ANALYSIS OF CONSUMERS BEHAVIOR TOWARDS NEW TECHNOLOGY

USING PERCEIVED CHARACTERISTICS OF INNOVATION METHOD (PCI) A

MARKET STUDY OF RESIDENTIAL LED LIGHTING

Junaidi Sinaga, ST.,MM.,MBA1, Grace Pramitha 2

Swiss German University, Indonesia
junaidi.sinaga@sgu.ac.id

ABSTRACT (ENGLISH)
In recent years, new innovations have been invented to support the idea of energy
conservation, one of the most renowned technology is Light Emitting Diode (LED) lights to
replace the commonly used Compact Fluorescent Lamp (CFL). Comparing to CFL, LED
lights not only result in less light pollution and longer lifetime but they also consume less
electricity, and therefore in the extreme sense less fossil fuel will be taken from the earth.
LED technology has been around since 1962, but it was not until recently that the technology
matured. The advancement of the technology enable LED to be applied in various
applications; aviation lightning, traffic signals, automotive lighting, laboratories, billboards
and other communication technologies.
This study is significant as it offers LED light retailers opportunity to better
understand the market awareness, perception and consideration. It is also expected to give
some inputs on appropriate marketing strategy that can be implemented to penetrate market.
Last but not least, this study shall give a model of understanding in-which innovationcharacteristics strongest influence the intention to use the innovation.
The purpose of this research is to investigate the residential-market awareness level
towards LED lights and to identify which innovation-characteristics (PCI) that has significant
influences over the potential adopters or intention to use (adopt). The data collection,
involved the distribution of 300 questionnaires to people with interest to purchase light bulbs
for their home; out of the 300 questionnaires, only 103 data can be processed using SPSS
ver.16 for both descriptive and statistical analysis.
The result shows that the awareness level for household LED lights innovation is very
low, comparing to the awareness level of LED light technology. All the observed PCIs
(relative advantage, compatibility, image and cost) have significant direct influence to
attitude and indirect influence towards the intention to use. Amongst the variable,
Compatibility has the strongest influence followed by Cost and latter Relative Advantages
and last Image. PCIs can be predictors for the intention to use the innovation.
Keywords, Diffusion of Inovation, LED Lights, Energy Efficiency, PCI, Marketing Mix,
Lauterborn 4Cs

ABSTRAKSI (INDONESIA)
Beberapa tahun belakangan ini, inovasi baru telah diciptakan untuk mendukung
gagasan penghematan energi , salah satu teknologi yang paling terkenal adalah Light
Emitting Diode ( LED ) yaitu, lampu yang menggantikan lampu umum digunakan saat ini,
yaitu, Compact Fluorescent Lamp ( CFL ). Secara garis besar dibandingkan dengan CFL,
lampu LED tidak hanya mengurangi tingkat polusi akan tetapi mengkonsumsi lebih sedikit
energi, dan karena itu dalam arti yang lebih luas akan lebih sedikit bahan bakar fosil yang
diambil dari bumi . Sebenarnya teknologi LED telah ada sejak tahun 1962, akan tetapi
teknologi in baru saat ini mencapai kematangannya untuk dapat dimanfaatkan secara luas.
Kemajuan teknologi LED sebelumnya sudah diterapkan diterapkan dalam berbagai aplikasi,
penerbangan, sinyal lalu lintas, lampu otomotif, laboratorium, billboard dan teknologi
komunikasi lainnya.
Studi ini sangat penting karena memberikan pengecer lampu LED kesempatan untuk
lebih memahami tingkat kesadaran pasar, persepsi dan pertimbangan-pertimbangannya.
Dengan demikian akan dapat memberikan masukan pada strategi pemasaran yang tepat untuk
meraih pasar . Terkahir, penelitian ini akan memberikan pemahaman mengenai karakteristik
inovasi yang mana yang akan mempengaruhi keinginan pasar untuk menggunakannya.
Tujuan dari penelitian ini adalah untuk mengetahui tingkat kesadaran pasar lampu
LED untuk pangsa pasar dan untuk mengidentifikasi karakteristik inovasi (PCI) yang
memiliki pengaruh signifikan atas potensi adopsi atau niat untuk menggunakan (mengadopsi)
produk inovasi tersebut . Pengumpulan data, meliputi pembagian kuesioner kepada 300 orang
dengan minat untuk membeli bola lampu untuk rumah mereka, dari 300 kuesioner , hanya
103 data dapat diolah menggunakan program SPSS ver.16 untuk analisis deskriptif dan
statistik
Hasilnya menunjukkan bahwa tingkat kesadaran pasar rumah tangga akan inovasi
lampu LED sangat rendah , dibandingkan dengan tingkat kesadaran teknologi lampu LED.
Semua PCI diamati (keuntungan relatif, kompatibilitas, kesan dan biaya ) mempunyai
pengaruh langsung yang signifikan terhadap sikap dan mempunyai pengaruh tidak langsung
terhadap niat untuk menggunakan . Di antara variabel-variabel tersebut di atas, kompatibilitas
memiliki pengaruh terkuat diikuti oleh biaya dan keuntungan relatif, dan kesan memiliki
pengaruh yang terkecil. PCI dapat juga menjadi prediktor untuk niat untuk mengadopsi suatu
inovasi.
Kata Kunci , Difusi Inovasi , Lampu LED , Efisiensi Energi , PCI , Bauran Pemasaran ,
Lauterborn 4C

