Adoption n Diffusion of Innovation

8/13/2019 Adoption n Diffusion of Innovation

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The ADOPTIONand DIFFUSION of

Innovations


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The Adoption Process

KNOWLEDGE PERSUASION DECISION

IMPLEMENTATIONSCONFIRMATION

TIME

The decision stages that focus on internal

consumer influences (psychological/social)that lead to innovation acceptance/rejection

A micro process-1948, Hybrid corn seed study Penn State


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Steps in the

AdoptionProcess


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Variations from the NormalAdoption Curve


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The DIFFUSION PROCESS is the spread of aninnovation from its source to the ultimate

consumer that focuses on external forces.

The key elements of Diffusion are:(1) an innovationis

(2)Communicatedthrough certain channels(types of change agents & information)

(3) Over time

(4)Among the members ofa social system(types of audiences, community).

A macro process


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Case in Point:irbus versus Boeing


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2.5% Innovators

13.5% Early Adopters

34% Early Majority34% Late Majority

The Diffusion Process h sidentified adopter typologies that are

linked to marketing strategies


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Diffusion Process,Adopter Categories

INNOVATORS - are first to buy andtypically described as venturesome,

younger, well educated, financiallystable, and willing to take risks.

EARLY ADOPTERS - are local opinionleaders who read magazines and whoare integrate into the social systemmore than the average consumer.


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EARLY MAJORITY - solid, middle-classconsumers who are more deliberate

and cautious

LATE MAJORITY - described as older,

more conservative, traditional, andskeptical of new products



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Laggards Resist change

Conservative

Like tradition Often older & lower in

socioeconomic status

Nonadopters

Refuse to change

OK, we will

buy X.

If I have

to buy itI will.

No way!



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Diffusion of innovation research traces the spreadof product acceptance across its product life cycle

Total Industry

Profit

+

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

Total IndustrySales

Stage customers:

Early Adopters Early Majority Majority Laggards


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THE DIFFUSION PROCESSHow different segments of the market act

P

ERCENTO

FTOTALM

ARKET

TIME

EARLYAD

OPTERS-13.5%

LATEMAJORITY-34%

LAGGARDS(INCL

UDINGNONADOPTER

S)-16%

These phases of adoption are important because they are linkedto different marketing strategies during the product life cycle.


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Life-Style Characteristics ofInnovators and Non innovators

Characteristics Innovators Non innovators

Product Interest MORE LESS

Opinion Leadership MORE LESS Personality:

Dogmatism OPEN-MINDED CLOSE-MINDED

Social Character INNER-DIRECT OTHER-DIRECT

Category Width BROAD NARROW

Venturesome ness MORE LESS

Perceived Risk LESS MORE


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Life-Style Characteristics ofInnovators and Noninnovators

Characteristics Innovators Noninnovators

Purchase and Consumption Traits:

Brand Loyalty LESS MOREDeal Proneness MORE LESS

Usage MORE LESS

Media Habits:Magazine Exposure MORE LESS

Television LESS MORE

Specialized Magazine MORE LESS


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Life-Style Characteristics ofInnovators and Noninnovators

Characteristics Innovators Noninnovators

Demographic Characteristics:Age YOUNGER OLDER

Income MORE LESS

Education MORE LESS

Occupational Status MORE LESS Social Characteristics:

Social Integration MORE LESS

Group Members MORE LESS


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is influenced by

* Competitive Intensity (+)* Good Supplier Reputation (+)

* Standardization of Technology (+)

* Vertical ( ) Channel Coordination (+) ($) Resource Commitments (+)

Brand Loyalty

Speed of Diffusion


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Communication is a Key elementin the Diffusion Process

Two types of communication in diffusion are:

1. Communications in theheterophilousgroups(groups outside an individuals personal

network)2. Communications in thehomophilous groups.

(i.e., peer and family)


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Communication in the DiffusionProcess

1. Trickle Up and Trickle Down

The transmission of influence between socioeconomic

groups can be described as a trickle-downprocess fromhigher to lower groups and a trickle-upprocess from

lower to higher groups. Traditionally, the view has been

that diffusion occurs in a trickle-down manner. The

transmission of influence occurs occasionally in a trickle-up direction, however. For example, innovators and early

adopters of jeans and of bluegrass and rock music were

those in lower socioeconomic classes.


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Communication in the DiffusionProcess

B. Trickle AcrossThe post-World War II period produced a levelingeffect in socioeconomic status, making trickle-down and trickle-up effects less relevant. Massmedia also rapidly communicate information on

innovations to all classes. A more likely process ofdiffusion is one that occurs across groups,regardless of socioeconomic status, known as atrickle-across effect.

