DIFFUSION OF INNOVATION

NEW PRODUCTS IN THE MARKET

Every year around 5000 new products appear in the market. However, most fail and only a few remain ( around 20%). Products which are innovative.

Why does this happen?

Marketing issues Valuable resources are wasted which

might have been deployed towards more productive uses

Products that might have helped people do things more productively or attain higher levels in their quality of life, fail to be used.

Marketing issues

Successful new product development is an important element in achieving long term competitive superiority and profitability, especially in low growth markets

A successful new product can be the beginning of a whole new company

THE VALUE CHAIN

Contemporary firms are being attacked by competitively on every dimension and from every direction. The only way to survive this onslaught is to create a ‘value chain’ to serve the customer, which will serve to differentiate the successful firm from its competitors and will provide competitive superiority on the critical attributes of importance to the consumer

WHAT IS AN INNOVATION?

It is any idea or product perceived by the potential adopter to be new. New products are ideas, behaviour or things that are qualitatively different from existing forms

Diffusion of innovation

A process by which a new product moves from initial introduction to regular purchase and use

A process by which an innovation (idea) is communicated through certain channels over time among the members of a social system – Everett Rogers

Diffusion variables

Innovation Communication Time Social system

Types of Innovations

Continuous – modification or improvement of an existing product

Dynamically continuous – may involve the creation of either a new product or the alteration of an existing one ,but does not generally alter established patterns of customer buying and product use

Discontinuous – production of an entirely new product that causes customers to alter their behaviour patterns significantly

INNOVATIONS INCLUDE BOTH A HARDWARE AND A SOFTWARE COMPONENT

The hardware are the physical and tangible aspects of a product. The software is the understanding consumers’ values and lifestyles

Likelihood of innovation success Relative advantage – new products that are most

likely to succeed are those that appeal to strongly felt needs Compatibility – degree to which the product is

consistent with existing values and past experience of the adopters

Complexity – degree to which an innovation is perceived as difficult to understand and use

Trialability – the ability to make trials easy for new products without economic risk to the consumer

Observability – reflects the degree to which results from using a new product are visible to friends and neighbours

Types of Innovators

Cognitive – problem solving, cerebral, new mental experience

Sensory – fantasy, day dreaming, thrill seeking Monomorphic - consumers who are innovators

for one type of product Polymorphic – consumers who are

innovators for more than one type of product

Speed of diffusion

Competitive intensity Standardised technology Vertical coordination Resource commitments

Communication of new products Mass media WOM Homophily – degree to which pairs of

individuals who interact are similar in beliefs, education and social status

Heterophily – inconsistent with own beliefs and views

The Adoption – Decision Process

Confirmation

Knowledge/Awareness

Interest

Evaluation

Trial

Decision

Adopter classes

Innovators - 2.5% Early adopters – 13.5% Early majority – 34% Late majority – 34% Laggards – 16%

Innovativeness

This is the degree to which an individual adopts an innovation relatively earlier than others

Based on time of adoption Based on number of new product

adoption

Parameters for innovativeness Socio-economic variables Personality and attitude Communication variables

Socio – economic variables

Education Literacy Higher social status Upward social mobility Larger-sized units Commercial orientation Favourable attitude towards credit Specialized operations

Personality and attitude

Empathy Ability to deal in

abstraction Rationality Intelligence Favourable

attitude towards change

Ability to cope with uncertainty

Favourable attitude towards education

Favourable attitude towards science

High aspirations

Communication variables

Social participation Interconnectedness

with the social system

Cosmopoliteness Change agent contact Mass media exposure

Exposure to interpersonal communication channels

Knowledge of innovations

Opinion leadership Belonging to highly

interconnected systems

POLYMORPHISM

The degree to which innovators and early adopters for one product are likely to be innovators for other products. Consumers who are innovators for one product are monomorphic. Consumers who are innovators for more than one product are polymorphic.