new product adoption and diffusion process (adoption theory)

NEW PRODUCT NEW PRODUCT ADOPTION ADOPTION AND DIFFUSION AND DIFFUSION PROCESSPROCESS

(Adoption Theory)(Adoption Theory)

The Adoption Decision The Adoption Decision ProcessProcess

How an individual consumer acts . . .How an individual consumer acts . . .

KNOWLEDGE PERSUASION DECISION

IMPLEMENTATIONSCONFIRMATION

TIME

New Product Adoption New Product Adoption TheoryTheory

ADOPTION PROCESSADOPTION PROCESS - The consumer decision stages that lead - The consumer decision stages that lead

to innovation acceptance/rejection to innovation acceptance/rejection - A - A micro processmicro process process that focuses process that focuses

on on internal forces of the consumerinternal forces of the consumer

* Intra Personal (Psych) Influences* Intra Personal (Psych) Influences* Inter Personal (Social) Influences* Inter Personal (Social) Influences* Product Selection Criteria* Product Selection Criteria

New Product Diffusion New Product Diffusion TheoryTheory

DIFFUSION PROCESS.DIFFUSION PROCESS.

- the spread of an innovation from its.- the spread of an innovation from its.

source to the ultimate consumer.source to the ultimate consumer.

- a - a macro processmacro process that focuses on external. that focuses on external.

forces on the consumer (change agents,forces on the consumer (change agents,

channels of information, types of.channels of information, types of.

information).information).

- occurs in a social system (a target.- occurs in a social system (a target.

audience, community, etc.audience, community, etc.

THE DIFFUSION PROCESSTHE DIFFUSION PROCESSHow different segments of the market How different segments of the market

actact

PER CENT OF TOTAL MARKET

TIME

INN

OV

AT

IOR

S-2

.5%

EA

RL

Y A

DO

PT

ER

S-1

3.5%

EA

RL

Y M

AJO

RIT

Y-3

4%

LA

TE

MA

JOR

ITY

-34%

LA

GG

AR

DS

(IN

CL

UD

ING

NO

NA

DO

PT

ER

S)-

16%

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 (+)

Speed of Diffusion

2.5% Innovators

13.5% Early Adopters

34% Early Majority34% Late Majority

Diffusion Diffusion ProcessProcess• Product Adopter Categories

Diffusion Process,Diffusion Process,Adopter CategoriesAdopter Categories

INNOVATORS - are first to buy and INNOVATORS - are first to buy and typically described as venturesome, typically described as venturesome, younger, well educated, financially younger, well educated, financially stable, and willing to take risks. stable, and willing to take risks.

EARLY ADOPTERS - are local opinion EARLY ADOPTERS - are local opinion

leaders who read magazines and who leaders who read magazines and who are integrate into the social system are integrate into the social system more than the average consumer. more than the average consumer.

EARLY MAJORITY - solid, middle-EARLY MAJORITY - solid, middle-class consumers who are more class consumers who are more deliberate and cautiousdeliberate and cautious

LATE MAJORITY - described as LATE MAJORITY - described as older, more conservative, older, more conservative, traditional, and skeptical of new traditional, and skeptical of new productsproducts


LaggardsLaggards– Resist changeResist change– ConservativeConservative– Like traditionLike tradition– Often older & lower in Often older & lower in

socioeconomic statussocioeconomic status

NonadoptersNonadopters– Refuse to changeRefuse to change

OK, we will

buy X.If I have to buy it I will.

No way!


Brand LoyaltyBrand Loyalty

CIGARETTESCIGARETTES 71%71%

LAUNDRY DETERGENTLAUNDRY DETERGENT 51%51%

GARBAGE BAGS 23%GARBAGE BAGS 23%

AUTOMOBILEAUTOMOBILE 47%47% MEN MEN 51% AGE 60+ : 51% AGE 60+ :

60%60%

WOMEN WOMEN 43% 43% 18-29 : 42% 18-29 : 42%

MidwesternersMidwesterners 52% 52%

EasternersEasterners 42% 42%

Life-Style Characteristics of Life-Style Characteristics of Innovators and Non Innovators and Non

innovatorsinnovators

CharacteristicsCharacteristics InnovatorsInnovators Non Non innovatorsinnovators

Product InterestProduct Interest MORE MORE LESSLESS Opinion LeadershipOpinion Leadership MOREMORE LESSLESS PersonalityPersonality:: DogmatismDogmatism OPEN-MINDEDOPEN-MINDED CLOSE-MINDEDCLOSE-MINDED Social CharacterSocial Character INNER-DIRECT OTHER-INNER-DIRECT OTHER-

DIRECTDIRECT Category WidthCategory Width BROADBROAD NARROWNARROW Venturesome nessVenturesome ness MOREMORE LESSLESS Perceived RiskPerceived Risk LESSLESS MORE MORE

Life-Style Characteristics of Life-Style Characteristics of Innovators and Innovators and NoninnovatorsNoninnovators

CharacteristicsCharacteristics InnovatorsInnovators NoninnovatorsNoninnovators

Purchase and Consumption TraitsPurchase and Consumption Traits: :

Brand LoyaltyBrand Loyalty LESSLESS MOREMORE

Deal PronenessDeal Proneness MOREMORE LESSLESS

UsageUsage MOREMORE LESSLESS Media HabitsMedia Habits::

Magazine ExposureMagazine Exposure MOREMORE LESSLESS

TelevisionTelevision LESSLESS MOREMORE

Specialized Magazine MORESpecialized Magazine MORE LESSLESS

Life-Style Characteristics Life-Style Characteristics of Innovators and of Innovators and

