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Diffusion of Innovation

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Title: Diffusion of Innovation


1
Diffusion of Innovation
2
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.

3
  • 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

4
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

5
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

6
Diffusion of innovation
  • A process 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

7
Diffusion variables
  • Innovation
  • Communication
  • Time
  • Social system

8
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

9
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

10
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

11
Types of Innovators
  • Cognitive problem solving, cerebral, new mental
    experience
  • Sensory fantasy, day dreaming, hedonistic,
    thrill seeking
  • Monomorphic - consumers who are innovators for
    one type of product
  • Polymorphic consumers who are innovators for
    more than one type of product

12
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.

13
Characteristics that encourage rejection
  • Value barrier
  • Usage barrier
  • Risk barrier

14
Speed of diffusion
  • Competitive intensity
  • Reputation of the supplier
  • Standardised technology
  • Vertical coordination
  • Resource commitments

15
Communication of new products
  • Mass media
  • WOM
  • Homophily degree to which pairs of individuals
    who interact are similar in beliefs, education
    and social status
  • Heterophily inconsistent with own beliefs and
    views

16
The Adoption Decision ProcessEverett Rogers
Knowledge
Persuasion
Decision
Implementation
Confirmation
17
Adopter classes
  • Innovators - 2.5
  • Early adopters 13.5
  • Early majority 34
  • Late majority 34
  • Laggards 16

18
Innovativeness
  • This is the degree to which an individual
    adopts an innovation relatively earlier than
    others
  • Based on time of adoption
  • Based on number of new product adoption

19
Parameters for innovativeness
  • Socio-economic variables
  • Personality and attitude
  • Communication variables

20
Socio economic variables
  • Education
  • Literacy
  • Higher social status
  • Upward social mobility
  • Larger-sized units
  • Commercial orientation
  • Favourable attitude towards credit
  • Specialized operations

21
Personality and attitude
  • Empathy
  • Ability to deal in abstraction
  • Rationality
  • Intelligence
  • Favourable attitude towards change
  • Ability to cope with uncertainty
  • Favourable attitude towards education
  • Favourable attitude towards science
  • High aspirations

22
Communication variables
  • Social participation
  • Interconnectedness with the social system
  • Cosmopoliteness
  • Change agent contact
  • Mass media exposure
  • Exposure to interpersonal communication channels
  • Knowledge of innovations
  • Opinion leadership
  • Belonging to highly interconnected systems

23
Polymorphism
  • 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
    polymorphic.
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