adoption diffusion 8aug06 n36

8/4/2019 Adoption Diffusion 8Aug06 n36

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The ADOPTIONhe ADOPTION

and DIFFUSION ofand DIFFUSION of

Innovationsnnovations



The Adoption Processhe Adoption Process

KNOWLEDGE PERSUASION DECISION

IMPLEMENTATIONSCONFIRMATION

TIME

s The decision stages that focus on internalThe decision stages that focus on internal

consumer influences (psychological/social)consumer influences (psychological/social)that lead to innovation acceptance/rejectionthat lead to innovation acceptance/rejection

A micro process-1948, Hybrid corn seed study Penn State



Steps in theSteps in the

Adoption AdoptionProcessProcess



Variations from the Normal Variations from the Normal

Adoption Curve Adoption Curve



TheThe DIFFUSION PROCESS isDIFFUSION PROCESS is the spread of anthe spread of an

innovation from its source to the ultimateinnovation from its source to the ultimate

consumer that focuses on external forces.consumer that focuses on external forces.

The key elements of Diffusion are:The key elements of Diffusion are:(1)(1) anan innovationnnovation isis

(2)2)Communicatedommunicated through certain channelsthrough certain channels

(types of change agents & information)(types of change agents & information)

(3)(3) OverOver timeime

(4)(4) Among the Among the members of members of aa social systemocial system

(types of audiences, community).(types of audiences, community).

A macro process



Case in Point:Case in Point:

Airbus versus BoeingAirbus versus Boeing



2.5% Innovators

13.5% Early Adopters

34% Early Majority34% Late Majority

The Diffusionus on Processocess …

has identified adopteras identified adopter

typologies that are linked toypologies that are linked to

marketing strategies.arketing strategies.



Diffusion Process,iffusion Process,

Adopter Categoriesdopter Categories

s INNOVATORS - are first to buy andINNOVATORS - are first to buy andtypically described as venturesome,typically described as venturesome,

younger, well educated, financiallyyounger, well educated, financiallystable, and willing to take risks.stable, and willing to take risks.

s EARLY ADOPTERS - are local opinionEARLY ADOPTERS - are local opinionleaders who read magazines and wholeaders who read magazines and whoare integrate into the social systemare integrate into the social system

more than the average consumer.more than the average consumer.



s EARLY MAJORITY - solid, middle-classEARLY MAJORITY - solid, middle-class

consumers who are more deliberateconsumers who are more deliberate

and cautiousand cautious

s LATE MAJORITY - described as older,LATE MAJORITY - described as older,

more conservative, traditional, andmore conservative, traditional, andskeptical of new productsskeptical of new products





s LaggardsLaggards – Resist changeResist change

– ConservativeConservative

– Like traditionLike tradition – Often older & lower inOften older & lower in

socioeconomic statussocioeconomic status

s NonadoptersNonadopters – Refuse to changeRefuse to change

OK, we will

buy X.

If I have

to buy itI wil l.

No way!





Diffusion of innovation research traces the spreadDiffusion of innovation research traces the spread

of product acceptance across its product life cycleof product acceptance across its product life cycle

Total Industry

Profit

+

–

$ 0

MarketIntroduction

MarketGrowth

MarketMaturity

SalesDecline

Time

Total IndustrySales

Stage customers:

Early Adopters Early Majority Majority Laggards



THE DIFFUSION PROCESSHE DIFFUSION PROCESSHow different segments of the market actHow different segments of the market act

P

E R C E N T O

F T O T A L M

A R K E T

TIME

I N N O V A T I O R S - 2 . 5 %

E A R L Y A D O P T E R S - 1 3 . 5 %

E A R L Y M A J O R

I T Y - 3 4 %

L A T E M A J O R I T Y - 3 4 %

L A G G A R D S ( I N C L

U D I N G N O N A D O P T E R

S ) - 1 6 %

These phases of adoption are important because they are linkedThese phases of adoption are important because they are linkedto different marketing strategies during the product life cycle.to different marketing strategies during the product life cycle.



