Diffusion Of Innovation

DIFFUSION DIFFUSION OF OF INNOVATION INNOVATION

Diffusion . . . ... . . refers to the idea that substances and ideas can gradually spread through a medium of some type and reach a state of equilibrium. . . . in the consumer behavior setting, refers to the process by which innovative ideas, products, and services spread through the consumer population.

INNOVATION An innovation is an idea, practice, or product perceived to be new by the relevant individual or group. The manner by which a new product spreads through a market is basically a group phenomenon. New products can be placed on a continuum from no change to radical change, depending on the market’s perception.

Categories of Innovation • Continuous Innovation - Adoption of this type of innovation requires relatively minor changes in behavior(s) that are unimportant to the consumer. • Dynamically continuous Innovation - Adoption of this type of innovation requires a moderate change in an important behavior or a major change in a behavior of low or moderate importance to the individual. • Discontinuous Innovation - Adoption of this type of innovation requires major changes in behavior of significant importance to the individual or group.

Diffusion of Innovation • It is the process by which acceptance of an innovation (new products or new service or new idea) is spread by communication (mass media, sales people, informal conversation) to members of the target market over a period of time.

Elements Of Diffusion Process • • • •

Innovation Channels of communication Social system Time

Innovation Allen & Hamilton identified six categories of new product in terms of their newness to the company and to the market place. They are: • • • • • •

New to the World New product lines Additions to the existing product lines Improvements or revision to existing products Repositioning Cost Reductions

Channels of Communication Two types of communication: • Communication between marketers & consumers • Communication among consumers

Consumer information source categories • Commercial sources – Sales people, advertising, sales promotion techniques. • Personal sources – Family, friends, neighbours, acquaintances. • Experimental sources – Demonstrations, handling samples. • Public sources – Mass media, Consumer rating organizations

Social system • A social system is a physical, social or cultural environment to which people belong and within which they function. • Modern Social system • Traditional Social system

Time • Time is the important factor for estimating the rate of diffusion. • Early • Late • Average

Consumer’s Adoption Process

Consumer’s Adoption Process – Awareness - the individual is exposed to the innovation but lacks complete information about it – Interest - the individual becomes interested in the new idea and seeks additional information about it – Evaluation - individual mentally applies the innovation to his present and anticipated future situation, and then decides whether or not to try it – Trial - the individual makes full use of the innovation – Adoption - the individual decides to continue the full use of the innovation

Adopter Categories • • • • •

Innovators Early Adopters Early Majority Late Majority Laggards

Innovators - Venturesome • Interest in new ideas leads them out of local circle of peer networks • Clique of innovators regardless of geographical distance • Control of substantial financial resources • Ability to understand and apply technical knowledge • Must cope with high degrees of uncertainty

Early Adopters - Respect • • • • • •

More integrated part of local social system Greatest degree of opinion leadership The person to check with Sought by change agents Respected by their peers Makes judicious innovation-decisions

Early Majority - Deliberate • • • • •

Interact frequently with peers Seldom hold leadership opinion positions Will deliberate for some time Innovation-decision period is longer Most numerous - one-third of the members of the system

Late Majority - Skeptical • Adopt just after the average member of a system • Adoption because of economic necessity • Also increasing pressures from peers • Skeptical and cautious in their approach • Peer pressure necessary • Most of the uncertainty must be removed

Laggards - Traditional • Last in a system to adopt • Point of reference is the past • Many are near isolates in the social network of their system • Interact primarily with others who have traditional values • Suspicious of innovations and change agents

Factors affecting diffusion • Innovation characteristics • Individual characteristics • Social network characteristics • Others…

Innovation characteristics • Observability

– The degree to which the results of an innovation are visible to potential adopters

• Relative Advantage

– The degree to which the innovation is perceived to be superior to current practice

• Compatibility

– The degree to which the innovation is perceived to be consistent with socio-cultural values, previous ideas, and/or perceived needs

• Trialability

– The degree to which the innovation can be experienced on a limited basis

• Complexity

– The degree to which an innovation is difficult to use or understand.

Individual characteristics • Innovativeness

– Originally defined by Rogers: the degree to

which an individual is relatively earlier in adopting an innovation than other members of his social system

– Modified & extended by Hirschman (1980): • Inherent / actualized novelty seeking • Creative consumer • Adoptive / vicarious innovativeness

Social Network characteristics • Reliance on others as source of information • Adopter threshold • Need-for-change / Need-forcognition

Network characteristics • Opinion leadership: number of nominations as source of information • Number of contacts within each adopter category • Complex structure

Other possible factors: – Social environment of diffusion of innovation – Marketing strategies employed – Institutional structures (e.g., government)