diffusion & adoption of innovations innovation management kevin o’brien
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Diffusion & Adoption of Innovations
Innovation Management
Kevin O’Brien
Learning Objectives
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
(Rogers, 1995)Time
No
n-c
um
ula
tive
Ad
op
ters
T
Time
Cu
mu
lati
veA
do
pte
rs
T
M
Time to First Adoption
Case A Case B
Elapsed time from product launch
Uni
t sa
les
(ado
ptio
n)
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
Adoption decision process Characteristics of the innovation Adopter characteristics Network connectedness Communication channels
Adoption Decision Process
Rate of diffusion is influenced by the level of perceived buying risk: High involvement – low involvement
Adoption decision process: Knowledge
Awareness of needs, awareness of innovation Persuasion
Evaluation, attitude formation Decision
Choice, trial – adoption/rejection Implementation
Putting innovation into use, technical issues, behaviours Confirmation
Reinforcement of decision made, discontinuance?
(Rogers, 1995)
Characteristics of the Innovation
Rate of diffusion is influenced by the characteristics of the innovation: 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
Innovators enthusiasts novelty value
Early adopters visionaries see advantages opinion leadership
Early majority deliberate willing adopters followers
Late majority conservative economic necessity safe to adopt
Laggards traditional cautious
Sloths avoidance isolation virtue of non-adoption
Rate of diffusion is influenced by adopter characteristics:
(after Moore, 1991)
Adopter Characteristics
TIME
SA
LE
S
Innovators
2.5%
Early Adopters
13.5%
Early Majority
34%
Late Majority
34%
Laggards
13.5%
Sloths
2.5%
Pioneers
Pragmatists
Sceptics
(Rogers, 1995; Moore 1991)
Network Connectedness
Earlier adopters are more “network connected”
More predictive than individual adopter characteristics
Word-of-mouth Opinion leaders
Influence others High number of network
links Competent & trustworthy
experts Shared meanings,
beliefs, understandings
AdopterB
AdopterC
AdopterA
AdopterD
Sales
Publications
Events
Sponsorship
Advertising
(Rogers, 1995)
Marketing Communications
Media communications Awareness, interest One-step model: sender-receiver, stimulus-
response Personal communications
Trial, adoption High risk situations Two-step model
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
Adoptions due to mass media
Adoptions due to interpersonal
communication
Time
No
n-c
um
ula
tive
ad
op
tio
ns
The Bass Model for Forecasting Rate of Adoption
(Bass, 1969; Mahajan, Muller & Bass, 1990)
Crossing the Chasm
Novelty Value Functional Value
Innovators Early Adopters
Early Majority
Late Majority
Laggards
Sales
TimeTime
CHASM
Sloths
(Moore, 1991)
Early-Market Strategies
Marketing to the visionaries: establish reputation “best possible solution” (brilliant technology) small number of visionaries buying customised
products high levels of technical support
The chasm: small numbers of customers with high investment
requirements profits squeezed
(Moore, 1991)
Marketing to the Mainstream
Marketing to the pragmatists: complete end-to-end solutions whole product
core, expected, augmented “best solution possible” (focus on needs) simplification, user-friendliness partnerships, collaborations
(Moore, 1991)
Targeting the Majority
When to target the majority rather than innovators? 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), 215-27.
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.
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