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17 cb diffusion of innovations 2015

  1. 1. Consumer Behaviour -Prof. Rajesh Satpathy
  2. 2. What is Diffusion? When the World Health Organization launched a worldwide campaign to eradicate small pox, it was engaged in diffusion. When Apple launched i-POD or ZUNE-HD by Microsoft, it was diffusing a new product. When Bob Dylan wrote “The times they are a-Changin,” he was describing diffusion. Def: “The diffusion process is the one, which is the spread of a new idea from its source of invention or creation to its ultimate users or adaptors”. Diffusion of Innovation
  3. 3. Video: Toothbrush by Oral B
  4. 4. ZUNE HD by Microsoft
  5. 5. Instant Photographic Camera by Polaroid
  6. 6. Online C2B by
  7. 7. Diffusion of Innovations is a theory of how, why, and at what rate new ideas and technology spread through cultures. It defines diffusion as "the process by which an innovation is communicated through certain channels over time among the members of a social system." History The origins of the diffusion of innovations theory are varied and span across multiple disciplines. Rogers identifies six main traditions that impacted diffusion research: anthropology, early sociology, rural sociology, education, industrial, and medical sociology. The diffusion of innovation theory has been largely influenced by the work of rural sociologists. Diffusion of Innovation
  8. 8. Elements of diffusion of innovations: The key elements in diffusion research are: the innovation, types of communication channels, time or rate of adoption, and the social system which frames the innovation decision process. Types of innovation-decisions: There are three types of innovation-decisions within diffusion of innovations. An individual or an organization/social system bases the type of decision on whether an innovation is adopted /rejected. The three types of innovation-decisions are: Optional innovation-decisions, collective innovation-decisions, authority innovation-decisions. Diffusion of Innovation
  9. 9. Optional Innovation-Decision: This decision is made by an individual who is in some way distinguished from others in a social system. Collective Innovation-Decision: This decision is made collectively by all individuals of a social system. Authority Innovation-Decision: This decision is made for the entire social system by few individuals in positions of influence or power. Diffusion of Innovation
  10. 10. The Adoption Process: Diffusion of an innovation occurs through a five–step process. This process is a type of decision-making. It occurs through a series of communication channels over a period of time among the members of a similar social system. Rogers categorizes the five stages (steps) as: awareness, interest, evaluation, trial, and adoption. It should be noted that an individual might reject an innovation at anytime during or after the adoption process. In later editions of the Diffusion of Innovations Rogers changes the terminology of the five stages to: knowledge, persuasion, decision, implementation, and confirmation. However the descriptions of the categories have remained similar throughout the editions. Diffusion of Innovation
  11. 11. Diffusion of Innovation
  12. 12. Knowledge In this stage the individual is first exposed to an innovation but lacks information about the innovation. It should be noted that during this stage of the process the individual has not been inspired to find more information about the innovation. Persuasion In this stage the individual is interested in the innovation and actively seeks information/detail about the innovation. Decision In this stage the individual takes the concept of the innovation and weighs the advantages/disadvantages of using the innovation and decides whether to adopt or reject the innovation. Due to the individualistic nature of this stage Rogers notes that it is the most difficult stage to acquire empirical evidence. Diffusion of Innovation
  13. 13. Implementation In this stage the individual employs the innovation to a varying degree depending on the situation. During this stage the individual determines the usefulness of the innovation and may search for further information about it. Confirmation Although the name of this stage may be misleading, in this stage the individual finalizes their decision to continue using the innovation and may use the innovation to its fullest potential. Diffusion of Innovation
  14. 14. State of the Art Water Purifier by Philips
  15. 15. Video: Nonstick Cookware introduced by by Nirlep
  16. 16. Rates of Adoption The rate of adoption is defined as: the relative speed with which members of a social system adopt an innovation. It is usually measured by the length of time required for a certain percentage of the members of a social system to adopt an innovation. The rates of adoption for innovations are determined by an individual’s adopter category. In general individuals who first adopt an innovation require a shorter adoption period (adoption process) than late adopters. Within the rate of adoption there is a point at which an innovation reaches critical mass. This is a point in time within the adoption curve that enough individuals have adopted an innovation in order that the continued adoption of the innovation is self-sustaining. Diffusion of Innovation
  17. 17. Rates of Adoption In describing how an innovation reaches critical mass, Rogers outlines several strategies in order to help an innovation reach this stage. These strategies are: have an innovation adopted by a highly respected individual within a social network, creating an instinctive desire for a specific innovation. Inject an innovation into a group of individuals who would readily use an innovation, and provide positive reactions and benefits for early adopters of an innovation. Diffusion of Innovation
  18. 18. Characteristics of Innovations Rogers defines several intrinsic characteristics of innovations that influence an individual’s decision to adopt or reject an innovation. The relative advantage is how improved an innovation is over the previous generation. Compatibility is the second characteristic, the level of compatibility that an innovation has to be assimilated into an individual’s life. The complexity of an innovation is a significant factor in whether it is adopted by an individual. If the innovation is too difficult to use an individual will not likely adopt it. The fourth characteristic, trialability, determines how easily an innovation may be experimented with as it is being adopted. If a user has a hard time using and trying an innovation this individual will be less likely to adopt it. Diffusion of Innovation
