Modeling the Dynamic Decision of a Contractual Adoption of a Continuous Innovation in B2B Market

Modeling the Dynamic Decision of a Contractual Adoption of a Continuous Innovation in B2B Market BY YINGGE QU JULY. 18. 2014 Committee Chair: Dr. V. Kumar Major Academic Unit: Regents’ Professor, Richard and Susan Lenny Distinguished Chair Professor in Marketing, and Executive Director, Center for Excellence in Brand & Customer Management A continuous service innovation such as Cloud Computing is highly attractive in the business-to-business world because it brings the service provider both billions of dollars in profits and superior competitive advantage. The success of such an innovation is strongly tied to a consumer’s adoption decision. When dealing with a continuous service innovation, the consumer’s decision process becomes complicated. Not only do consumers need to consider two different decisions of both whether to adopt and how long to adopt (contract length), but also the increasing trend of the service-related technological improvements invokes a forward-looking behavior in consumer’s decision process. Moreover, consumers have to balance the benefits and costs of adoption when evaluating decision alternatives. Consumer adoption decisions come with the desire to have the latest technology and the fear of the adopted technology becoming obsolete. Non-adoption prevents consumers from being locked-in by the service provider, but buying that technology may be costly. Being bound to a longer contract forfeits the opportunity to capitalize on the technological revolution. Frequently signing shorter contracts increases the non-physical efforts such as learning, training and negotiating costs. Targeting the right consumers at the right time with the right service offer in the businessto-business context requires an efficient strategy of sales resource allocation. This is a “mission impossible” for service providers if they do not know how consumers make decisions regarding service innovation. In order to guide the resource allocation decisions, we propose a complex model that integrates the structural, dynamic, and learning approaches to understand the consumer’s decision process on both whether or not to adopt, and how long to adopt a continuously updating service innovation in a B2B context.