Diffusion of InnovationsChapter 11Diffusion of Innovations

DiffusionIn consumer behavior terms, refers to research on the consumer acceptance of new products and servicesInvolves understanding two closely related processes:Diffusion: a macro process concerned with the spread of a new product--an innovation--from its source to the consuming publicAdoption: the micro process concerned with the stages the consumer goes through in deciding to accept or reject a new product

The diffusion processDiffusion is the process by which the acceptance of an innovation--a new product, service, idea or practiceis spread by communication--mass media, salespeople, or word-of-mouth to members of a social system--target marketover a period of time

Four basic elements of the diffusion process:The innovationThe channel of communicationThe social systemTime

1. The innovationInnovation takes many formsThere is no universally accepted definition of the terms product innovation or new productInstead, approaches to define the term have taken place within certain contexts:Firm-oriented definitionsMarket-oriented definitionsConsumer-oriented definitionsProduct-oriented definitions

Product-oriented definitionsThis approach focuses on the features inherent in the product itself and the effects these features are likely to have on consumers established usage patternsRobertson identified three types of product innovations:Continuous innovationDynamically continuous innovationDiscontinuous innovation

Continuous innovationIntroduction of a modified product rather than a totally new productLittle or no change in technologyHas the least disruptive influence on established usage patternsSymbolic innovations tend to be continuous

Dynamically continuous innovationMay involve a new product or modification of an existing productSome technical advancesStill does not disrupt or alter consumer buying and usage patterns

Discontinuous innovationIntroduction of a pioneering productInvolves a major technological advanceConsumers must learn new behavior patternsMay be difficult to market initiallyIs rare

Product characteristics that influence diffusionNot all new products meet with immediate successNo precise formula marketers can use to predict how consumers will react to their products

Researchers have identified five characteristics that appear to influence consumer acceptanceRelative advantageCompatibilityComplexityTrialabilityObservability

Relative advantageThe degree to which potential consumers perceive a new product is superior to existing substitutes

CompatibilityThe degree to which potential consumers feel a new product is consistent with their present needs, values and practices

ComplexityThe degree to which a new product is difficult to understand or use

TrialabilityThe degree to which a new product is capable of being tried on a limited basis

ObservabilityThe ease with which a products benefits or attributes can be observed, imagined or described to potential consumers

2. Channel of communicationSpeed with which an innovation spreads through the market depends in great part on communicationsBetween the marketer and consumerBetween consumers (word-of-mouth)In recent years a number of new channels of communication have been developed

3. The social systemThe physical, social, or cultural environment to which people belong and within which they functionMembers of a social system have at least one characteristic in common that makes them potential buyers of a particular productThe values and norms of a social system will influence the acceptance or rejection of new products

Three characteristics of a social system influence spread of new productsThe degree of compatibility between innovation and values of membersHomogeneity of membersAcross cultures, depends on social similarity of the cultures

4. TimeTime relates to diffusion in three ways:Amount of purchase timeAdopter categoriesRate of adoption

1. Purchase timeRefers to the amount of time that elapses between a consumers initial awareness of a new product or service and the point at which he or she purchases or rejects itImportant because is a predictor of the overall length of time it will take for the product to achieve widespread adoption

2. Adopter categoriesInvolve a classification scheme that indicates where a consumer stands relative to other consumers in terms of when they adopt a new product (i.e., time)Five categories identified in research:InnovatorsEarly adoptersEarly majorityLate majorityLaggards

Opinion leadersOpinion leaders are most likely to be found among the early adopters categoryOpinion leadership is the process by which one person--the opinion leader--informally influences the actions or attitudes of othersThe key characteristic is that it takes place between two individuals, neither of whom represents a commercial selling source and is thus considered more reliable

Time and the Adopter CategoriesAdopter Categories Based on Innovativeness

The S-Shaped Diffusion Curve A pattern of market acceptance for an innovation that begins slow, then accelerates, and finally slows-down.The S-Shaped Diffusion Curve for Beanie Babies

3. Rate of adoptionHow long it takes a new product or service to be adopted by members of a social systemRate of adoption generally is becoming fasterDiffusion of products worldwide is becoming more rapid as wellMarketers generally desire as fast a rate of adoption as possible in order to dominate a market before competitors enter

SkimmingSometimes marketers dont seek a rapid rate of adoptionMaking the product available at a very high price to consumers who are willing to pay top dollar, then gradually lowering the price over time for additional segments of the marketPermits manufacturers to recover development costs more quickly

The adoption processSeries of stages the consumer moves through in arriving at a decision to purchase or reject a new productFive stages includeKnowledge/awarenessPersuasion/interestDecision/evaluationImplementation/trialConfirmation/adoption (rejection)

Resistance to adoptionResearchers have identified five factors that may result in consumers failure to adopt a new productValue barriersUsage barriersRisk barriersTradition barriersImage barriers

Table 15.11 The Stages in the Adoption ProcessNAME OF STAGEWHAT HAPPENS DURING THIS STAGEEXAMPLEAwarenessConsumer is first exposed to the product innovation.David sees an ad for a new digital camera in the newspaper.InterestConsumer is interested in the product and searches for additional information.David reads about the camera on the manufacturers Web site, ad then goes to a camera store near his office and has a salesman show him the camera.EvaluationConsumer decides whether or not to believe that this product or service will satisfy the need--a kind of mental trial.After talking with a knowledgeable friend, David decides that his camera should be able to provide him with the photos he needs to use in PowerPoint presentations. He also likes the fact that it uses standard floppy disks for storage.