Innovators and Nonnnovators and Non

innovatorsnnovators

Characteristicsharacteristics Innovatorsnnovators Nononinnovatorsnnovators

s

Product InterestProduct Interest MOREMORE LESSLESSs Opinion LeadershipOpinion Leadership MOREMORE LESSLESSs PersonalityPersonality::

DogmatismDogmatism OPEN-MINDEDOPEN-MINDED CLOSE-MINDEDCLOSE-MINDED

Social CharacterSocial Character INNER-DIRECT OTHER-DIRECTINNER-DIRECT OTHER-DIRECT

Category WidthCategory Width BROADBROAD NARROWNARROWs Venturesome ness Venturesome ness MOREMORE LESSLESS

s Perceived Risk Perceived Risk LESSLESS MOREMORE



Life-Style Characteristics ofife-Style Characteristics of

Innovators and Noninnovatorsnnovators and Noninnovators

Characteristicsharacteristics Innovatorsnnovators Noninnovatorsoninnovators

s Purchase and Consumption TraitsPurchase and Consumption Traits::Brand LoyaltyBrand Loyalty LESSLESS MOREMORE

Deal PronenessDeal PronenessMOREMORE LESSLESS

UsageUsage MOREMORE LESSLESSs Media HabitsMedia Habits::

Magazine ExposureMagazine Exposure MOREMORE LESSLESS

TelevisionTelevision LESSLESS MOREMORE



Innovators andnnovators and

Noninnovatorsoninnovators

Characteristicsharacteristics Innovatorsnnovators Nononinnovatorsnnovators

s

Demographic CharacteristicsDemographic Characteristics::Age Age YOUNGER YOUNGER OLDER OLDER

IncomeIncome MOREMORE LESSLESS

EducationEducation MOREMORE LESSLESS

Occupational Status MOREOccupational Status MORE LESSLESSs Social CharacteristicsSocial Characteristics::

Social IntegrationSocial Integration MOREMORE LESSLESS

Group MembersGroup Members MOREMORE LESSLESS



is influenced by…is influenced by…

* Competitive Intensity (+)* Competitive Intensity (+)* Good Supplier Reputation (+)* Good Supplier Reputation (+)

* Standardization of Technology (+)* Standardization of Technology (+)

* Vertical ( ) Channel Coordination (+)* Vertical ( ) Channel Coordination (+)• ($) Resource Commitments (+)($) Resource Commitments (+)

• Brand LoyaltyBrand Loyalty

Speed of Diffusion



Communication is a Key elementCommunication is a Key element

in the Diffusion Processin the Diffusion Process

Two types of communication in diffusion are:Two types of communication in diffusion are:

1.1. Communications in theCommunications in the heterophilousheterophilous groupsgroups

(groups outside an individual’s personal(groups outside an individual’s personal

network)network)2.2. Communications in theCommunications in the homophilous groupshomophilous groups ..

(i.e., peer and family)(i.e., peer and family)



Communication in the DiffusionCommunication in the Diffusion

ProcessProcess

1.1. Trickle Up and Trickle DownTrickle Up and Trickle Down

The transmission of influence between socioeconomicThe transmission of influence between socioeconomic

groups can be described as agroups can be described as a t t r i c k l e -downi ck l e -down process fromprocess fromhigher to lower groups and ahigher to lower groups and a t r i c k l e -upr i ck l e -up process fromprocess from

lower to higher groups. Traditionally, the view has beenlower to higher groups. Traditionally, the view has been

that diffusion occurs in a trickle-down manner. Thethat diffusion occurs in a trickle-down manner. The

transmission of influence occurs occasionally in a trickle-uptransmission of influence occurs occasionally in a trickle-updirection, however. For example, innovators and earlydirection, however. For example, innovators and early

adopters of jeans and of bluegrass and rock music wereadopters of jeans and of bluegrass and rock music were

those in lower socioeconomic classes.those in lower socioeconomic classes.



Communication in the DiffusionCommunication in the Diffusion

ProcessProcess

B.B. Trickle AcrossTrickle AcrossThe post-World War II period produced a levelingThe post-World War II period produced a levelingeffect in socioeconomic status, making trickle-downeffect in socioeconomic status, making trickle-downand trickle-up effects less relevant. Mass mediaand trickle-up effects less relevant. Mass mediaalso rapidly communicate information onalso rapidly communicate information on

innovations to all classes. A more likely process of innovations to all classes. A more likely process of diffusion is one that occurs across groups,diffusion is one that occurs across groups,regardless of socioeconomic status, known as aregardless of socioeconomic status, known as atrickle-across effect.trickle-across effect.

