Session 9 - Consumer & Diffusion of Innovation

8/7/2019 Session 9 - Consumer & Diffusion of Innovation

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Prof. Aparna Kanchan

The Adoption Process

&

Diffusion of Innovation

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DiffusionDiffusion

ProcessProcess

The process by

which the

acceptance of

an innovation isspread by

communication

to members of

social system

over a period of

time.


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AdoptionAdoption

ProcessProcess

The stages

through which an

individual

consumer passesin arriving at a

decision to try (or

not to try), to

continue using (ordiscontinue using)

a new product.


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The meaning of New Products

Marketers need to differentiate between emerging markets

and developed markets on what consumers perceive asnew

A touch of reality is required when conventional definitionsof new products are applied to an emerging market like India

Value, Convenience and Cultural associations are factorsthat may in combination work in the Indian Context

Good Night Mosquito Coil

Vatica hair oil with a combination of lime and coconut oil

Chik Sachets Value of 1 time use packs (Introduced the jasmine variant in SouthIndia)

Frooti introduced the first time Tetra pack with manjo juice- mango is a fruit with astrong cultural association

Ujala, Robin Blue- Additng a tinge of blue to white clothes is a cultural practice inseveral parts of India

PepsiCos Kurkure and ITCs Bingo have strong cultural association with the tasteof India

Nokia introduced the mobile phone with a torch and FM radio

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New Categories and the Diffusion of

Innovation

Eg: Contact lenses have been in India for the last 4

decades but despite the presence of multinational brands,

the category does not have a high level of penetration

Several aspects of consumer perception and perceivedrisks need to be addressed to ensure that the category

diffused to higher levels of penetration

What is the target market? and What is the Benefit?

Benefits can be functional convenience or enhanced

appearance that provides a fillip to ones self concept 5


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New Categories and the Diffusion of

InnovationAspects with regards to the product which the marketer

needs to look into; Knowledge Aspects- Is there a lack of understanding

about the product itself among prospective Consumers?

Persuasion Aspects- What is the WOM from users ofthe product?

Decision Aspects What kind of value does thecustomer expect & how can these aspects becustomized to the consumer at the POS?

Implementation of the decision- What kind of assurance

needs to be provided by the brand an the retailer toensure that the customer implements his/her decision totry out the product?

Confirmation- What should be the firms strategy toretain the consumer and ensure that he does not leave

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The Diffusion Process

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Elements of the Diffusion Process

The Innovation

The Channels of CommunicationThe Social System

Time

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The Innovation

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Defining Innovations

Firm-oriented definitions

Product-oriented definitionsMarket-oriented definitions

Consumer-oriented definitions

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Firm-oriented definitions

Treats the newness of a product from the perspective ofthe company producing or marketing it

When the product is new to the company it is

considered new

This definition ignores whether or not the product isactually new to the marketplace i.e. to the competitor or

the consumer

Consistent with this definition, copying or modification of

the competition product would be considered newNot very useful when the goal is to understand

consumer acceptance of a new product

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Product Oriented definitions

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Continuous

Innovation

Dynamically

Continuous

Innovation

Discontinuous

Innovation

Least Disruptive

Influence- Modified

Product rather than a

completely new

product

More Disruptive than

continuous innovation may involve creation of

a new product or

modification of an

existing product

Requires consumers

to adopt new

behaviour patterns

airplanes, TV,

automobiles, fax

machines


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Telephone Innovations

Telephone

Cell Phone

Fax

Machine

Telephone answering

machines

Call forwarding

Call waiting

Caller ID

Banking by telephoneCall-prompting systems

Hold button

Line-in-use indicator

Redial button

Auto dialing feature

Touch-tone service

800 Numbers900 Numbers

Ability to send/receive email

Incorporate PDA functions

Calendar/Phonebook

Voice-activated dialing

Switch from analog to

digital

Include camera

Ringer stylesPlay games

Fax modem

Mobile fax machines

Home office systems

(combined fax, copier,

computer printer)

Plain paper fax

Speed dial buttons

Delayed send

Copy function

Paper cutter

Discontinuous

Innovations

Dynamically Continuous

Innovations

Continuous

Innovations

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Market-Oriented definitions

This approach judges the newness of a product in terms ofhow much exposure consumers have to the new product.

Two popular definitions

A Product is considered new if it has been purchased

y a relatively small ( fixed) % of the potential market

A Product is considered new if it has been on the

market for a relatively short ( specified) period of time

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Consumer-Oriented definitions

A new product is any product that a potential consumerjudges to be new

Newness is based on Consumers perception s of the

product rather than on physical features or market realities

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What Influences Diffusion?

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C f


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Product Characteristics That Influence

Diffusion

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All products that are new do not have equal potential for

consumer acceptance

Some products seem to catch on almost overnight (eg:

cordless telephones), whereas others take a very long time

to gain acceptance or never seem to achieve widespread

consumer acceptance (eg: trash contractors)

The uncertainties of product marketing would be reduced if

marketers could anticipate how consumers will react to their

products

P d t Ch t i ti Th t I fl


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Product Characteristics That Influence

Diffusion

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Relative Advantage-The degree to which potential customers

perceive a new product as superior to existing substitutes is its relativeadvantage

Compatibility-The degree to which potential consumers feel a product

is consistent with their present needs, values and practices is a measure

of its compatibility

Complexity-The degree to which a new product is difficult to

understand and use , affects product acceptance

Trialability Refers to the degree to which a new product tried on a

limited basis

Observability Is the ease with which a products benefits or attributes

can be observed , imagined or described to potential consumers


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Characteristics That Influence Diffusion

