Download Diffusion of innovations

Innovation Management
Kevin O’Brien
Diffusion & Adoption of
Innovations
Learning Objectives
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Understand the early stages of the
product life cycle
Identify factors affecting innovation
adoption
Appreciate the role of social networks in
diffusion
Identify key issues in marketing new
products
What is diffusion?
“Diffusion is the process by which an
innovation is communicated through
certain channels over time among the
members of a social system.”
“It is a special type of communication, in
that the messages are concerned with
new ideas.”
(Rogers, 1995)
Diffusion of Innovation
Cumulative
Adopters
M
Time
T
Time
Non-cumulative
Adopters
T
(Rogers, 1995)
Unit sales (adoption)
Time to First Adoption
Case A
Case B
Elapsed time from product launch
Case A demonstrates the impact of exponential sales growth
when the first adoption is secured twice as quickly as in case B
Factors Affecting Diffusion
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Adoption decision process
Characteristics of the innovation
Adopter characteristics
Network connectedness
Communication channels
Adoption Decision Process
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Rate of diffusion is influenced by the level of
perceived buying risk:
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High involvement – low involvement
Adoption decision process:
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Knowledge
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Persuasion
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Choice, trial – adoption/rejection
Implementation
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Evaluation, attitude formation
Decision
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Awareness of needs, awareness of innovation
Putting innovation into use, technical issues, behaviours
Confirmation
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Reinforcement of decision made, discontinuance?
(Rogers, 1995)
Characteristics of the Innovation
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Rate of diffusion is influenced by the
characteristics of the innovation:
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relative advantage over previous solutions
compatibility with existing ways of doing
things
complexity in use
ease of low risk trial
ability to communicate innovation’s
benefits
observability of benefits
(Rogers, 1995)
Adopter Characteristics
Rate of diffusion is influenced by adopter characteristics:
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Innovators
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enthusiasts
novelty value
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visionaries
see advantages
opinion leadership
Early majority
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deliberate
willing adopters
followers
Late majority
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Early adopters
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Laggards
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conservative
economic necessity
safe to adopt
traditional
cautious
Sloths
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avoidance
isolation
virtue of non-adoption
(after Moore, 1991)
SALES
Adopter Characteristics
Pragmatists
Sceptics
Pioneers
Innovators
2.5%
Early
Adopters
Early
Majority
Late
Majority
13.5%
34%
34%
Laggards
Sloths
13.5%
2.5%
TIME
(Rogers, 1995; Moore 1991)
Network Connectedness
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Sales
Publications
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Adopter
B
Adopter
D
Adopter
C
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Earlier adopters are
more “network
connected”
More predictive than
individual adopter
characteristics
Word-of-mouth
Opinion leaders
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Adopter
A
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Events
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Advertising
Sponsorship
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Influence others
High number of network
links
Competent & trustworthy
experts
Shared meanings,
beliefs, understandings
(Rogers, 1995)
Marketing Communications
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Media communications
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Awareness, interest
One-step model: sender-receiver, stimulusresponse
Personal communications
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Trial, adoption
High risk situations
Two-step model
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Media communications picked up by opinion leaders and
then passed on to other members of the intended
audience
Identifying/influencing opinion leaders?
Communication strategy
Diffusion Modelling
Non-cumulative adoptions
The Bass Model for Forecasting Rate of Adoption
Adoptions due to
interpersonal
communication
Adoptions due to
mass media
Time
(Bass, 1969; Mahajan, Muller & Bass, 1990)
Crossing the Chasm
Novelty Value
Functional Value
Sales
C
H
A
S
M
Innovators
Early
Adopters
Early
Majority
Late
Majority
Laggards
Sloths
Time
(Moore, 1991)
Early-Market Strategies
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Marketing to the visionaries:
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establish reputation
“best possible solution” (brilliant technology)
small number of visionaries buying customised
products
high levels of technical support
The chasm:
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small numbers of customers with high investment
requirements
profits squeezed
(Moore, 1991)
Marketing to the Mainstream
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Marketing to the pragmatists:
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complete end-to-end solutions
whole product
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core, expected, augmented
“best solution possible” (focus on needs)
simplification, user-friendliness
partnerships, collaborations
(Moore, 1991)
Targeting the Majority
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When to target the majority rather than
innovators?
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declining influence of innovators on the
majority
consumer markets (lead users in industrial)
relatively low ratio of innovators to majority
innovator profitability falling
slow rate of market acceptance
high cost of capital
(Mahajan & Muller, 1998)
References
Bass, F.M. (1969) A new product forecasting model for
consumer durables, Marketing Science, 15 (2), 21527.
Mahajan, V., Muller, E. and Bass, F.M. (1990) New
product diffusion models in marketing: a review and
directions for research, Journal of Marketing, 54
(January), 1-26.
Mahajan, V. and Muller, E. (1998) When is it worthwhile
targeting the majority instead of the innovators in a
new product launch? Journal of Marketing Research,
35 (November), 488-495.
Moore, G.A. (1991) Crossing the chasm, New York:
Harper Collins.
Rogers, E.M. (1995) Diffusion of innovations, 4th Ed.
New York: Free Press.