INTRODUCTION
Electricity crisis is no longer a threat, but has become a valid issue for Indonesia. In
November 2009, the president of Indonesia confirmed this with an explicit expression,
Indonesia is facing a major electricity crisis (Vivanews.com). The impact of this electrical
crisis has been obvious over the years by the endless increment of TDL (tariff dasarlistrik)
that makes electricity quite costly. Many believe that there is a smart solution for this
troublesome issue; conservation.
Electricity Conservation LED Lights Innovation.
Electricity conservation is an attitude of efficient electricity consumption. More
efficient usage of electricity will minimize the environment damage, and people may benefit
from less electricity charges. The main idea of electricity conservation is to still enjoy the
privilege of lights and other electrical devices, but with a more responsible and efficient
usage. In recent years, new innovations have been invented to support the idea of electricity
conservation; one of the most renowned technologies is Light Emitting Diode (LED). LEDs
are solid light bulbs which are extremely energy-efficient;retrofitting the commonly used
Incandescent and Compact Fluorescent Lamp (CFL). In comparison of LED to Incandescent
and CFL, not only it contains no harming mercury usage, and a much longer lifetime it also
consumes significantly less electricity.
The electrical usage of typical household, and lightning is accounted for the second
largest electricity consuming appliances for home, and Energy Efficiency and Conservation
Clearing House Indonesia (EECCHI) believes that Indonesian households are accounted for
approximately 11% of the total Indonesia energy consumption.Moreover, Indonesian
households are claimed to be the primary light consumer;

AsosiasiIndustriPerlampuanListrik Indonesia (Aperlindo) researchshows that 64% of

the light users in Indonesia comes from the households. The large usage of lights in
households gives the opportunity for asignificant impact if LED retrofit is applied. Aside
from the advance technology of LED lights (comparing to other traditional light sources), it
has not manage to dominate the market. PT. Philips Indonesia, one of the major lightning
players confirmed that the usage of CFL dominates Indonesia houses and the usage rate is
close to 65% (Kompas). LED which has a better efficiency and more benefits however is
very raw to the Indonesian home market; in 2011 LED only grow for a mere 3%. From the
discussed trends and phenomena above, clearly there is a huge opportunity for LED lights to
diffuse into the household sector. With the electricity crisis waiting ahead and the rising
awareness of electricity conservation in households, retrofit of LED lightsbecome the
alternative solution. The market however, is not responding to LED lights asaggressively as
desired; thus motivate the researcher to choose this subject as the core of the study.
Research Problems
According to LED retailers1, despite all the benefits being offered and its modern
technology, LED lights currently have rather low demand comparing with other types of
lights (CFL and incandescent). All three LED retailers confirmed that residential sector has
the largest potential for LED retrofit but ironically it has the least demand for the innovation.
In regards of reasoning, two out of three supposed it is a result of LED higher price; but the
third retailer argued that market unawareness lead to the undersized demand. Due to limited
resources and time constraint, the LED retailers do not attempt to investigate the real market
perception and wait for the market to adopt the innovation instead. An opportunity for
conducting the research arises as problem been identified: The low demand for LED lights in
residential market.

