1. Diffusion of Innovations
Chapter 11
Diffusion of Innovations
Diffusion of Innovations

2. Diffusion
In consumer behavior terms, refers to research on the consumer acceptance of new products and services
Involves 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 public
Adoption: the micro process concerned with the stages the consumer goes through in deciding to accept or reject a new product
Derived from the Latin for “spread out”

3. The diffusion process Diffusion is the process by which
the acceptance of an innovation--a new product, service, idea or practice
is spread by communication--mass media, salespeople, or word-of-mouth
to members of a social system--target market
over a period of time
Examples?
Laser eye surgery

4. Four basic elements of the diffusion process:
The innovation
The channel of communication
The social system
Time

5. 1. The innovation Innovation takes many forms
There is no universally accepted definition of the terms product innovation or new product
Instead, approaches to define the term have taken place within certain contexts:
Firm-oriented definitions
Market-oriented definitions
Consumer-oriented definitions
Product-oriented definitions
Start by citing stats and examples in book (p ) 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 words…is it “new” to the firm; to the market; does the consumer consider it new?
We will focus on the last

6. Product-oriented definitions
This approach focuses on the features inherent in the product itself and the effects these features are likely to have on consumers’ established usage patterns
Robertson identified three types of product innovations:
Continuous innovation
Dynamically continuous innovation
Discontinuous innovation

7. Continuous innovation
Introduction of a modified product rather than a totally new product
Little or no change in technology
Has the least disruptive influence on established usage patterns
Symbolic innovations tend to be continuous
What is it?
Examples?
Redesigned automobile (new Beetle)
Latest version of software program
low-fat version of food product
What are “symbolic innovations”?
Symbolic innovations convey new social or psychological meanings
designer jeans, skin care products for men, specialty coffees

8. Dynamically continuous innovation
May involve a new product or modification of an existing product
Some technical advances
Still does not disrupt or alter consumer buying and usage patterns
What is it?
Examples?
CD players; antilock brakes; disposable diapers; laptops; electric toothbrushes
What about cell phones?

9. Discontinuous innovation
Introduction of a pioneering product
Involves a major technological advance
Consumers must learn new behavior patterns
May be difficult to market initially
Is rare
What is it?
Examples?
Airplanes; cars; home computer; fax machines; VCRs; internet
Cell phone?

10. Product characteristics that influence diffusion
Not all new products meet with immediate success
No precise formula marketers can use to predict how consumers will react to their products
Examples of those?
Apple’s Newton
Electric cars (book); trash compactors; composting toilets
Examples of those that have succeeded?
nutrasweet; disposable diapers (book); cordless phones

11. Researchers have identified five characteristics that appear to influence consumer acceptance
Relative advantage
Compatibility
Complexity
Trialability
Observability

12. Relative advantage
The degree to which potential consumers perceive a new product is superior to existing substitutes
What is it?
Examples?
Cell phone over pager;
fax machine over delivery services;
Vinyl records to cassette to CD
Floppy disks to CD’s

13. Compatibility
The degree to which potential consumers feel a new product is consistent with their present needs, values and practices
What does it mean?
Examples?
Gillette’s Mach 3 razor has become very popular…
But 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 don’t like talking into space

14. Complexity
The degree to which a new product is difficult to understand or use
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 use
VCR 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

15. Trialability
The degree to which a new product is capable of being tried on a limited basis
What does this mean?
Examples?
Free trial (samples)
money-back guarantees--Total Gym (Chuck and Christie); America Online; Ron Popiel’s various products

16. Observability
The ease with which a product’s benefits or attributes can be observed, imagined or described to potential consumers
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

17. 2. Channel of communication
Speed with which an innovation spreads through the market depends in great part on communications
Between the marketer and consumer
Between consumers (word-of-mouth)
In recent years a number of new channels of communication have been developed
The second element in the diffusion process is the…
Examples?
Company web sites ask consumers if they want to receive s, etc. about new products
Companies use floppy disks or CD-ROMS to promote products

18. 3. The social system
The physical, social, or cultural environment to which people belong and within which they function
Members of a social system have at least one characteristic in common that makes them potential buyers of a particular product
The values and norms of a social system will influence the acceptance or rejection of new products
The third element in diffusion is…
What is it?
Why does this matter?
Examples?
Religion will affect acceptance of a new birth control method
Older generation’s acceptance of computers, cell phones, etc.

19. Three characteristics of a social system influence spread of new products
The degree of compatibility between innovation and values of members
Homogeneity of members
Across cultures, depends on social similarity of the cultures
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?

20. 4. Time Time relates to diffusion in three ways:
Amount of purchase time
Adopter categories
Rate of adoption
Time is the final element in the diffusion process

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

22. 2. Adopter categories
Involve 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:
Innovators
Early adopters
Early majority
Late majority
Laggards
These are all explained well in reading, so won’t go into detail.
However, worth mentioning that…

23. Opinion leaders
Opinion leaders are most likely to be found among the early adopters category
Opinion leadership is the process by which one person--the opinion leader--informally influences the actions or attitudes of others
The key characteristic is that it takes place between two individuals, neither of whom represents a commercial selling source and is thus considered more reliable
We’ll see this again later under the heading of “word of mouth”

24. Time and the Adopter Categories
Innovators
Graphically, adopter categories looks something like this
“Average consumer” is right in the middle
Adopter Categories Based on Innovativeness

25. The S-Shaped Diffusion Curve
The S-Shaped Diffusion Curve for Beanie Babies
A pattern of market acceptance for an innovation that begins slow, then accelerates, and finally slows-down.
Graphically, diffusion looks something like this—an “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.

26. 3. Rate of adoption
How long it takes a new product or service to be adopted by members of a social system
Rate of adoption generally is becoming faster
Diffusion of products worldwide is becoming more rapid as well
Marketers generally desire as fast a rate of adoption as possible in order to dominate a market before competitors enter
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 VCR’s, 3-4 years (with the US lagging);
for CD players, about 3 years.

27. “Skimming” Sometimes marketers don’t seek a rapid rate of adoption
Making 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 market
Permits manufacturers to recover development costs more quickly
Skimming is a practice related to rate of adoption
What is it and when might it be used?
Examples?
VCR’s originally sold for $700; now $100 for a better product (sometimes also the result of better technology, e.g., computers)

28. The adoption process
Series of stages the consumer moves through in arriving at a decision to purchase or reject a new product
Five stages include
Knowledge/awareness
Persuasion/interest
Decision/evaluation
Implementation/trial
Confirmation/adoption (rejection)
Nicely covered in book, so won’t go into detail
A simplistic model that doesn’t account for full complexity of consumer decision process, but is still useful
Consumer 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 product
Consumer decides whether the product will meet his/her needs
Consumer 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

29. Resistance to adoption
Researchers have identified five factors that may result in consumers’ failure to adopt a new product
Value barriers
Usage barriers
Risk barriers
Tradition barriers
Image barriers
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 legends”
Chevy Nova
Other 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

30. Table 15.11 The Stages in the Adoption Process
NAME OF STAGE
WHAT HAPPENS DURING THIS STAGE
EXAMPLE
Awareness
Consumer is first exposed to the product innovation.
David sees an ad for a new digital camera in the newspaper.
Interest
Consumer is interested in the product and searches for additional information.
David reads about the camera on the manufacturer’s Web site, ad then goes to a camera store near his office and has a salesman show him the camera.
Evaluation
Consumer 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.

31. Table 15.11 The Stages in the Adoption Process
NAME OF STAGE
WHAT HAPPENS DURING THIS STAGE
EXAMPLE
Trial
Consumer uses the product on a limited basis
Since 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.