NEW PRODUCT ADOPTION AND DIFFUSION PROCESS (Adoption Theory)

The Adoption Decision Process How an individual consumer acts... KNOWLEDGEPERSUASIONDECISION IMPLEMENTATIONSCONFIRMATION TIME

New Product Adoption Theory n ADOPTION PROCESS - The consumer decision stages that lead to innovation acceptance/rejection - The consumer decision stages that lead to innovation acceptance/rejection - A micro process process that focuses on - A micro process process that focuses on internal forces of the consumer internal forces of the consumer * Intra Personal (Psych) Influences * Inter Personal (Social) Influences * Product Selection Criteria

New Product Diffusion Theory n 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 macro process that focuses on external. - a macro process 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 PROCESS How different segments of the market act PER CENT OF TOTAL MARKET TIME INNOVATIORS-2.5% EARLY ADOPTERS-13.5% EARLY MAJORITY-34% LATE MAJORITY-34% LAGGARDS (INCLUDING NONADOPTERS)-16%

is influenced by… * Competitive Intensity (+) * Good Supplier Reputation (+) * Standardization of Technology (+) * Vertical ( ) Channel Coordination (+) * ($) Resource Commitments (+) Speed of Diffusion

2.5% Innovators 13.5% Early Adopters 34% Early Majority 34% Late Majority Diffusion Process Product Adopter Categories

Diffusion Process, Adopter Categories n INNOVATORS - are first to buy and typically described as venturesome, younger, well educated, financially stable, and willing to take risks. n EARLY ADOPTERS - are local opinion leaders who read magazines and who are integrate into the social system more than the average consumer.

n EARLY MAJORITY - solid, middle-class consumers who are more deliberate and cautious n LATE MAJORITY - described as older, more conservative, traditional, and skeptical of new products Diffusion Process, Adopter Categories

n Laggards –Resist change –Conservative –Like tradition –Often older & lower in socioeconomic status n Nonadopters –Refuse to change OK, we will buy X. If I have to buy it I will. No way! Diffusion Process, Adopter Categories

Brand Loyalty CIGARETTES71% LAUNDRY DETERGENT51% GARBAGE BAGS 23% AUTOMOBILE47% MEN 51% AGE 60+ : 60% MEN 51% AGE 60+ : 60% WOMEN 43% : 42% WOMEN 43% : 42% Midwesterners 52% Easterners 42%

Life-Style Characteristics of Innovators and Non innovators Characteristics Innovators Non innovators n Product Interest MORELESS n Opinion LeadershipMORELESS n Personality: DogmatismOPEN-MINDEDCLOSE-MINDED DogmatismOPEN-MINDEDCLOSE-MINDED Social CharacterINNER-DIRECT OTHER-DIRECT Social CharacterINNER-DIRECT OTHER-DIRECT Category WidthBROADNARROW Category WidthBROADNARROW n Venturesome nessMORELESS n Perceived RiskLESSMORE

Life-Style Characteristics of Innovators and Noninnovators Characteristics Innovators Noninnovators n Purchase and Consumption Traits: Brand LoyaltyLESSMORE Brand LoyaltyLESSMORE Deal PronenessMORELESS Deal PronenessMORELESS UsageMORELESS UsageMORELESS n Media Habits: Magazine ExposureMORELESS TelevisionLESSMORE TelevisionLESSMORE Specialized Magazine MORELESS Specialized Magazine MORELESS

Life-Style Characteristics of Innovators and Noninnovators Characteristics Innovators Non innovators n Demographic Characteristics: AgeYOUNGEROLDER AgeYOUNGEROLDER IncomeMORELESS IncomeMORELESS EducationMORELESS EducationMORELESS Occupational Status MORELESS Occupational Status MORELESS n Social Characteristics: Social IntegrationMORELESS Social IntegrationMORELESS Group MembersMORELESS Group MembersMORELESS

Characteristics of New Product Success n RELATIVE ADVANTAGE - is an enhanced bundle of benefits or clear-cut advantages over existing offerings (+)

­ Compatibility with existing habits, values and consumption behavior, similar usage as existing products Characteristics of New Product Success

® Trial ability…experience or see the newness –Easily tested –Low risk –Inexpensive –No special equipment –Free samples or coupons Demo days Sample size Characteristics of New Product Success

(wsj 23 July 85) Women Buying a New Food Product Within the Last Month, Their Reasons:

n OBSERVABILITY - is the opportunity for buyers to see the newness (+) n COMPLEXITY - is a disadvantage for new products which slows diffusion and may be offset by simplifying usage or through extensive education (-) Characteristics of New Product Success

Why Some New Products Fail and Others Succeed n Failure to Meet Customer Needs n Poor Timing n Market Conditions n Ineffective or Inconsistent Branding n Technical or Design Problems n Overestimation of Market Size n Poor Promotion n Insufficient Distribution 80 to 90% Fail. Why?

Successful and Unsuccessful New Products Difference from 50 Successful 50 Unsuccessful Competitive Product New Products New Products - Significantly better performance, 22 4 performance, 22 4 higher price higher price - Better performance 15 6 same or higher price same or higher price - Same performance 4 0 lower price lower price

Successful and Unsuccessful New Products Difference from 50 Successful 50 Unsuccessful Competitive Product New Products New Products - Same performance 9 30 same or higher price same or higher price - Worse performance 0 10 same or higher price same or higher price _____ _____ _____ _____ TOTAL TOTAL 50 50

Communication Flows n Two-Step Flow of Communication COMPANY MESSAGE OPINION LEADERS TARGET AUDIENCES

Positions of Status n OPINION LEADER - one who occupies a position of informal influences over the attitudes and overt behavior of others. Opinion leadership is earned not assumed. n CHANGE AGENT - one who occupies a professional position of formal influence associated with a given role of status. Change agent status is assumed, not necessarily earned n FOLLOWER - not a “passive patsy.” Actively seeks influence.

Two-Step Flow of Communication and Adopter Categories Early adopters Innovators Early majority Company Message from mass media Product Category Opinion leader(s) Potential target audiences Opinion recipient 1 Opinion recipient 2 Opinion recipient 3

Characteristics of Opinion Leaders in contrast with their followers n More like, than unlike, their followers n More technically competent n More socially accessible n More cosmopolitan n More innovative (receptive to change) n Higher media exposure (more informed) n Higher social status n More conformist with social norms and values

Generalized Relationships With Innovativeness Innov- Early Early Late Laggards ators adopters majority majority High Independent variables Low Dogmatism, Fatalism Income variables Opinion leadership

Industrial Firms, Diffusion of Innovation n Factors related to innovativeness among industrial firms 1. Favorable attitude toward science…as witnessed by status given scientists in firm. 2. Cosmopolitanisms…as indicated by worldwide travel of executives and lack of secretiveness. 3. 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 universities 4. High growth rate (sales) 5. Lack of “shop-floor resistance to innovation” Source: Journal of Industrial Economics (1959)