The ADOPTION and DIFFUSION of Innovations

1
The ADOPTION and DIFFUSION of Innovations
2
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-1948, Hybrid corn seed study Penn
State
3
Steps in the Adoption Process
4
Variations from the Normal Adoption Curve
5
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
6
Case in PointAirbus versus Boeing
7
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
8
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.

9
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

10
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!
11
Diffusion of innovation research traces the
spread of product acceptance across its product
life cycle
Stage customers
Early Adopters
Early Majority
Majority
Laggards
12
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
LAGGARDS (INCLUDING NONADOPTERS)-16
EARLY ADOPTERS-13.5
LATE MAJORITY-34
INNOVATIORS-2.5
TIME
13
Life-Style Characteristics of Innovators 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

14
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

15
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

16

Speed of Diffusion

• is influenced by
• Competitive Intensity ()
• Good Supplier Reputation ()
• Standardization of Technology ()
• Vertical ( ) Channel Coordination ()
• () Resource Commitments ()
• Brand Loyalty

17
Communication is a Key element in the Diffusion
Process

• Two types of communication in diffusion are
• Communications in the heterophilous groups
  (groups outside an individuals personal network)
• Communications in the homophilous groups. (i.e.,
  peer and family)

18
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
  and a trickle-up process 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.

19
Communication in the Diffusion Process

• Trickle Across
• The post-World War II period produced a leveling
  effect in socioeconomic status, making
  trickle-down and trickle-up effects less
  relevant. Mass media also rapidly 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.
• C. Internet
• Will the Internet result in a More Rapid
  Rate of adoption diffusion?

20
Communication Flows

• Two-Step Flow of Communication

COMPANYMESSAGE
OPINION LEADERS
TARGET AUDIENCES
21
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.

22
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
23
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

24
Generalized Relationships With Innovativeness
Dogmatism, Fatalism
High
Opinion leadership
Independent variables
Income variables
Low
Innov- Early Early
Late Laggards ators adopters
majority majority
25
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)

26
The Winds of Change
Total Power Capacity , in Megawatts
Johnson, Keith. In Energy Hunt, Is EU Tilting at
Windmills? WSJ, A13.
27
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

28
Marketing Value Added(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

29
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 from A to B
  (No fundamental change)
  (Electric utilities?)

30
Characteristics of New Product Success

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

31
Characteristics of New Product Success

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

32
Women Buying a New Food Product Within the Last
Month, Their Reasons
33
Characteristics of New Product Success

• OBSERVABILITY - is the opportunity for buyers to
  see the newness ()
• COMPLEXITY - is a disadvantage for new products
  which slows diffusion and may be offset by
  simplifying usage or through extensive education
  (-)

34
Observability ??? (Field test validity)
35
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

36
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