C. InternetC. Internet

Will the Internet result in a MoreWill the Internet result in a MoreRapid Rate of adoption & diffusion?Rapid Rate of adoption & diffusion?



Communication Flowsommunication Flows

s Two-Step Flow of CommunicationTwo-Step Flow of Communication

COMPANYMESSAGE

OPINIONLEADERS

TARGET AUDIENCES



Positions of Statusositions of Status

s OPINION LEADER -OPINION LEADER - one who occupies a position of one who occupies a position of

informal informal influences over the attitudes and overt behaviorinfluences over the attitudes and overt behavior

of others. Opinion leadership isof others. Opinion leadership is earned earned

not assumed.not assumed.

s CHANGE AGENT -CHANGE AGENT - one who occupies a professionalone who occupies a professional

position of position of formal formal influence associated with a given role of influence associated with a given role of

status. Change agent status is assumed, not necessarilystatus. Change agent status is assumed, not necessarily

earnedearned

s FOLLOWER -FOLLOWER - not a “passive patsy.” Actively seeksnot a “passive patsy.” Actively seeks

influence.influence.



Two-Step Flow of Communicationwo-Step Flow of Communication

and Adopter Categoriesnd Adopter Categories

Early

adopters

Innovators Early

majority

Company Message

from mass media

Product Category

Opinion

leader(s)

Potential target

audiences

Opinion recipient 1

Opinion recipient 2

Opinion recipient 3



Characteristics of Opinion Leadersharacteristics of Opinion Leaders

in contrast with their followersn contrast with their followers

s More like, than unlike, their followersMore like, than unlike, their followers

s More technically competentMore technically competent

s More socially accessibleMore socially accessible

s More cosmopolitanMore cosmopolitan

s

More innovative (receptive to change)More innovative (receptive to change)s Higher media exposure (more informed)Higher media exposure (more informed)

s Higher social statusHigher social status

s More conformist with social norms and valuesMore conformist with social norms and values



Generalized Relationshipseneral ized Relationships

With Innovativenessith Innovativeness

Innov- Early Early Late Laggards

ators adopters majority majority

High

Independent

variables

Low

Dogmatism,

Fatalism

Income

variables

Opinion

leadership



Industrial Firms,ndustrial Firms,

Diffusion of Innovationiffusion of Innovation

s Factors related to innovativeness among industrial firmsFactors related to innovativeness among industrial firms

1. Favorable attitude toward science…as witnessed by status1. Favorable attitude toward science…as witnessed by statusgiven scientists in firm.given scientists in firm.

2. Cosmopolitanisms…as indicated by worldwide travel of 2. Cosmopolitanisms…as indicated by worldwide travel of executives and lack of secretiveness.executives and lack of secretiveness.

3. Adequate information sources3. Adequate information sources

(a) high subscription levels to scientific journals(a) high subscription levels to scientific journals

(b) high degree of contact with universities(b) high degree of contact with universities4. High growth rate (sales)4. High growth rate (sales)

5. Lack of “shop-floor resistance to innovation” 5. Lack of “shop-floor resistance to innovation” Source: Journal of Industrial Economics (1959)Source: Journal of Industrial Economics (1959)



The Winds of ChangeThe Winds of Change

0

1000

2000

3000

4000

5000

6000

7000

1999 2000 2001

Germany

Spain

Denmark

U.S.A.

Total Power Capacity , in Megawatts

Johnson, Keith. “In Energy Hunt, Is EU Tilting at Windmills?” WSJ, A13.