  19. 19. Characteristics of Innovations The final characteristic, observability, is the extent that an innovation is visible to others. An innovation that is more visible will drive communication among the individual’s peers and personal networks and will in turn create more positive or negative reactions. Diffusion of Innovation
  20. 20. Adopter Categories: Rogers defines an adopter category as a classification of individuals within a social system on the basis of innovativeness. Rogers suggests a total of five categories of adopters in order to standardize the usage of adopter categories in diffusion research. It should be noted that the adoption of an innovation follows an S curve when plotted over a length of time. The categories of adopters are: innovators, early adopters, early majority, late majority, and laggards. Diffusion of Innovation
  21. 21. Diffusion of Innovation The diffusion of innovations according to Rogers. With successive groups of consumers adopting the new technology (shown in blue), its market share (yellow) will eventually reach the saturation level.
  22. 22. Innovators : (2.5% of the Market) Innovators are the first individuals to adopt an innovation. Innovators are willing to take risks, youngest in age, have the highest social class, have great financial lucidity, very social and have closest contact to scientific sources and interaction with other innovators. Early Adopters: (13.5% of the Market) This is second fastest category of individuals who adopt an innovation. These individuals have the highest degree of opinion leadership among the other adopter categories. Early adopters are typically younger in age, have a higher social status, have more financial lucidity, advanced education, and are more socially forward than late adopters. Diffusion of Innovation
  23. 23. Video: iPOD by Apple Computers
  24. 24. Video: Processors by Intel Corp.
  25. 25. Early Majority: (34% of the Market) Individuals in this category adopt an innovation after a varying degree of time. This time of adoption is significantly longer than the innovators and early adopters. Early Majority tend to be slower in the adoption process, have above average social status, contact with early adopters, and show some opinion leadership. Late Majority: (34% of the Market) Individuals in this category will adopt an innovation after the average member of the society. These individuals approach an innovation with a high degree of skepticism and after the majority of society has adopted the innovation. Late Majority are typically skeptical about an innovation, have below average social status, very little financial lucidity, in contact with others in late majority and early majority, very little opinion leadership. Diffusion of Innovation
  26. 26. Laggards: (16% of the Market) Individuals in this category are the last to adopt an innovation. Unlike some of the previous categories, individuals in this category show little to no opinion leadership. These individuals typically have an aversion to change-agents and tend to be advanced in age. Laggards typically tend to be focused on “traditions”, have lowest social status, lowest financial fluidity, oldest of all other adopters, in contact with only family and close friends, very little to no opinion leadership. Diffusion of Innovation
  27. 27. The Diffusion Process: Diffusion process is the manner in which innovations spread throughout the market. Spread refers to the purchase behavior where a product is purchased with some continuing regularity. The diffusion process follows a similar pattern, overtime, irrespective of the social group or innovation. The typical diffusion process shows a slow growth or adoption. It later rises rapidly, and then a period of slow growth is noticed. In fast diffusion process, the product clicks immediately. The spread of innovation is very quick. People patronize the product immediately and later on there is again slow diffusion. Diffusion of Innovation
  28. 28. The Diffusion Process: In slow diffusion process, the product takes a lot of time to diffuse or spread, and the consumer follows a pattern of adoption slowly by getting acquainted with the product. These studies show that the products take a certain amount of time, from when it gets introduced to its saturation. The marketer therefore has to understand what determines the spread of innovation in a given market segment, and how do the early buying consumers differ from those of late purchasers. Diffusion of Innovation
  29. 29. The rate of spread of innovation depends on a number of factors: 1. Type of group: Some groups, who are young, affluent and highly educated, accept changes faster than the old, traditional and poor groups. This shows that the target market is an important determinant of the rate of diffusion. 2. Perceived risk: The more the risk associated with changing to new innovation, the slower is the rate of diffusion. The risk consists of the product not performing as expected, the risk of the consequences of change-over, and the risk of reverting back to the old product, if not satisfied with the innovative product. Diffusion of Innovation
  30. 30. The rate of spread of innovation depends on a number of factors: 3. Type of decision: An individual vs. a collective decision. Individual decisions head to faster diffusion than collective ones. 4. Marketing effort: This also affects the diffusion process. More aggressive marketing effort, consisting of high and continuous advertising expenditure, diffuses faster than otherwise. 5. Trial: The trial can be taken at low cost and low risk, the diffusion is faster. Some products can be borrowed, rented or, their trial can be taken at retail outlets. These products like medicines and other low-priced items have faster diffusion. These days even car outlets are giving free trials and rides to prospective customers to make their new models of cars diffuse faster!!!
