DIFFUSION OF INNOVATIONS

How fast will the diffusion of the innovation take place?

An Innovation is a product, service, attribute or idea that consumers within a market segment perceive as new and that has an effect on existing consumption patterns Diffusion is a macro process concerned with the spread of a new product an innovation from its source to the consuming public. Adoption is a micro process that focuses on the stages through which an individual consumer passes when deciding to accept or reject a new product.

Diffusion of innovations is the process by which acceptance of an innovation (new products or new service or new idea) is spread by communication (mass media, sales people, informal conversation) to members of the target market over a period of time.

Diffusion of innovations

New Product

Benefit Communicated

1.

Vacuum

cleaner Compact, easy to use vacuum cleaner to keep home clan

and tidy, home delivery after demonstration.

(Eureka Forbes)

2. Fire extinguisher (Real Portal piece of safety equipment-fire extinguisher. Value) 3. Plastic water tank A convenient low cost alternative to the traditional metal

(Sintex)

or concrete water tank

4. Utensil cleaner cake Premixed scouring solution in the form of bar instead of (Rin cake) waste prone powder.

5. Mosquito repellent matt A mosquito repellent-which has no smoke, no fumes, no (Good Knight) 6. Diaper (Huggys) ash, no cream, no mosquitos Drier, more comfortable than cloth, disposable diaper for

babies. Some new product innovation, which were easily accepted by customers

Figure: Diffusion Process

The four basic elements of Diffusion process are: 1. The Innovation 2. The channels of Communication 3. The Social System 4. Time

a) Firm-oriented definitions: When the product is new to the firm it is considered to be new. b) Product oriented definitions Continuous innovation(E.g., latest version of Microsoft Office, Gillette Mach 3), dynamically continuous innovation e.g., disposable diapers, CD players, internet shopping, digital camera, notebook computers, touch screens, discontinuous innovations (e.g., electrical bulbs, photocopying machines, inkjet and laser printers, TV, fax machines, Internet, heart transplant, tablet )

1. The Innovation

c)Market oriented definitions i. A product is considered new if it has been purchased by a relatively small (fixed) percentage of the potential market. ii. A product is considered new if it has been on the market for a relatively short (specified) period of time d) Consumer oriented definitions: A new product is any product that a potential consumer judges to be new.

a. Communication between marketers and consumers b. Communication among consumers i.e., word of mouth.

How quickly an innovation spreads through a market depends to a great extent on communications between the marketer and consumers, as well as communication among consumers i.e., word-of-mouth communication.

2. The channels of Communication

Consumer information sources fall into four categories Personal sources : Family, friends, neighbors, and acquaintances. Commercial sources : sales people, advertising, sales promotion techniques. Public sources : Mass media, consumer rating organisations Experimental sources : Demonstration, handling samples. Depending on the innovation or new product, and the prospective customers, the firms try to adopt a cost effective way of communicating with them.

2. The channels of Communication

3. The Social System

The diffusion of a new product usually takes place in a social setting frequently referred to as a social system. Shifting towards health food habits/Turning to vegetarians

a) The amount of purchase time b) The identification of adopter categories c) The rate of adoption

4. Time

Type of Time Purchase time

Meaning Time awareness purchase

Examples between If you look at your cars fuel meter and it and reads Empty you stop at the next petrol pump you come to.

Adopter categories

A classification scheme that indicates where a consumer stands, in relation to others, when adopting a new product
of How long it takes a new product or service to be adopted by members of a social system

If you are shopping for your second car, you may take a while to make a purchase, as long as your present car is working fine. Innovators are the first to adopt a new product, and laggards are the last
Black-and-white TVs were adopted by consumers much more quickly than their manufacturers had envisioned; in contrast, trash compactors have never been widely adopted

Rate adoption

4. Time

1. Type of group: young, affluent and highly educated, accept

changes faster than the old, traditional and poor groups new innovation, the slower is the rate of diffusion

2. Perceived risk: The more the risk associated with changing to 3. Type of decision: Individual decisions lead to faster diffusion than collective ones. 4.Marketing
More aggressive marketing effort, consisting of high and continuous advertising expenditure, diffuses faster than otherwise

effort:

5. Trial

Influence of Product Characteristics on diffusion

6. Fulfillment of felt need: The faster a need is satisfied or fulfilled by a product, the greater is the rate of its diffusion 7. Compatibility: The more the product is compatible with the beliefs, attitudes and values of the individual or group the faster the diffusion - vegetables soup for vegetarians 8. Relevant advantage: The advantage could be of price, quality, ease of handling, product quality. Washing machine is expensive, but a labour saving device 9. Complexity: If the product is complex (difficult to understand and use) the diffusion is slower. 10.Observability: The more easily the positive effects of the products can be observed, the more discussion takes place and faster the diffusion process, e.g. cell phones.

Influence of Product Characteristics on diffusion

Classification of Adopters

Adopters can be classified into five groups based on the time when they adopt. Innovators: The first 2.5 per cent to adopt innovation.

(Innovators are venturesome risk takers. They are younger, more educated and socially mobile.)

Early adopters: The next 13.5 per cent to adopt. Early majority: The next 34 per cent to adopt.

(They take a calculated risk before investing and using new innovations. They are opinion leaders and provide information to groups, but they are also concerned about failure. )

(.They are elders, well educated and less socially mobile. They rely heavily on inter-personal source of in- formation. ) Late majority: The next 34 per cent to adopt.(They are doubtful and skeptical about the innovation of new products. They tend to use the product not so much because of innovation, but because of other pressures, non-availability of the product and social pressures. ) Laggards: The final 16 per cent to adopt. (They are more traditional. They possess limited social interaction and are oriented to the past. They adopt the innovations with great reluctance)

Classification of Adopters