Diffusion Of Innovation

VENUGOPAL ARRAVELLI VENKAT SWAMINATH CHANNA susheel VASUDHA UBAD KHAN

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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.

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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.

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 saturation point is the maximum proportion of consumers likely to adopt a product.

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INNOVATORS - are first to buy and typically described as venturesome, younger, well educated, financially stable, and willing to take risks.

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EARLY ADOPTERS - are local opinion leaders who read magazines and who are integrate into the social system more than the average consumer.

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EARLY MAJORITY - solid, middle-class consumers who are more deliberate and cautious

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LATE MAJORITY - described as older, more conservative, traditional, and skeptical of new products

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Laggards ◦ ◦ ◦ ◦

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

OK, we will buy X. If I have to buy it I will.

Non adopters

◦ Refuse to change No way!

Market Introduction

Market Growth

Market Maturity

Sales Decline

Total Industry Sales + Total Industry Profit

$0

Tim e

– Stage customers: Early Adopters

Early Majority

Majority

Laggards

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

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

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Two-Step Flow of Communication COMPANY MESSAGE

OPINION LEADERS

TARGET AUDIENCES

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

(Field test ..

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 

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