Based on interview session with the author

Research Purpose
The main purpose of this study is to investigate the residential-markets awareness
level towards LED lights. The second purpose is to identify which innovation-characteristics
(PCI) that strongly influences the potential adopters intention to use (adopt).
Significance of Study
This study is significant for four reasons: (1) the study offers an opportunity for the
LED retailers to have a greater understanding in regards to its market awareness, perception
and considerations (2) it is expected that this study offers some applicable inputs and
recommendations regarding the appropriate strategy for marketing LED lights into residential
market (3) provide a model of understanding in which innovation-characteristics strongest
influence the intention to use the innovation (adopt).

LITERATURE REVIEW
LED Technology Background
In 1950s, the firstLED was producedby British scientists who discovered that when
semiconductor gallium arsenide is subjected into a current, it emits low-level infrared light.
The first LED had properties similar to those of a transistor: high tolerance for shock and
vibration, and a long operating life(U.S. office of Energy Efficiency and Renewable
Energy, 2011). Though, the first LED has a low efficiency level of approximately only 1
lumen/watt; for four decades after the first LED generation the researchers have significantly
improved this technology. Todays LED commercial packaged efficiency level has
significantly awed the world by reaching as high as 124 lumen/ watt2, which exceeds the
efficacies of most incumbent technologies (DOE (c), 2010).

A Lumileds cool white LED (LXML-PWC1-0120) reached 124 lm/W in 2010.

Advantages of LED lights

Despite the facts that incandescent and fluorescent lamps still dominate the light
sources, LEDs have offered several potential advantages over the light-source dominators,
such as:
1. Lumens-Efficacy
2. Long Life-span
3. Environmentally friendly and safety
4. Durability
Diffusion of Innovation
Rogers diffusion of innovation theory is the most appropriate and relevant concept to
investigate technology adoption, indeed much diffusion research involves technological
innovations so Rogers (2003) usually used the word technology and innovation as
synonyms (Sahin, 2006). The main challenge in innovation is how the market embrace the
change and accept the innovation; adoption. Rogers (2003) defines adoption as the decision
of any individual or organization to make full use of an innovation as the best course of
action available (p. 177), and he refers diffusion as the process in which an innovation is
communicated through certain channels over time among the member of a social system
(p. 5). Rogers Diffusion of Innovation has four key elements: innovation, communication
channel, time and social system.Of these elements, diffusion theorys main focus is on the
means by which the information of the innovation is being spread within the social system
through mass media or interpersonal communication and resulted in the speed and shape of
the diffusion curve (Rogers, 2003; Gatignon& Robertson, 1985; Mahajan, Muller & Bass,
1990).