Characteristics That Encourage andCharacteristics That Encourage and

Discourage DiffusionDiscourage Diffusion

Encouragencourage

1.. Relativeelative

advantagedvantage2.. Compatibilityompatibility withwith

past usagepast usage

3.. Simplicityimplicity of useof use

4.. Observabilitybservability

5.. Trialabilityrialability

6.. Divisibil ityivisibil ity

Discourageiscourage

1.1. Value barrier Value barrier

2.2. Usage barrierUsage barrier

3.3. ComplexityComplexity

4.4. Risk barrierRisk barrier



Marketing Value AddedMarketing Value Added(Shareholder investment & Co.’s current value)(Shareholder investment & Co.’s current value)

W I N N E R SI N N E R S : P h a rma c eu t i c a l C ompa n i e sP h a rma c eu t i c a l C ompa n i e s

- I nnova t io n aga i n s t d i s e a s eI nnova t io n aga i n s t d i s e a s e

d i sab i l i ty, & de a thi sab i l i ty, & de a th

- new t oo l s to p ro l ong l i fe &new t oo l s to p ro l ong l i f e &

we l l n e s se l l n e s s

RELATIVE ADVANTAGE - is an enhancedbundle of benefits or clear-cut advantages

over existing offerings (+)

Characteristics of New Products



Marketing Value Added ???Marketing Value Added ???L O S E R SO S E R S : Fo rd , G .M ., C h r ys l e r,Fo rd , G .M ., Ch rys l e r,

1 9 5 0 - c a r s m ov ed p eop l e f r om A t o9 5 0 - c a r s m ov ed p eop l e f r om A t o

B1995 - h i g h i n c a r m i le age & qu a l i ty ,9 95 - h i g h i n c a r m i le age & qu a l i ty ,

c a r s s t i l l b a s i c a l ly m ove pe op l e f r oma r s s t i l l b a s i c a l ly m ove p eop l e f rom

A t o B (No fu n d a m en t a l c h a n g e )A t o B (No fu n d a m en t a l c h a n g e )



y CompatibilityCompatibility with existing habits,with existing habits,

values and consumption behavior,values and consumption behavior,

similar usage as existing productssimilar usage as existing products

Characteristics of Newharacteristics of New

Product Successroduct Success



z Trial ability…Trial ability…experience orexperience or

see the newnesssee the newness

– Easily testedEasily tested

– Low risk Low risk

– InexpensiveInexpensive

– No special equipmentNo special equipment

– Free samples or couponsFree samples or coupons

Demo days

Sample size





(wsj 23 July 85)

Women Buying a New Food ProductWomen Buying a New Food Product

Within the Last Month, Their Reasons:Within the Last Month, Their Reasons:

%

%

%0

%0

%0

%0

%0%0

%0

%0

l ik e t r y i n g

c o u p o n

p r i c e

i n t e r e s t

a d v e r t i s i n g



s OBSERVABILITY OBSERVABILITY - is the opportunity foris the opportunity for

buyers to see the newness (+)buyers to see the newness (+)

s COMPLEXITY -COMPLEXITY - is a disadvantage foris a disadvantage for

new productsnew products which slows diffusion andwhich slows diffusion and

may be offset by simplifying usage ormay be offset by simplifying usage orthrough extensive education (-)through extensive education (-)





Observability ??? (Field test validity)



Why Some New Products Fail andWhy Some New Products Fail and

Others SucceedOthers Succeed

s Unreal time pressureUnreal time pressure & vested interest groups& vested interest groups

s Absorption in process Absorption in process: lack of objectivity: lack of objectivity, courage (risk), courage (risk)

s Product DeficienciesProduct Deficiencies (Technical or Design Problems)(Technical or Design Problems)

s Inadequate researchInadequate research (Overestimation of Market Size)(Overestimation of Market Size)

s

Poor Execution of PlansPoor Execution of Plans (Promotion, Distribution,(Promotion, Distribution,Price, poor timing, etcetera)Price, poor timing, etcetera)

s Result: No differential advantage & Result: No differential advantage &

Failure to Meet Customer NeedsFailure to Meet Customer Needs

80 to 90% Fail. Why?

Absolute failure Relative failureAbsolute failure Relative failure



s #1.#1. Performance & Priceerformance & Price

New product failures generally offer the same orNew product failures generally offer the same or

worse performance … than competing productsworse performance … than competing productswith … the same or higher pricewith … the same or higher price

s #2. Inadequate Market Analysis#2. Inadequate Market Analysis

• Offer a unique benefit (a differential advantage)

• Solve a consumers problem or provide an

t it d

New Product Success

Why Some New Products Fail andWhy Some New Products Fail and

Others SucceedOthers Succeed

80 to 90% Fail. Why?

adoption diffusion 8aug06 n36

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