Diffusion of Innovation Diffusion by RushenChahal


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									Diffusion of Innovation

    Prof Rushen Chahal
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.
        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 by 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
• Sensory – fantasy, day dreaming, hedonistic, thrill
• Monomorphic - consumers who are innovators for one
  type of product
• Polymorphic – consumers who are innovators for
  more than one type of product
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
• 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





             Adopter classes
•   Innovators - 2.5%
•   Early adopters – 13.5%
•   Early majority – 34%
•   Late majority – 34%
•   Laggards – 16%
  This is the degree to which an individual
  adopts an innovation relatively earlier than
• 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

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

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