The ADOPTION and DIFFUSION of Innovations

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The ADOPTION and DIFFUSION of Innovations
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The Adoption Process

• The decision stages that focus on internal
  consumer influences (psychological/social) that
  lead to innovation acceptance/rejection

KNOWLEDGE
PERSUASION
DECISION
TIME
IMPLEMENTATIONS
CONFIRMATION
A micro process
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Steps in the Adoption Process
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Variations from the Normal Adoption Curve
Case in Point Airbus versus Boeings 747
RD years
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The DIFFUSION PROCESS is the spread of an
innovation from its source to the ultimate
consumer that focuses on external forces.

• The key elements of Diffusion are
• an innovation is
• Communicated through certain channels (types of
  change agents information)
• Over time
• Among the members of a social system (types of
  audiences, community).

A macro process
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The Diffusion Process has identified adopter
typologies that are linked to marketing
strategies.
2.5 Innovators
13.5 Early Adopters
34 Early Majority
34 Late Majority
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Diffusion Process, Adopter Categories

• INNOVATORS - are first to buy and typically
  described as venturesome, younger, well educated,
  financially stable, and willing to take risks.
  
• EARLY ADOPTERS - are local opinion leaders who
  read magazines and who are integrate into the
  social system more than the average consumer.

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Diffusion Process,Adopter Categories

• EARLY MAJORITY - solid, middle-class consumers
  who are more deliberate and cautious
• LATE MAJORITY - described as older, more
  conservative, traditional, and skeptical of new
  products

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Diffusion Process,Adopter Categories

• 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 it I will.
No way!
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Diffusion of innovation research traces the
spread of product acceptance across its product
life cycle
Stage customers
Early Adopters
Early Majority
Majority
Laggards
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THE DIFFUSION PROCESSHow different segments of
the market act

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

EARLY MAJORITY-34
PER CENT OF TOTAL MARKET
EARLY ADOPTERS-13.5
LAGGARDS (INCLUDING NONADOPTERS)-16
INNOVATIORS-2.5
LATE MAJORITY-34
TIME
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Life-Style Characteristics of Innovators and Non
innovators
Theory

• 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 of Innovators and
Noninnovators

• Characteristics Innovators Noninnovators
• Purchase and Consumption Traits
• Brand Loyalty LESS MORE
• Deal 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 of Innovators and
Noninnovators

• Characteristics Innovators Non
  innovators
• 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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Speed of Diffusion

• is influenced by
• Competition Intensity ()
• Channel Coordination (suppliers distributor
  reputations) ()
• Standardization of Technology ()
• () Resource Commitments ()
• Communication in groups outside an individuals
  personal network (heterophilous groups) and
  communications among peers and family
  (homophilous groups)

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Communication in the Diffusion Process

• Trickle Up and Trickle Down
• The transmission of influence between
  socioeconomic groups can be described as a
  trickle-down process from higher to lower groups
  (the traditional view) or a trickle-up process.
  Occasionally, a trickle-up direction occurs. For
  example, innovators and early adopters of jeans
  and of bluegrass and rock music were those in
  lower socioeconomic classes.

• 2. Trickle Across
• Since the post World War II period, a leveling
  effect in
• socioeconomic status has occurred which makes
  trickle-down or up
• effects less relevant. Mass media now
  communicate information on
• innovations to all classes. A more likely
  process of diffusion is one
• that occurs across groups, regardless of
  socioeconomic status,
• known as a trickle-across effect.

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Communication Flows

• Two-Step Flow of Communication

COMPANYMESSAGE
OPINION LEADERS
TARGET AUDIENCES
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Two-Step Flow of Communication and Adopter
Categories
Early adopters
Early majority
Innovators
Potential target audiences
Product Category Opinion leader(s)
Opinion recipient 1 Opinion recipient 2 Opinion
recipient 3
Company Message from mass media
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Positions of Status

• OPINION LEADER - one who occupies a position of
  informal influences over the attitudes and overt
  behavior of others. Opinion leadership is earned
  not assumed.
• CHANGE AGENT - one who occupies a professional
  position of formal influence associated with a
  given role of status. Change agent status is
  assumed, not necessarily earned
• FOLLOWER - not a passive patsy. Actively seeks
  influence.

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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 Relationships With Innovativeness
Dogmatism, Fatalism
High
Opinion leadership
Independent variables
Income variables
Low
Innov- Early Early
Late Laggards ators adopters
majority majority
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Industrial Firms,Diffusion of Innovation

• Factors related to innovativeness among
  industrial firms
• 1. Favorable attitude toward scienceas
  witnessed by status given scientists in firm.
• 2. Cosmopolitanismsas indicated by worldwide
  travel of executives and lack of secretiveness.
• 3. Adequate information sources
• (a) high subscription levels to scientific
  journals
• (b) high degree of contact with universities
• 4. High growth rate (sales)
• 5. Lack of shop-floor resistance to innovation
• Source Journal of Industrial Economics (1959)

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The Winds of Change
Total Power Capacity , in Megawatts
Johnson, Keith. In Energy Hunt, Is EU Tilting at
Windmills? WSJ, A13.
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Characteristics That Encourage and Discourage
Diffusion

• Discourage
• Value barrier
• Usage barrier
• Complexity
• Risk barrier

• Encourage
• Relative advantage
• Compatibility with past usage
• Simplicity of use
• Observability
• Trialability
• Divisibility

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Marketing Value Added (2000)(Shareholder
investment Co.s current value)
Characteristics of New Products
RELATIVE ADVANTAGE - is an enhanced bundle of
benefits or clear-cut advantages over existing
offerings ()

• WINNERS Pharmaceutical Companies
• - Innovation against disease
• disability, death
• - new tools to prolong life wellness

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Marketing Value Added ???

• LOSERS Ford, G.M., Chrysler,
• 1950 - cars moved people from A to B
• 2000 - high in car mileage quality ,
• cars still basically move people from A to B
  (No fundamental change)

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Characteristics of New Product Success

• Compatibility with existing habits, values and
  consumption behavior, similar usage as existing
  products

• COMPLEXITY - is a disadvantage for new products
  which slows diffusion and may be offset by
  simplifying usage or through extensive education

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Characteristics of New Product Success

• Trial abilityexperience or see the newness
• Easily tested
• Low risk
• Inexpensive
• No special equipment
• Free samples or coupons

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Women Buying a New Food Product Within the Last
Month, Their Reasons
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• OBSERVABILITY - is the opportunity for buyers to
  see the newness ()

(Field test .. validity??)
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Why Some New Products Fail and Others Succeed
Absolute failure Relative
failure
80 to 90 Fail. Why?

• 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

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Why Some New Products Fail and Others Succeed
80 to 90 Fail. Why?

• 1. Performance Price
• New product failures generally offer the same
  or worse performance than competing products
  with the same or higher price
• 2. Inadequate Market Analysis

New Product Success

• Offer a unique benefit (a differential advantage)
  
• Solve a consumers problem or provide an
  opportunity, a reward