Innovation
Innovation is described as an idea, practice, or project that is perceived as new by an
individual or other unit of adoption (Roger, 2003, p. 12). One type of new product
innovation is dynamically continuous innovations; it involves changes in technology but is
being use in the same way as the predecessor, the buyers can easily understand the product
idea (Cowan, 2011). LED lightning adopts a totally new technology (LED) but is being apply
into the old concept of light bulb, thus LED lightning is under dynamically continuous
category of innovation. Rogers believed that innovation adoption consequences obstacle of
uncertainty creation; consequences are the changes that occur in an individual or social
system as the result of adoption or rejection of an innovation (Rogers, 2003, p. 436).
Innovation-diffusion process is described by Roger (2003) as uncertainty reduction process
(p. 232), and he suggests five attributes of innovation (relative advantage, compatibility,
complexity, trialability, observability) that he believe to reduce innovation uncertainty.
Relative advantage is defined by Rogers (2003) as the degree to which an innovation
is perceived as being better than the idea it supersedes (p. 229). This refers to the potential
adopters perception regarding the innovation to perform better and is superior to the
alternative products, concept and services.
Compatibilityand relative advantage are the only two attributes of innovation that
refer to the innovation itself (the product). Compatibility is the degree to which an
innovation is perceived as consistent with the perceiving values, past experiences and need of
the potential adopters (Rogers, 2003, p. 15).
Complexity is defined by Rogers (2003) as the degree to which the innovation is
perceived as relatively difficult to understand and use (p. 16). Complexity is the only
attributes that have negative relation with adoption rate of innovation, the higher degree of
complexity in an innovation the slower adoption rate of the innovation is.

Trialabilityrefers to the degree to which an innovation may be experimented with on

a limited basis (Rogers, 2003, p. 16). Trialability has a positive relation with adoption rate
of innovation, the more innovation are tried the faster adoption rate of the innovation.
Observability is the last innovation attribute that has positive correlation with
adoption rate of innovation. Observability is defined as the degree to which the results of an
innovation are visible to other (Rogers, 2003, p.16).
Aside from Rogers approach of innovation-characteristic Tornatzky and Klein (1982)
offers five additional innovation characteristics of: (1) cost, (2) communicability, (3)
divisibility, (4) profitability, and (5) social approval. Tornatzky noted that divisibility is
similar to trialability and communicability is related to observability. In his separate research,
Moore (2001) claim that Tornatzkys profitability characteristic is closely related with
relative advantage and so he suggested that the real additional characteristics are: cost and
social approval.

METHODOLOGY
This paper combines exploratory, descriptive and causal research in sequence. The
exploratory research is executed in the early phase to help identify the research problem
faced in LED light industry. This is also a causal study as the research intention is to
investigate how innovation-characteristic variables influenced (cause-effect) the decision to
adopt (purchase) LED lights in residential sector.
Data Collection Method
For qualitative method; interviews, observations and focus group discussions are chosen,
and questionnaires for quantitative method. All data are being collected as a cross-sectional
study, and are collected at one-point in time, without examining the time interval difference
effect towards the variables.

Research Framework

The research model in this study is an illustration of the original concept by Rogers
(1995) concerning the Adoption of Technology. The model suggests that Perceivedcharacteristics of Innovation (PCI) ought to affect the attitude of the potential adopters
towards a particular innovation which in case is LED lights. Furthermore, attitude should
then affect the intention to use or adopt the innovation.
Research Questions
Question #1

: What is the current market awareness level towards LED house lightning
innovation?

Question #2

: Does PCI (relative advantage, compatibility, image and cost) have influence

over the potential markets attitude for LED household lights innovation?
Question #3

: Does attitude have any influence towardsthe intention to use (adopt)

LED lights in residential market?

Research Hypotheses
Awareness
Hypothesis 1

Residential market has low awareness towards LED house lightning

innovation (descriptive hypothesis).

Relative Advantages
Hypothesis #2

The relative advantage of using LED light at home does significantly

affect users attitude towards household LED light.

Hypothesis #3

The relative advantage of using LED light at home does positively

affect users attitude towards household LED light.

Compatibility
Hypothesis #4

The compatibility of using LED lights at home with the adopters

values does significantly affect users attitude towards household
LED light.

Hypothesis #5

The compatibility of using LED lights at home with the adopters

values does positively affect users attitude towards household LED
light.

Image
Hypothesis #6

The image of using LED light in household does significantly affect

users attitude towards household LED light

Hypothesis #7

Theimage of using LED light in household does positively affect

users attitude towards household LED light.

