Relative advantage

Relative advantage represents the degree to which consumers notice a new brand like better one than existing alternatives with regard to specific benefits or attributes. Relative advantage is the use of consumer perception and is not a case if a new brand in a new product category is really better through objective standards. The Relative advantage is favorably correlated with an innovation's adoption rate. It means that the greater an innovation's relative advantages assimilate to existing offerings, the quicker the rate of adoption, all other considerations held steady. Conversely, is with a new brand's relative disadvantages:

• the difficulty of learning how to adopt a new product,
• high price

will delay the rate of adoption.

Generally, the relative advantage exists to the extent where a new brand offers:

• the immediacy of reward
• better performance compared to other options or
• savings in effort and time.

Example of relative advantage

For example, with regard to the adoption of hybrid-engine (gas and electric) cars. In spite of the fact that many car owners are affected not only about high fuel prices but also about environmental pollution, and additionally about the payback on the higher-priced hybrid cars stays elusive to many mainstream-market customers. The incremental car's price in $2.000-4.000 relative to the fuel savings over time merely do not make the relative advantage (compared to highly fuel-efficient, a cheaper compact, gasoline-powered car) is compelling enough for many consumers-yet.

High-tech products

Additionally to the dollar price, the ambiguity of high-tech products might carry on to emotional worry, a type of psychic cost. The customer can have uncertainty, fear, and doubt about if the promised benefits will deliver the technology, and the customer will have the capabilities and skills to realize those benefits. A lot of high-tech entrepreneurs trust that their invention is the Holy Grail, the next best thing to sliced bread and a better mousetrap - all rolled into one. However, the factor of relative advantage proposes that it is not sufficient for the inventor to trust that she or he really has a better product. The improvements have to be readily noticed through the customer and be worthy of the money and other costs of adoption.

Rogers definition of relative advantage

The relative advantage of the innovation might influences the adoption decision. Rogers determines relative advantage as "the degree to which an innovation is perceived as being better than the idea it supersedes". This definition might be expanded since advantage relative to other positions might be considered in a broader sense. Definition of Rogers' proposes that the advantage of innovation is just referred to as the situation where this innovation was not available yet .

Limitations of Relative advantage

Relative advantage is an important factor in the adoption of a new product or service, but its limitations should be taken into account. The limitations of relative advantage include:

• The relative advantage of a new product or service may be overestimated by consumers. For example, a new product may be advertised as having a particular benefit, but the actual benefit may not be as great in real life.
• Relative advantage is based on consumer perception, which can be subjective. Consumers may perceive a product differently than experts and may not have the same level of knowledge or understanding of its benefits.
• Relative advantage is only one factor in determining whether a new product or service will be adopted. Other factors, such as innovation, price, and user experience, may be more influential.
• Relative advantage is determined on a case-by-case basis, and can vary from product to product or from market to market. As such, it may not be applicable in all situations.

Other approaches related to Relative advantage

The other approaches related to Relative advantage are:

• Customer value proposition - this approach is used to measure the perceived value of the new product by customers. It compares the perceived benefits of the new product with the cost of the product, and it helps to understand the consumer’s willingness to pay for the product.
• Comparative advantage - this approach focuses on the comparison of a new brand to the existing competitors in the market. It is used to identify the unique benefits of the new brand and how it is different from the existing competitors.
• Market share - this approach is used to measure the success of the new brand in the market. It is done by comparing the sales of the new brand to the sales of the existing competitors.
• Brand loyalty - this approach is used to measure the customer loyalty towards the new brand. It focuses on the customers’ willingness to stick with the brand and its ability to keep customers loyal over a long period of time.

In summary, the other approaches related to Relative advantage are customer value proposition, comparative advantage, market share, and brand loyalty. These approaches are used to measure the success of the new brand in the market and to understand the perceived value of the new product by customers.

Footnotes

Relative advantage — recommended articles

Brand equity measure — Perceived quality — Prestige products — Potential market — Competitive product — Substitute goods — Augmented product — Perceived value — Veblen effect

References

• Brummans A.H., (2006)., Adoption and Diffusion of EDI In Multilateral Networks of Organizations,Rozenberg Publishers
• Mohr J.J., Sengupta S., Slater S.F., (2010)., Marketing of High-technology Products and Innovations, Pearson Prentice Hall
• Shimp T.A., (2008)., Advertising Promotion and Other Aspects of Integrated Marketing Communications, Cengage Learning

Author: Jakub Postawa