1. Innovation Management
Kevin O’Brien
Diffusion & Adoption of Innovations

2. 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

3. 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)

4. Diffusion of InnovationM
Time
Cumulative
Adopters T
Time
Non-cumulative
Adopters T
(Rogers, 1995)

5. Time to First Adoption
Case A
Case B
Elapsed time from product launch
Unit sales (adoption)
Case A demonstrates the impact of exponential sales growth when the first adoption is secured twice as quickly as in case B

6. Factors Affecting Diffusion
Adoption decision process
Characteristics of the innovation
Adopter characteristics
Network connectedness
Communication channels

7. 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)

8. 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)

9. Adopter Characteristics
Rate of diffusion is influenced by 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
(after Moore, 1991)

10. Adopter Characteristics
TIME
SALES
Innovators
2.5%
Early Adopters
13.5%
Early Majority
34%
Late Majority
Laggards
Sloths
Pioneers
Pragmatists
Sceptics
(Rogers, 1995; Moore 1991)

11. 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
Adopter B C A D
Sales
Publications
Events
Sponsorship
Advertising
(Rogers, 1995)

12. 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

13. Diffusion Modelling The Bass Model for Forecasting Rate of Adoption
Adoptions due to mass media
Adoptions due to interpersonal communication
Time
Non-cumulative adoptions
The Bass Model for Forecasting Rate of Adoption
(Bass, 1969; Mahajan, Muller & Bass, 1990)

14. Crossing the Chasm Novelty Value Functional Value Sales Time CHASM
Innovators
Early Adopters
Early Majority
Late Majority
Laggards
Sales
Time
CHASM
Sloths
(Moore, 1991)

15. 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)

16. 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)

17. 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)

18. References
Bass, F.M. (1969) A new product forecasting model for consumer durables, Marketing Science, 15 (2),
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),
Moore, G.A. (1991) Crossing the chasm, New York: Harper Collins.
Rogers, E.M. (1995) Diffusion of innovations, 4th Ed. New York: Free Press.