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CHARACTERISTICSCHARACTERISTICS EXAMPLESEXAMPLES

Relative

Advantage

Air travel over train travel,

cordless phones over corded

telephones

Compatibility

Gillette MACH3 over disposable

razors, digital telephone

answering machines over

machines using tape

ComplexityElectric shavers, instant

puddings


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Characteristics That Influence Diffusion

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CHARACTERISTICSCHARACTERISTICS EXAMPLESEXAMPLES

Trialability

Trial size jars and bottles of new

products, free trials of software,

free samples, cents-off coupons

Observability

Clothing, such as a new Tommy

Hilfiger jacket, a car,

wristwatches, eyeglasses


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The Channels of Communication

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The Channels of Communication

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How quickly an innovation spreads thru the market

depends to a great extent on communications between themarketer and consumers as well as communication among

consumers ( WOM)

Two key influencers Impersonal Sources ( advertising

and editorial matter) & Interpersonal Sources(Salespeople and informal opinion leaders)

Internet also a major source of consumer - related

information

Both impersonal and Interpersonal source

Newchannels of communication in recent years Interactive marketing DVDs/podcasts


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The Social System

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The Social System

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The diffusion of a new product usually takes place in a social

setting frequently referred to as the social system

A social system is a physical, social or cultural environment

to which people belong and within which they function

The orientation of a social system, with its own special

values or norms , is likely to influence the acceptance or

rejection of new products

When a social system is modern in orientation, the

acceptance of innovation is likely to be high

When a social system is traditional in orientation, the

innovations are perceived as radical or as infringement

on established customs and are likely to be avoided

Ch t i ti f M d S i l


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Characteristics of a Modern Social

System

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A positive attitude towards change

An advanced technology and skilled labour force

A general respect for science and education

An emphasis on rational and ordered social relationships

rather than emotional ones

An outreach perspective, in which members of the system

frequently interact with outsiders thus facilitating the

entrance of new ideas into the social system


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Time

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Time and Diffusion

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Time is the backbone of the diffusion process

It pervades the study of diffusion on 3 distinct but

interrelated ways:

The Amount of purchase Time

The identification of the adopter Categories

Rate of Adoption


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A sequence of

categories that

describes how

early (or late) a

consumer

adopts a new

product inrelation to other

adopters.

Adopter

Categories


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Innovators

2.5%

Early

Adopters

13.5%

Laggards

16%

Percentage of Adopters by Category Sequence

Early

Majority

34%

Late

Majority

34%

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Adopter Categories


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Innovators: Description

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2.5% of population

Venturesome

Very eager to try new ideas Acceptable if risk is daring

More cosmopolite social relationships

Communicates with other innovators


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Early Adopters: Description

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13.5% of population Respected

More integrated into the local social system

The persons to check with before adopting a new

idea

Category contains greatest number of opinionleaders

Are role models


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Early Majority: Description

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34% of population

Deliberate

Adopt new ideas just prior to the average time Seldom hold leadership positions

Deliberate for some time before adopting


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Late Majority: Description

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34% of population

Skeptical

Adopt new ideas just after the average time

Adopting may be both an economic necessity

and a reaction to peer pressures

Innovations approached cautiously


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Laggards: Description

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16% of population

Traditional

The last people to adopt an innovation

Most localite in outlook

Oriented to the past

Suspicious of the new


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Stages in the Adoption Process

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NAME OF

STAGE

WHAT HAPPENS

DURING THIS STAGEEXAMPLE

Awareness

Consumer is first

exposed to the product

innovation.

Janet sees an ad for a new MP3 player

in the magazine she is reading.

Interest

Consumer is interested

in the product and

searches for additional

information.

Janet reads about the MP3 player on the

manufacturers Web site and then goes

to an electronics store near her

apartment and has a salesperson show

her a unit.

Evaluation

Consumer decides

whether or not to

believe that this productor service will satisfy the

need--a kind of mental

trial.

After talking to a knowledgeable friend,

Janet decides that this MP3 player will

allow her to easily download the MP3files that she has on her computer. She

also feels that the units size is small

enough to easily fit into her beltpack.


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Trial

Consumer uses the

product on a limited

basis

Since an MP3 player cannot be tried

like a small tube of toothpaste, Janet

buys the MP3 player online fromAmazon.com, which offers a 30-day

full refund policy.

Adoption

(Rejection

)

If trial is favorable,

consumer decides to

use the product on a

full, rather than alimited basis--if

unfavorable, the

consumer decides to

reject it.

Janet finds that the MP3 player is easy

to use and that the sound quality is

excellent. She keeps the MP3 player.

NAME OF

STAGE

WHAT HAPPENS

DURING THIS STAGEEXAMPLE


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Pre-

existing

problem

or Need

Awareness Interest Evaluation Trial

Adoption

or

Rejection

Postadoption

or

Postpurchase

Evaluation

Evaluation

Adoption or Rejection

Discontinuation

Discontinuation or

RejectionRejection

An Enhanced Adoption Process Model


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Importance

High

Low

Awareness

Adoption

Trial

Evaluation

Interest

Personal

and

interpersona

l sources

Impersonal

mass-

media

sources

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An Enhanced Adoption Process Model


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Thank- You

Documents

Session 9 - Consumer & Diffusion of Innovation