DIFFUSION OF INNOVATION
NEW PRODUCTS IN THE MARKET
Every year around 5000 new products appear in the market. However, most fail and only a few remain ( around 20%). Products which are innovative.
Why does this happen?
Marketing issues Valuable resources are wasted which
might have been deployed towards more productive uses
Products that might have helped people do things more productively or attain higher levels in their quality of life, fail to be used.
Marketing issues
Successful new product development is an important element in achieving long term competitive superiority and profitability, especially in low growth markets
A successful new product can be the beginning of a whole new company
THE VALUE CHAIN
Contemporary firms are being attacked by competitively on every dimension and from every direction. The only way to survive this onslaught is to create a ‘value chain’ to serve the customer, which will serve to differentiate the successful firm from its competitors and will provide competitive superiority on the critical attributes of importance to the consumer
WHAT IS AN INNOVATION?
It is any idea or product perceived by the potential adopter to be new. New products are ideas, behaviour or things that are qualitatively different from existing forms
Diffusion of innovation
A process by which a new product moves from initial introduction to regular purchase and use
A process by which an innovation (idea) is communicated through certain channels over time among the members of a social system – Everett Rogers
Diffusion variables
Innovation Communication Time Social system
Types of Innovations
Continuous – modification or improvement of an existing product
Dynamically continuous – may involve the creation of either a new product or the alteration of an existing one ,but does not generally alter established patterns of customer buying and product use
Discontinuous – production of an entirely new product that causes customers to alter their behaviour patterns significantly
INNOVATIONS INCLUDE BOTH A HARDWARE AND A SOFTWARE COMPONENT
The hardware are the physical and tangible aspects of a product. The software is the understanding consumers’ values and lifestyles
Likelihood of innovation success Relative advantage – new products that are most
likely to succeed are those that appeal to strongly felt needs Compatibility – degree to which the product is
consistent with existing values and past experience of the adopters
Complexity – degree to which an innovation is perceived as difficult to understand and use
Trialability – the ability to make trials easy for new products without economic risk to the consumer
Observability – reflects the degree to which results from using a new product are visible to friends and neighbours
Types of Innovators
Cognitive – problem solving, cerebral, new mental experience
Sensory – fantasy, day dreaming, thrill seeking Monomorphic - consumers who are innovators
for one type of product Polymorphic – consumers who are
innovators for more than one type of product
Speed of diffusion
Competitive intensity Standardised technology Vertical coordination Resource commitments
Communication of new products Mass media WOM Homophily – degree to which pairs of
individuals who interact are similar in beliefs, education and social status
Heterophily – inconsistent with own beliefs and views
The Adoption – Decision Process
Confirmation
Knowledge/Awareness
Interest
Evaluation
Trial
Decision
Adopter classes
Innovators - 2.5% Early adopters – 13.5% Early majority – 34% Late majority – 34% Laggards – 16%
Innovativeness
This is the degree to which an individual adopts an innovation relatively earlier than others
Based on time of adoption Based on number of new product
adoption
Parameters for innovativeness Socio-economic variables Personality and attitude Communication variables
Socio – economic variables
Education Literacy Higher social status Upward social mobility Larger-sized units Commercial orientation Favourable attitude towards credit Specialized operations
Personality and attitude
Empathy Ability to deal in
abstraction Rationality Intelligence Favourable
attitude towards change
Ability to cope with uncertainty
Favourable attitude towards education
Favourable attitude towards science
High aspirations
Communication variables
Social participation Interconnectedness
with the social system
Cosmopoliteness Change agent contact Mass media exposure
Exposure to interpersonal communication channels
Knowledge of innovations
Opinion leadership Belonging to highly
interconnected systems
POLYMORPHISM
The degree to which innovators and early adopters for one product are likely to be innovators for other products. Consumers who are innovators for one product are monomorphic. Consumers who are innovators for more than one product are polymorphic.
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