NoninnovatorsNoninnovators

CharacteristicsCharacteristics InnovatorsInnovators Non Non innovatorsinnovators

Demographic CharacteristicsDemographic Characteristics:: AgeAge YOUNGERYOUNGER OLDEROLDER

IncomeIncome MOREMORE LESSLESS EducationEducation MOREMORE LESSLESS Occupational Status MOREOccupational Status MORE LESSLESS

Social CharacteristicsSocial Characteristics:: Social IntegrationSocial Integration MOREMORE LESSLESS Group MembersGroup Members MOREMORE LESSLESS

Characteristics of New Characteristics of New Product SuccessProduct Success

RELATIVE ADVANTAGERELATIVE ADVANTAGE - is an - is an enhanced bundle of benefits or clear-enhanced bundle of benefits or clear-cut advantages over existing offerings cut advantages over existing offerings (+)(+)

CompatibilityCompatibility with existing with existing habits, values and consumption habits, values and consumption behavior, similar usage as behavior, similar usage as existing productsexisting products


Trial ability…Trial ability…experience or see the experience or see the newnessnewness– Easily testedEasily tested– Low riskLow 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 Women Buying a New Food Product Within the Last Month,Product Within the Last Month,

Their Reasons: Their Reasons:

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

like tryingcouponpriceinterestadvertising

OBSERVABILITY OBSERVABILITY - is the opportunity - is the opportunity for buyers to see the newness (+)for buyers to see the newness (+)

COMPLEXITY - COMPLEXITY - is a disadvantage is a disadvantage for new productsfor new products which slows which slows diffusion and may be offset by diffusion and may be offset by simplifying usage or through simplifying usage or through extensive education (-)extensive education (-)


Why Some New Products Why Some New Products Fail and Others SucceedFail and Others Succeed

Failure to Meet Customer NeedsFailure to Meet Customer Needs Poor TimingPoor Timing Market ConditionsMarket Conditions Ineffective or Inconsistent BrandingIneffective or Inconsistent Branding Technical or Design ProblemsTechnical or Design Problems Overestimation of Market SizeOverestimation of Market Size Poor PromotionPoor Promotion Insufficient DistributionInsufficient Distribution

80 to 90% Fail. Why?

Successful and Successful and UnsuccessfulUnsuccessfulNew ProductsNew Products

Difference fromDifference from 50 Successful 50 50 Successful 50 UnsuccessfulUnsuccessful

Competitive ProductCompetitive Product New ProductsNew Products New ProductsNew Products

- - Significantly betterSignificantly better performance,performance, 22 22 4 4 higher pricehigher price- Better performance- Better performance 15 15

66 same or higher pricesame or higher price- Same performance- Same performance 4 4

00 lower pricelower price

Successful and Successful and UnsuccessfulUnsuccessfulNew ProductsNew Products

Difference from 50 SuccessfulDifference from 50 Successful 50 50 UnsuccessfulUnsuccessful

Competitive ProductCompetitive Product New ProductsNew Products New New ProductsProducts

- Same performance- Same performance 9 9 30 30 same or higher pricesame or higher price

- Worse performance- Worse performance 0 0 10 10 same or higher pricesame or higher price

__________ __________ TOTALTOTAL 50 50 50 50

Communication FlowsCommunication Flows

Two-Step Flow of CommunicationTwo-Step Flow of Communication

COMPANYMESSAGE

OPINIONLEADERS

TARGET AUDIENCES

Positions of StatusPositions of Status

OPINION LEADER - OPINION LEADER - one who occupies a position one who occupies a position of of informalinformal influences over the attitudes and overt influences over the attitudes and overt behavior of others. Opinion leadership is behavior of others. Opinion leadership is earnedearned not not assumed.assumed.

CHANGE AGENT - CHANGE AGENT - one who occupies a one who occupies a professional position of professional position of formalformal influence associated influence associated with a given role of status. Change agent status is with a given role of status. Change agent status is assumed, not necessarily earnedassumed, not necessarily earned

FOLLOWER - FOLLOWER - not a “passive patsy.” Actively not a “passive patsy.” Actively seeks influence.seeks influence.

Two-Step Flow of Two-Step Flow of Communication Communication

and Adopter Categoriesand Adopter Categories

Earlyadopters

Innovators Earlymajority

Company Messagefrom mass media

Product CategoryOpinionleader(s)

Potential targetaudiences

Opinion recipient 1Opinion recipient 2Opinion recipient 3

Characteristics of Opinion Characteristics of Opinion LeadersLeaders

in contrast with their followersin contrast with their followers

More like, than unlike, their followersMore like, than unlike, their followers More technically competentMore technically competent More socially accessibleMore socially accessible More cosmopolitanMore cosmopolitan More innovative (receptive to change)More innovative (receptive to change) Higher media exposure (more informed)Higher media exposure (more informed) Higher social statusHigher social status More conformist with social norms and valuesMore conformist with social norms and values

Generalized Relationships Generalized Relationships With InnovativenessWith Innovativeness

Innov- Early Early Late Laggardsators adopters majority majority

High

Independentvariables

Low

Dogmatism,Fatalism

Incomevariables

Opinionleadership

Industrial Firms,Industrial Firms,Diffusion of InnovationDiffusion of Innovation

Factors related to innovativeness among industrial Factors related to innovativeness among industrial firmsfirms

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

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

new product adoption and diffusion process (adoption theory)

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