The ADOPTION and DIFFUSION of Innovations

The Adoption Process

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

PERSUASION

DECISION

CONFIRMATION

IMPLEMENTATIONS

Steps in the Adoption Process

Variations from the Normal Adoption Curve

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:
(1) an innovation is (2)Communicated through certain channels (types of change agents & information) (3) Over time (4) Among the members of a social system (types of audiences, community).
A macro process

Diffusion of innovation research traces the spread of product acceptance across its product life cycle
Market Introduction Market Growth Market Maturity Sales Decline

Total Industry Sales + Total Industry Profit Time

Stage customers: Early Adopters Early Majority Majority Laggards

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Diffusion Process, Adopter Categories

INNOVATORS - are first to buy and typically described as adventurous, 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.

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

Diffusion Process, Adopter Categories

Laggards
Resist change Conservative Like tradition Often older & lower in socioeconomic status

OK, we will

buy X.
If I have to buy it I will.

Nonadopters
Refuse to change
No way!

How different segments of the market act

PER CENT OF TOTAL MARKET These phases of adoption are important because they are linked to different marketing strategies during the product life cycle.
LAGGARDS (INCLUDING NONADOPTERS)-16%

THE DIFFUSION PROCESS

EARLY ADOPTERS-13.5%

LATE MAJORITY-34%

TIME

Life-Style Characteristics of Innovators and Non innovators

Characteristics Innovators Non innovators Product Interest MORE LESS Opinion Leadership MORE LESS Personality: Stubbornness OPEN-MINDED CLOSE-MINDED Social Character INNER-DIRECT OTHER-DIRECT

Venturesomness Perceived Risk

MORE LESS

LESS MORE

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

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

Speed of Diffusion
is influenced by

Competitive Intensity (+) Good Supplier Reputation (+) Standardization of Technology (+) Vertical ( ) Channel Coordination (+) Brand Loyalty (-)

Communication is a Key element in the Diffusion Process

Two types of communication in diffusion are: 1. Communications in the heterophilous groups (groups outside an individuals personal network) 2. Communications in the homophilous groups. (i.e., peer and family)

Communication in the Diffusion Process

1.

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 trickleup direction, however. For example, innovators and early adopters of jeans.

B. Trickle Across The post-World War II period produced a leveling effect in socioeconomic status, making trickledown 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?

Communication in the Diffusion Process

Communication Flows

Two-Step Flow of Communication

COMPANY MESSAGE

OPINION LEADERS

TARGET AUDIENCES

Two-Step Flow of Communication and Adopter Categories

Early adopters Early majority
Potential target audiences Company Message from mass media

Innovators

Product Category Opinion leader(s)

Opinion recipient 1 Opinion recipient 2 Opinion recipient 3

Generalized Relationships With Innovativeness

High Dogmatism, Fatalism

Independent variables

Opinion leadership
Income variables

Low

Innovators

Early adopters

Early Late majority majority

Laggards

So what u should do to succeed.

Characteristics of New Products

RELATIVE ADVANTAGE - is an enhanced bundle of benefits or clear-cut advantages over existing offerings (+)
(Shareholder investment & Co.s current value)

Marketing Value Added

Characteristics of New Product Success

Compatibility

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

Characteristics of New Product Success

Trial abilityexperience or see the newness

Easily tested Low risk Inexpensive No special equipment Free samples or coupons

Sample size

Demo days

Women Buying a New Food Product Within the Last Month, Their Reasons:
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
(wsj 23 July 85)

like trying coupon price interest advertising

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 (-)

Observability ???

Why Some New Products Fail and Others Succeed

Absolute failure Relative failure

80 to 90% Fail. Why? Unreal time pressure. 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

Why Some New Products Fail and Others Succeed

80 to 90% Fail. Why?

New product failures generally offer the same or worse performance than competing products with the same or higher price Inadequate Market Analysis

New Product Success

Offer a unique benefit (a differential advantage)

Solve a consumers problem or provide an opportunity, a reward

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