Cost
Hypothesis #8

The cost of using LED light in household does significantly affect

users attitude towards household LED light.

Hypothesis #9

Thecost of using LED light in household does negatively affect

users attitude towards household LED light.

Attitude
Hypothesis #10

The attitude towards household LED light does significantly affects

the intention to use (adopt) LED light at home.

Hypothesis #11

The attitudetowards household LED lightdoes positively affects the

intention to use (adopt) LED light at home.

RESULT
This study relies on questionnaires to collect data, and there are two phase in the distribution
of questionnaires; (1) pre-test to test the validity and reliability and (2) post-test. For pre-test,
30 questionnaires were distributed to potential respondents to test the validity and reliability,
as for the post-test 300 questionnaires were being spread. For the descriptive analyzing, all
300 respondents data is processed and analyzed, but in the later more complex analysis, only
103 data are processed due to the awareness qualification. While 30 samples of the pre-test
were further processed using SPSS ver.16, only 103 samples are being further processed for
the. Following are the result

Summary of Validity and Reliability test for 6 variables and indicators

Source: Author ,SPSS ver.16 (2012) Pre-test Questionnaires

Variables

Indicators

(Correlation
Coefficient)

r
Relative
Advantage
(RA)

Compatibility
(CP)

RA1
RA2
RA3
RA4
CP1
CP2
CP3
CP4

Image
(IM)

Cost
(CS)

Attitude
(A)

Intention to
Use
(IU)

IM1
IM2
IM3
CS1
CS2
AT1
AT2
AT3
AT4
AT5
AT6
IU1
IU2
IU3

0.727
0.708
0.585
0.464
0.416
0.430
0.705
0.518
0.729
0.765
0.545
0.660
0.660
0.521
0.558
0.440
0.647
0.645
0.699
0.619
0.433
0.529

(Cronbach's Alpha)

N of Items

0.799

0.723

0.813

0.794

0.806

0.704

DISCUSSION & ANALYSIS

The respondents are female and male ranging age from <30 years old to >60 years old
that have the interest and need to purchase lights for home. The descriptive analysis questions
cover the general respondent profile, decision maker in home light purchasing, budgets for
lights at home, preference factors in purchasing lights for home, awareness of LED lights and
innovation perception towards LED lights and LED lights for home, and the usage of LED
lights at home.
Awareness
The low awareness level of LED lights for household is an indication that there is not
enough information spread in regards to LED lights for household. The reason for such low
awareness level may be caused by the limited stores that provide the product, and even when
they manage to supply the product, not enough information is transferred to the potential
buyers. Since LED lights for home usage is a new product, it takes time before the market
comes to respond, the transition time is what may be faced by LED lights for household.

Compatibility towards Attitude

The result shows that compatibility has significant relationship with attitude, and it is a
positive relationship. In fact, according to the study result shows that compatibility is the
most significant factors that affect the attitude (r=0.518) The result implies that peoples
attitude towards an innovation (LED lights for home) will elevated whenever they believe
that the innovation is in accordance to their current values, habits, beliefs and habits
Cost towards Attitude
The result shows that cost has significant relationship with attitude, and it the
relationship takes form as a negative relationship. The study result shows that cost is the
second most significant factors that affect the attitude (r=0.283). The result implies that when
people perceived a higher cost for the innovation, the less likely they will regard the
innovation with a good attitude. Cost being the second most influencing factor to the attitude
is an illustration of the market characteristic that have strong cost-consciousness towards
product.
Relative Advantage towards Attitude
The result shows that relative advantages do have significant relationship with
attitude, and it is a positive relationship. Relative advantage is indeed the third strongest
correlated factor that affects the attitude of the market towards (r=0.232) LED lights for
home. The result shows that when people believe that LED lights for home gives them more
benefits such as, longer life-span, more durable, and better energy efficiency, they will have
better Attitude towards the LED lights for home.
Image towards Attitude
The result shows that image has significant relationship with attitude, and it is a
positive relationship. Nevertheless, image has the weakest correlation with attitude (r=0.207),
an indication that though image has significant positive relationship; it has the least impact

towards attitude comparing to other PCIs.

