A System Dynamics Approach to Implementing Consumer Experience in Technology Adoption Models

Abstract

A System Dynamics Approach to Implementing Consumer Experience in Technology Adoption Models The ethanol-fuel ecosystem presents a common narrative seen in many systems whose components include durable goods with high switching costs to the consumer: Market growth does not match policy expectations and model projections. Indeed, despite federally mandated volumes for ethanol production, current ethanol fuel blends (E10 & E85) are under-consumed. Although the federal policy seeks to provide market assurance by prescribing set volumes of ethanol sales, the regulations are unable to require other system stakeholders to purchase the available fuel, to manufacture vehicles that can use high blend concentrations of the fuel, or to make the fuel available for sale. More broadly, the overall behavior of this complex, multi-stakeholder system—emerging from the complex linkages and feedbacks between the stakeholders who desire different outcomes—is not captured in current system and mental models. This research describes the development of a new system dynamics model to improve understanding of this problem in order to guide improved system design, system behavior expectations, and individual stakeholder decision making and behavior. Past models for the deployment of alternative fuel powertrain vehicles have considered situations in which consumers are limited to a single fuel choice per vehicle, and show that market growth occurs thanks to the buyer's perceived utility only at the time of purchase, and because of positive social diffusion (as peers interact with vehicle owners). Yet the consumer and marketing literature suggests that negative experiences with a technology, resulting from poor post-purchase customer experience, should also be taken into account. By including unfavorable word of mouth as a variable, the new model captures the asymmetric effect of unfavorable consumer perceptions and interactions on market growth--allowing new types of system behavior to be observed. Results show that the removal of potential consumers from the market due to unfavorable word of mouth and direct negative experience can overwhelm marketing efforts, changing virtuous growth into a vicious reinforcement, leading to market collapse. More broadly, the research demonstrates how a system dynamics approach can identify the underlying structure that results in system and stakeholder behavior and how this can help to achieve favorable market outcomes in a complex multi-stakeholder durable good system with high switching costs.