Diffusion of Innovation

Why does this happen?

Macromarketing 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
• Successful products are those that become
culturally anchored.
Micromarketing issues
• Succesful new product development is an important
element in achieving long term competitive superiority
and profitability,especially in low growth markets
• New product development plays an important role in
market leadership and profitability. Market leaders
normally have three times higher returns than firms with
lower market shares
• 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 through 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, hedonistic, thrill
seeking
• Monomorphic - consumers who are innovators for one
type of product
• Polymorphic – consumers who are innovators for
more than one type of product
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.
Characteristics that encourage rejection

• Value barrier
• Usage barrier
• Risk barrier
 Speed of diffusion
• Competitive intensity
• Reputation of the supplier
• 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
Everett Rogers

Knowledge

Persuasion

Decision

Implementation

Confirmation
 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 cope with
• Ability to deal in uncertainty
abstraction • Favourable attitude
• Rationality towards education
• Intelligence • Favourable attitude
• Favourable attitude towards science
towards change • High aspirations
 Communication variables
• Social participation • Exposure to interpersonal
• Interconnectedness with communication channels
the social system • Knowledge of innovations
• Cosmopoliteness • Opinion leadership
• Change agent contact • Belonging to highly
• Mass media exposure 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.