The result implies that when an innovation

manages to create a good image for the people, the innovation will be regarded with better
attitude.
Attitude towards Intention to Use
From the first regression we understand that all the observed PCI (relative advantages,
compatibility, image, and cost) have significant relationship with the attitude. Through the
second regression, the result shows an apparent significant positive relationship of attitude
with intention to use. Approximately 53.7% (r=0.537) of the changes in Intention to Use can
be explained by attitude, when PCI affects attitude and attitude affects the intention to use
LED lights for home, the relations can be simplified as the PCI indirectly affect the intention
to use LED lights for home. The result implies that when people have positive attitude
towards the innovation, is likely to have higher intention to use the innovation.

CONCLUSION AND RECOMMENDATION

Variables Relationship
1. All observed variables in Perceived-Characteristics of Innovation (PCI) which are:
relative advantage, compatibility, image, and cost, are significantly influential on the
respondents attitude towards household LED lights. All PCI variables except cost have
positive relationship with attitude.
2. Attitude has significant positive affect towards intention to use household LED lights.
To maximize the market intention to use household LED lights, one must enhanced the
markets attitude through the PCI. In conclusion, observed PCI variables directly
influence attitude and indirectly influenced the intention to use (adopt) household LED
lights.

Recommendations
There are two forms of recommendations given in this study: (1) Marketing
Recommendations, and (2) Academic Recommendations
Marketing Recommendations
It is widely known that the consumer mostly value energy efficiency as the main
feature in purchasing lights, followed by durability and price. The marketing campaign of
LED lights should really highlight how this new innovation has more significant efficiency
comparing to other traditional light-source.
Cost (Price)
The main reason for those who aware of household LED lights existence but decides
not to use the innovation is the exceeding cost of the innovation. In fact, LED lights do have
higher price comparing to traditional light source. The main reason for its exceedingly high
price is due to the new technology application and imported parts of the production.
The significant demand of LED lights may result in mass production of the lights and
give the advantages in economies of scale that lessen the production cost per unit of LED
light. With mass production of LED lights the cost may fall and the price gap between LED
lights with other traditional light source will likely to close in. .
Convenience (Place)
Another issue faced by household LED lights as is mentioned in chapter 4, is the
scarcity of the product. There is a certain degree of difficulty in locating the stores that sell
LED lights, only a limited number of stores supply this new innovation. It is recommended
that LED lights should be supplied in more convenient places in which people commonly
purchase light-source for their homes. Hypermarkets such as Giant, Carrefour, Hypermart,
and Lotte-mart should supply LED lights in their stores to ease the buying process of the
lights.

Communication (Promotion)
Communication plays the main role in this recommendation to increase the awareness
level of the market towards LED lights for home. As is discussed in chapter 2, to boost the
awareness in the early phase of the innovation infusion, mass media communication works
best. The current situation is that people are not aware of the very existence of LED lights for
home; to encounter the situation there should be more campaign in mass media regarding of
LED lights existence and benefits. Mass media communication channels being recommended
are printed media (magazine and newspapers), television broadcast, outdoor media, and
internets.
Academic Recommendations
For future research with similar topic, there are several recommendations to be noted:
1. The scope of this particular research is limited to only South Tangerang, for
future research perhaps the scope can be widened into larger area to gain a more
thorough understanding of the subject.
2. This study does not emphasize on the marketing mix strategy needed for
household LED lights

, future study might be able to focus the subject into the

appropriate marketing strategy to enhance the diffusion of LED lights innovation.

3. This study only sees from the consumer perception point-of view, future studies
may be able to explore the subject from a certain (LED light) company point of
view to gain a more comprehensive data and understanding of the subject.
4. Due to limited time and resources, this study only rely on questionnaires as the
main data to be processed, future study may need to explore different data
collection method to gain more qualitative value of the data; focus group
discussion.

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