketers over the longer term even though they shed
material presented
little light on how to manage the pricing strategy over a product life cycle.
The authors also ask why it is that innovators are less price sensitive when
studies of heavy users reveal price sensitivity. As a sub-group of heavy users,
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the innovators do not fit the expected pattern with other factors influencing
their decision.

Innovators and early adopters form a key audience for those launching a
new product. After all it’s these people who will take the plunge and indulge
themselves in the new product or service. Marketers need to address their
efforts to identifying such people and working out how to communicate with
them most effectively.

For product or service categories well served by specialist media, such

avenues represent the best way forward. And, since such media often have
mailing lists, product card packs, exhibitions and other promotional
opportunities besides the magazine itself, there is the opportunity to widen
the promotional mix in reaching the key target of innovators. There remain,
however, some categories where the innovator is harder to reach since there
are no specialist media. A new microwave steam pudding may be a great
idea but it’s extremely difficult to reach innovators in this sort of market
other than as a part of the whole market.

Perhaps, with the emergence of supermarket loyalty cards and more

collection of personal data on consumer buying habits, we will begin to see
opportunities to reach innovators in nonspecialized consumer markets.

Since new product development represents an area of growing importance to

consumer marketers seeking to maintain competitive advantage there is a
need for planners and researchers to look at how to identify the key
consumers in any product launch – those who will buy it first. Much of the
targeting specificity has gone in creative work rather than media selection
or market segmentation. This should change as methodologies emerge
enabling more precise targeting and a better understanding of consumer
behavior and motivation. The new methodology tested by Goldsmith and
Newell in this research presents an important step forward in allowing a
better targeted product launch.

Certainly the availability of a simple, “psychometrically” sound, method for

assessing price sensitivity and elasticity represents a major advance for

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997 173

 consumer researchers. To date much of the work on price elasticity has
relied on retrospective analysis of sales and assumptions made about the
similarities between markets. If a robust approach to assessing price
sensitivity ahead of product launch exists then marketers can begin to use it
as a way of segmenting their market. Indeed, if a lack of price sensitivity is a
feature of the early adopter then it is a means of identifying such people
especially when combined with the knowledge that most heavy users are
price sensitive. On this basis, any heavy users of a product category who
reveal themselves as less sensitive to price are highly likely to be innovators
when it comes to new product adoption.

Clearly there remains much to be done before the approach proposed by

Goldsmith and Newell is widely used. Not only does there need to be an
acceptance that market analysis represents a vital element of new product
research but marketers need to become more familiar still with the use of
research methodologies and techniques.

Finally, the marketer must consider, in any research, the answer to the
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question posed by Goldsmith and Newell about when to change the pricing
strategy. It is likely that this will vary, depending on the particular product
category, with some markets having more innovators than others. Planning a
pattern of pricing over a product life cycle should be part of the overall
planning process. Such an approach requires the measurement of price
elasticity and sensitivity over time, not just at the launch stage. Goldsmith
and Newell’s method could prove especially useful in this activity.

(A précis of the article “Innovativeness and price sensitivity: managerial,

theoretical and methodological issues.” Provided by the Cooke Consultancy
for MCB University Press.)

174 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 3 1997

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