C. Internet

Will the Internet result in a MoreRapid Rate of adoption & diffusion?


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Communication Flows

Two-Step Flow of Communication

COMPANYMESSAGE

OPINIONLEADERS

TARGET AUDIENCES


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Positions of Status

OPINION LEADER - one who occupies a position ofinformalinfluences over the attitudes and overt behaviorof others. Opinion leadership is earnednot assumed.

CHANGE AGENT - one who occupies a professionalposition of formalinfluence associated with a given roleof status. Change agent status is assumed, notnecessarily earned

FOLLOWER - not a passive patsy. Actively seeksinfluence.


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Two-Step Flow of Communicationand Adopter Categories

Early

adopters

Innovators Early

majority

Company Message

from mass media

Product Category

Opinion

leader(s)

Potential target

audiences

Opinion recipient 1

Opinion recipient 2

Opinion recipient 3


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Characteristics of Opinion Leadersin contrast with their followers

More like, than unlike, their followers

More technically competent

More socially accessible

More cosmopolitan

More innovative (receptive to change)

Higher media exposure (more informed)

Higher social status

More conformist with social norms and values


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Generalized RelationshipsWith Innovativeness

Innov- Early Early Late Laggards

ators adopters majority majority

High

Independent

variables

Low

Dogmatism,

Fatalism

Income

variables

Opinion

leadership


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Industrial Firms,Diffusion of Innovation

Factors related to innovativeness among industrial firms

1. Favorable attitude toward scienceas witnessed bystatus given scientists in firm.

2. Cosmopolitanismsas indicated by worldwide travel ofexecutives and lack of secretiveness.

3. Adequate information sources

(a) high subscription levels to scientific journals

(b) high degree of contact with universities4. High growth rate (sales)

5. Lack of shop-floor resistance to innovationSource: Journal of Industrial Economics (1959)


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The Winds of Change

0

1000

2000

3000

4000

5000

6000

7000

1999 2000 2001

Germany

Spain

Denmark

U.S.A.

Total Power Capacity , in Megawatts

Johnson, Keith. In Energy Hunt, Is EU Tilting at Windmills? WSJ, A13.


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Characteristics That Encourage andDiscourage Diffusion

Encourage

1. Relative

advantage2. Compatibilitywith

past usage

3. Simplicityof use

4. Observability

5. Trialability

6. Divisibility

Discourage

1. Value barrier

2. Usage barrier3. Complexity

4. Risk barrier


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Marketing Value Added(Shareholder investment & Co.s current value)

WINNERS: Pharmaceutical Companies

- Innovation against diseasedisability, & death

- new tools to prolong life & wellness

RELATIVE ADVANTAGE- is an enhancedbundle of benefits or clear-cut advantages

over existing offerings (+)

Characteristics of New Products


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Marketing Value Added ???LOSERS: Ford, G.M., Chrysler,

1950 - cars moved people from A to B

1995 - high in car mileage & quality ,cars still basically move people fromA to B (No fundamental change)

(Electric utilities?)


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Compatibilitywith existing habits,values and consumption behavior,

similar usage as existing products

Characteristics of NewProduct Success


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Trial abilityexperience orsee the newness

Easily tested

Low risk

Inexpensive

No special equipment

Free samples or coupons

Demo days

Sample size



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(wsj 23 July 85)

Women Buying a New Food ProductWithin the Last Month, Their Reasons:

0%

5%

10%

15%

20%

25%

30%35%

40%

45%

like trying

coupon

price

interest

advertising


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OBSERVABILITY - is the opportunity forbuyers to see the newness (+)

COMPLEXITY - is a disadvantage fornew productswhich slows diffusion and

may be offset by simplifying usage orthrough extensive education (-)



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Observability ??? (Field test validity)


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Why Some New Products Fail andOthers Succeed

Unreal time pressure& vested interest groups

Absorption in process: lack of objectivity, courage (risk)

Product Deficiencies(Technical or Design Problems)

Inadequate research(Overestimation of Market Size)

Poor Execution of Plans(Promotion, Distribution,Price, poor timing, etcetera)

Result: No differential advantage &Failure to Meet Customer Needs

80 to 90% Fail. Why?

Absolute failure Relative failure


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#1. Performance & Price

New product failures generally offer the same or

worse performance than competing productswith the same or higher price

#2. Inadequate Market Analysis

Offer a unique benefit (a differential advantage)

Solve a consumers problem or providean

t it d

New Product Success

Why Some New Products Fail andOthers Succeed

80 to 90% Fail. Why?

Documents

Adoption n Diffusion of Innovation