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

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Ad

op

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T

Time

Cu

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lati

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do

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Time to First Adoption

Case A Case B

Elapsed time from product launch

Uni

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les

(ado

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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

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ad

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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.