DIFFUSION OF INNOVATION

GROUP MEMBERS

VENUGOPAL ARRAVELLI
VENKAT SWAMINATH CHANNA
susheel
VASUDHA
UBAD KHAN
MEANING
The diffusion of an innovation is the spread
of a product, process, or idea perceived as
new, through communication channels,
among the members of a social system
over time. Innovations can be a new
product or output, a new process or way of
doing something, or a new idea or concept.
The “newness” of an innovation is
subjective, determined by the potential
adopter.
CONTINUE….

 The product will reach a maturity stage where little growth will
be seen & some products may also reach a decline stage,
usually because the product category is being replaced by
something better. For example, typewriters experienced
declining sales as more consumers switched to computers or
other word processing equipment.
 The product life cycle is tied to the phenomenon of diffusion of
innovation. When a new product comes out, it is likely to first be
adopted by consumers who are more innovative than others—
they are willing to pay a premium price for the new product and
take a risk on unproven technology.
 It is important to be on the good side of innovators since many
other later adopters will tend to rely for advice on the
innovators who are thought to be more knowledgeable about
new products for advice.
PRODUCT LIFE CYCLE
example, IBM did not invent the personal
computer, but entered after other firms showed
the market to have a high potential. Products can
be new to the segment—e.g., cellular phones and
pagers were first aimed at physicians and other
price-insensitive segments. Later, firms decided
to target the more price-sensitive mass market.

The diffusion of innovation refers to the tendency

of new products, practices, or ideas to spread
among people.  Usually, when new products or
ideas come about, they are only adopted by a
small group of people initially; later, many
innovations spread to other people. 
The DIFFUSION PROCESS is the spread of an
innovation from its source to the ultimate
consumer that focuses on external forces.
The saturation point is the maximum
proportion of consumers likely to adopt a
product.
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.
 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 OK, we will
 Resist change buy X.
 Conservative If I
 Like tradition have to
 Often older & lower in buy it I
socioeconomic status will.

 Non adopters
 Refuse to change
No
way!
Diffusion of innovation research traces the
spread of product acceptance across its
product life cycle
Market Market Market Sales
Introduction Growth Maturity Decline

Total Industry
Sales
+
Total Industry
Profit
$0
Tim
– e
Stage customers:
Early Adopters Early Majority Majority Laggards
Characteristics That Encourage and
Discourage Diffusion
Encourage Discourage

1. Relative 1. Value barrier

advantage 2. Usage barrier
2. Compatibility 3. Complexity
with past usage 4. Risk barrier
3. Simplicity of use
4. Observability
5. Trialability
6. Divisibility
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 (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.
 Diffusion in organizations

TWO TYPES OF INNOVATION-DECISIONS

collective innovation decisions

Authority innovation decisions

Communication Flows
 Two-Step Flow of Communication

COMPANY
MESSAGE

OPINION
LEADERS

TARGET AUDIENCES
■ OBSERVABILITY - is the opportunity for
buyers to see the newness (+)

(Field test
..
Characteristics of New Product
Success
② 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
 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
THANK YOU