Relative Advantage

Definition

Relative advantage refers to the degree to which an innovation or new product is perceived as being better than the product it supersedes or the existing alternatives. It is a key factor that influences the adoption and diffusion of new products from the customer's perspective.

5 Must Know Facts For Your Next Test

1. Relative advantage is one of the five key characteristics of innovations that influence the consumer adoption process.
2. Customers are more likely to adopt a new product if it offers a clear and significant advantage over existing alternatives.
3. Relative advantage can be measured in terms of economic factors, such as cost savings, as well as social and personal factors, such as prestige and convenience.
4. The greater the perceived relative advantage of a new product, the more rapidly it will be adopted by consumers.
5. Relative advantage is particularly important in the early stages of the consumer adoption process, as it helps overcome initial resistance to change.

Review Questions

• Explain how the concept of relative advantage relates to the adoption of new products from a customer's perspective.
  • From the customer's perspective, relative advantage is a crucial factor in the adoption of new products. Customers are more likely to adopt a new product if they perceive it as offering a clear and significant advantage over existing alternatives. This advantage can be measured in terms of economic factors, such as cost savings, as well as social and personal factors, such as prestige and convenience. The greater the perceived relative advantage, the more rapidly the new product will be adopted by consumers, as it helps overcome initial resistance to change.
• Describe how the concept of relative advantage influences the different stages of the consumer adoption process for new products.
  • Relative advantage is particularly important in the early stages of the consumer adoption process. In the awareness and interest stages, relative advantage helps customers understand the benefits of the new product and how it is superior to existing options. In the evaluation and trial stages, relative advantage becomes a key factor in the customer's decision to adopt the new product. If the perceived relative advantage is high, customers are more likely to move forward in the adoption process. Finally, in the adoption and post-adoption stages, relative advantage can influence the customer's continued use and recommendation of the new product to others.
• Analyze how the concept of relative advantage interacts with other characteristics of innovations, such as compatibility and complexity, in the consumer adoption process.
  • Relative advantage does not exist in isolation; it interacts with other characteristics of innovations that influence the consumer adoption process. For example, the relative advantage of a new product may be diminished if it is perceived as being incompatible with the customer's existing values, past experiences, and needs (low compatibility). Similarly, if a new product is perceived as being highly complex and difficult to understand and use, the relative advantage may not be enough to overcome the customer's hesitation to adopt. Conversely, if a new product offers a clear relative advantage and is also highly compatible and easy to use, it is more likely to be rapidly adopted by consumers. Understanding the interplay between relative advantage and other innovation characteristics is crucial for effectively marketing and diffusing new products.

Related terms

Compatibility: The degree to which an innovation is perceived as being consistent with the existing values, past experiences, and needs of potential adopters.

Complexity: The degree to which an innovation is perceived as being difficult to understand and use.

Observability: The degree to which the results of an innovation are visible to others.