Table 15.11 The Stages in the Adoption ProcessTrialConsumer uses the product on a limited basisSince camera cannot be tried like a small bottle of a new shampoo, David buys the camera from a dealer offering a 14-day full refund policy.Adoption (Rejection)If trial is favorable, consumer decides to use the product on a full, rather than a limited basis--if unfavorable, the consumer decides o reject it.David finds that the camera is easy to use and the results are excellent; consequently, he keeps the digital camera.NAME OF STAGEWHAT HAPPENS DURING THIS STAGEEXAMPLE

**Derived from the Latin for spread out

*Examples?Laser eye surgery*Start by citing stats and examples in book (p. 353-4) of how businesses must continue to innovate or fail

What is innovation?

Examples of forms? In the computer industry, we have:Completely new technology (pc); changes to existing products (laptop); symbolic changes (shape of the iMac)

but FTC says if using term new, it has to be less than six months from initial distribution in the market

In other wordsis it new to the firm; to the market; does the consumer consider it new?

We will focus on the last*What is it?

Examples?Redesigned automobile (new Beetle)Latest version of software programlow-fat version of food product

What are symbolic innovations?Symbolic innovations convey new social or psychological meanings

Examples?designer jeans, skin care products for men, specialty coffees*What is it?

Examples?CD players; antilock brakes; disposable diapers; laptops; electric toothbrushes

What about cell phones?*What is it?

Examples? Airplanes; cars; home computer; fax machines; VCRs; internet

Cell phone?*Examples of those?Apples NewtonElectric cars (book); trash compactors; composting toilets

Examples of those that have succeeded? nutrasweet; disposable diapers (book); cordless phones*What is it?

Examples? Cell phone over pager; fax machine over delivery services; Vinyl records to cassette to CDFloppy disks to CDs *What does it mean?

Examples? Gillettes Mach 3 razor has become very popularBut unlikely men will accept a depilatory cream designed to remove facial hair (because incompatible with daily shaving practices)

It is possible to make a very tiny phone, and they are popular in Japan, but Americans dont like talking into space*Obviously, the harder to understand, assemble or operate, the less its likelihood of being selected

Examples?Cameras--drop-in film auto focus, built-in flash, etc. all added to make cameras easier to useVCR is an exception to this!

Apple had a great ad a couple of years ago, comparing the size of the pile of documentation that came along with a new Windows-based computer and an Apple*What does this mean?

Examples? Free trial (samples)money-back guarantees--Total Gym (Chuck and Christie); America Online; Ron Popiels various products*What is it?

Examples?Fashions and jewelry (worn in public) vs. soap or deodorant

Use of celebrities and athletes to wear/use products can enhance speed of adoption*The second element in the diffusion process is the

Examples?Company web sites ask consumers if they want to receive e-mails, etc. about new productsCompanies use floppy disks or CD-ROMS to promote products

*The third element in diffusion is

What is it?

Why does this matter?

Examples? Religion will affect acceptance of a new birth control methodOlder generations acceptance of computers, cell phones, etc.*Examples?Diet pills and sugar-free food appeal to American desire to eat as much as they want, not exercise

Hair care product for African-Americans in New York City vs. whites in upstate New York

Similar? US and UK. Dissimilar? Christian vs. Muslim; but halal v. kosher?*Time is the final element in the diffusion process

*What does it mean?

See Kanuk Table 15-8 p. 421 for time line for typical purchase

In other words, when individual purchase time is short, a marketer can expect the overall rate of diffusion will be faster*These are all explained well in reading, so wont go into detail.However, worth mentioning that*Well see this again later under the heading of word of mouth*Graphically, adopter categories looks something like this

Average consumer is right in the middle*Graphically, diffusion looks something like thisan S shape

Why does the curve ultimately flatten out?Because after a while most people who were going to purchase the innovation have already done so.*The third time-related factor is

What is it?

E.g., it took 12 years longer for black and white tvs to reach the same level of penetration in Europe and Japan as in US; for color TVs, 5 years in Japan and slightly longer in Europe; for VCRs, 3-4 years (with the US lagging); for CD players, about 3 years.*Skimming is a practice related to rate of adoption

What is it and when might it be used?

Examples?VCRs originally sold for $700; now $100 for a better product (sometimes also the result of better technology, e.g., computers)*Nicely covered in book, so wont go into detailA simplistic model that doesnt account for full complexity of consumer decision process, but is still usefulConsumer is first exposed to the product innovation (e.g., an ad on television)Consumer is interested and seeks and obtains information about the product; develops a favorable or unfavorable attitude toward the productConsumer decides whether the product will meet his/her needsConsumer uses the product on a limited basis (e.g., a 14-day money-back guarantee)If trial is favorable, consumer decides to use the product on a full, rather than limited basis/or rejects it*Again, these are explained well in text and will not cover in detail

Focus on #4: Tradition barriers Language and cultural norms sometimes get in the way of adoption outside the U.S.Examples in book p. 378

Some famous instances of language barriers have turned out to be urban legendsChevy NovaOther examples (see web articles in file)

Sometimes cultural differences can raise serious problems:Nestle/infant formula--not considering quality of water and mothers dilution of product due to low incomes