  31. 31. The rate of spread of innovation depends on a number of factors: 6. Fulfillment of felt need: The faster a need is satisfied or fulfilled by a product, the greater is the rate of its diffusion. 7. Compatibility: The more the product is compatible with the beliefs, attitudes and values of the individual or group the faster the diffusion—vegetables soup for vegetarians, ordinary microwave, no roasting. 8. Relevant advantage: The advantage could be of price, quality and ease of handling product quality. To have quick diffusion, the product must offer either a price advantage or a performance advantage. Washing machine is expensive, but a labour saving device.
  32. 32. The rate of spread of innovation depends on a number of factors: 9. Complexity: If the product is complex (difficult to understand and use) the diffusion is slower. The product may be complex but it must be easy to understand. Complexity may be because of many attributes (attributes complexity which are difficult to understand). The other complexity may be trade off complexity. The trade off takes place between cost of purchase and economy. Convenience vs. space or speed of cooking vs. quality of cooking, as in microwave ovens. Eg: Airtel Black Berry Ad- Where tech savvy customers can adopt this product who knows the use of internet, e-mail etc. 10. Observability: The more easily the positive effects of the products can be observed, the more discussion takes place and faster the diffusion process, e.g., cell phones.
  33. 33. Adoption and Diffusion through Marketing Strategy: Marketers have been trying to influence consumers to adopt new innovations. This is done through free samples and price promotions. Advertising is done extensively when the results are not found positive by distribution of free samples and promotions. Sometimes price promotions and free samples are backed by advertising techniques. Sometimes change agents are used to overcome resistance to adoption. Eg.: For medical products, hospitals, clinics and physicians of repute are used as change agents. Diffusion of Innovation
  34. 34. Adoption and Diffusion through Marketing Strategy: Rate of Diffusion: The rate of diffusion can be low or high. Marketers have 2 options that can influence the rate of diffusion. Skimming Strategy: This strategy used for major innovations, and when the product is in great demand. Prices are set high and it has slow rate of diffusion. The strategy aims at skimming the cream of the market i.e., to take advantage and get the profits in abundance. The segment is small and specific. The segment is not price sensitive. It has its own lifestyles and demographic characteristics, awareness and information advertising is used in this case. The distribution is done from selective outlets. Diffusion of Innovation
  35. 35. Adoption and Diffusion through Marketing Strategy: Penetration Strategy: In this, there is rapid and widespread diffusion as the product is of low value and is within the reach of many. The product is sold to a General Market by an intensive campaign. The distribution is extensive and the product used is general. It is used in new products which are not major innovations like cold drink, health drinks, coffee etc. The advertising is widespread and other means of promotion are also used. Diffusion of Innovation
  36. 36. Adoption and Diffusion through Marketing Strategy: The distribution is extensive and covering as many outlets as possible. The price is low and the product is available. The strategy keeps changing with its position on the diffusion curve. All electronic products of major innovation start with the skimming strategy and gradually move down to penetration strategy. The price of computers, television, microwave ovens etc., start with a high price and as the product is adopted and many more competitors come in the skimming strategy is changed to penetration strategies. Some products start with a penetration strategy and raise their prices with the widespread acceptance of the product in the market. Diffusion of Innovation
  37. 37. Video: Diapers by Pampers
  38. 38. World’s Top Innovative Companies
  39. 39. Thank You!!