The ADOPTION and DIFFUSION of Innovations

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

The Adoption Process

PERSUASION

DECISION

CONFIRMATION

IMPLEMENTATIONS

A micro process-1948, Hybrid corn seed study Penn State

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

Case in Point:

Airbus versus Boeing

The Diffusion Process

has identified adopter typologies that are linked to marketing strategies.

2.5% Innovators

13.5% Early Adopters

34% Late Majority

34% Early Majority

Diffusion Process, Adopter Categories

s

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

s

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

s

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!

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 Tim e

Early Majority Majority Laggards

$0
Stage customers: Early Adopters

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.
EARLY MAJORITY-34% LAGGARDS (INCLUDING NONADOPTERS)-16%

THE DIFFUSION PROCESS

EARLY ADOPTERS-13.5%

INNOVATIORS-2.5%

LATE MAJORITY-34%

TIME

Life-Style Characteristics of Innovators and Non innovators

Characteristics innovators s Product Interest s Opinion Leadership s Personality: Dogmatism Social Character Category Width s Venturesome ness s Perceived Risk Innovators MORE MORE Non LESS LESS

OPEN-MINDED CLOSE-MINDED INNER-DIRECT OTHER-DIRECT BROAD NARROW MORE LESS LESS MORE

Life-Style Characteristics of Innovators and Noninnovators

Characteristics Innovators Noninnovators s Purchase and Consumption Traits: Brand Loyalty LESS Deal PronenessMORE LESS Usage MORE s Media Habits: Magazine Exposure MORE Television LESS

MORE LESS LESS MORE

Life-Style Characteristics of Innovators and Noninnovators

Characteristics Innovators innovators s Demographic Characteristics: Age YOUNGER Income MORE Education MORE Occupational Status MORE s Social Characteristics: Social Integration MORE Group Members MORE Non OLDER LESS LESS LESS LESS LESS

Speed of Diffusion
is influenced by * * * *

Competitive Intensity (+) Good Supplier Reputation (+) Standardization of Technology (+) Vertical ( ) Channel Coordination (+) ($) Resource Commitments (+) 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 trickle-up direction, however. For example, innovators and early adopters of jeans and of bluegrass and rock music were those in lower socioeconomic classes.

B. 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?

Communication in the Diffusion Process

Communication Flows
s

Two-Step Flow of Communication

COMPANY MESSAGE

OPINION LEADERS

TARGET AUDIENCES

Positions of Status
s

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 s

FOLLOWER - not a passive patsy.

influence.

Actively seeks

Two-Step Flow of and Adopter

Innovators

Communication Categories
Early majority
Potential target audiences

Early adopters

Company Message from mass media

Product Category Opinion leader(s)

Opinion recipient 1 Opinion recipient 2 Opinion recipient 3

Characteristics of in contrast with

s

Opinion Leaders their followers

More like, than unlike, their followers s More technically competent s More socially accessible s More cosmopolitan s More innovative (receptive to change) s Higher media exposure (more informed) s Higher social status s More conformist with social norms and values

Generalized Relationships With Innovativeness

High Opinion leadership Income variables Low Innovators Early adopters Early Late majority majority Laggards Dogmatism, Fatalism

Independent variables

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
s Source: Journal of Industrial Economics (1959)

The Winds of Change Total Power Capacity , in Megawatts

7000 6000 5000 4000 3000 2000 1000 0 1999 2000 2001 Germany Spain Denmark U.S.A.

Johnson, Keith. In Energy Hunt, Is EU Tilting at Windmills? WSJ, A13.

Characteristics That Encourage and Discourage Diffusion

Encourage
1. Relative advantage 2. Compatibility with past usage 3. Simplicity of use 4. Observability 5. Trialability 6. Divisibility

Discourage
1. 2. 3. 4. Value barrier Usage barrier Complexity Risk barrier

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

WINNERS : Pharmaceutical Companies - Innovation against disease disability, & death - new tools to prolong life & wellness

Marketing Value Added ???

B LOSERS : Ford, G.M., Chrysler, 1950 - cars moved people from A to 1995 - high in car mileage & quality , cars still basically move people from A to B (No fundamental change)

Characteristics of New Product Success

y

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

Characteristics of New Product Success

z

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:
0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0 % 0 %
(wsj 23 July 85)

lik e t ry in g coupon p ric e in t e re s t a d v e r t is in g

Characteristics of New Product Success

s

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 ??? (Field test validity)

Why Some New Products Fail and Others Succeed

Absolute failure Relative failure

80 to 90% Fail. Why? s Unreal time pressure & vested interest groups s Absorption in process: lack of objectivity, courage (risk) s Product Deficiencies (Technical or Design Problems) s Inadequate research (Overestimation of Market Size) s Poor Execution of Plans (Promotion, Distribution,
Price, poor timing, etcetera)
s

Result: No differential advantage & Failure to Meet Customer Needs

Why Some New Products Fail and Others Succeed

80 to 90% Fail. Why? s #1. Performance & Price New product failures generally offer the same or worse performance than competing products with the same or higher price s #2. Inadequate Market Analysis

New Product Success Offer a unique benefit (a differential advantage) Solve a consumers problem or provide an opportunity, a reward