Advanced Models in High-Tech Marketing Day 3- Diffusion of Innovation modelos avançados em marketing de alta tecnologia

The Chasm Copyrights reserved to Ronen Arbel Atravessando o Abismo

The Fall into the Chasm Copyrights reserved to Ronen Arbel 20123

Course Objectives Review of advanced models in high-tech marketing Implementation of these models by the participants in a unique project Implementação Único Projeto Copyrights reserved to Ronen Arbel 20124

Course Rational Innovation Diffusion of Innovation Positioning/Branding Revenues Copyrights reserved to Ronen Arbel 20125

Course Rational inovação difusão da inovação Posicionamento/ Gestão de Marcas receita Copyrights reserved to Ronen Arbel 20126

Course Plan Copyrights reserved to Ronen Arbel 20127

Day 3 Objectives Product Life Cycle Ciclo de vida do produto Crossing the Chasm Atravessando o Abismo Dual Markets Change of Dominance mudança de domínio Copyrights reserved to Ronen Arbel 20128

DIFFUSION OF INNOVATIONS IN HEALTH CARE: DOES THE DUAL MARKET PHENOMENON EXIST? Ronen Arbel Thesis Defense Presentation Ben-Gurion University -March 2012

Effect of innovation on healthcare Copyrights reserved to Ronen Arbel Saúde Esperança de vida

Diffusion of innovation in healthcare 50% reduction in mortality was achieved in 7/9 major causes of death, by the following path (1) : 1.Research and technology breakthroughs (Innovation) 2.Widespread diffusion of innovation 3.Public health efforts 1.Rust G., Satcher D, Fryer GE, Levine RS, Blumenthal DS, Triangulating on Success: Innovation, Public Health, Medical Care, and Cause- Specific US Mortality Rates Over a Half Century, (1950–2000); Am J Public Health April 1; 100 (Suppl 1): S95– Yusuf S, Islam SQ, Chow CK, et al, Use of secondary prevention drugs for cardiovascular disease in the community in high-income, middle-income, and low-income countries (the PURE Study): a prospective epidemiological survey. Lancet 2011; 378: 1231–43. The use of secondary prevention medications is low worldwide—especially in low-income countries and rural areas (2).

Adoption of New Tech - Rogers Rogers EM, Diffusion of Innovation, 4th ed. The free press, 1995

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The Classic Model of Diffusion- Bass S(T) =p X m + (q - p)Y(T) – (q/m)[Y(T)]2 M- total number of buyers in the period P – coefficient of innovators Q- coefficient of “imitators” Y(T) – previous year buyers Bass FM, A New Product Growth for Model Consumer Durables. Management Science, Vol. 15, No. 5, Theory Series (Jan., 1969),

The dual market phenomenon Recent studies have extended Moore’s approach by dividing the market into 2 distinct groups: – innovators and early adopters as “early market” or “innovators” – all other groups as “majority adopters” or “main market”. The two mathematical models developed for the consumer electronics market were analyzed: – The Saddle Model (Goldenberg, Libai and Muller) – The CD Time Model (Muller and Yogev)

The Saddle Model Goldenberg J, Libai B, Muller E, Riding the saddle: how cross-market communication can create a major slump in sales. J. Mark. 2002; 66: 1–16. A main limitation with the saddle model is that many technologies do not follow the strict saddle definitions

The CD Model Muller E, Yogev G, When does the majority become a majority? Empirical analysis of the time at which main market adopters purchase the bulk of our sales. Technological Forecasting & Social Change 73 (2006) 1107–1120

The CD Model Parameters SerparameterDescription 1NiMarket potential of the early market 2NmMarket potential of the majority 3PiCoefficient of external influence for the early market 4QiCoefficient of internal influence for the early market 5PmCoefficient of external influence for the main market 6QmCoefficient of internal influence for the main market 7QimInfluence of early market on main market 8I(t)number of adopters out of the early market population 9M(t)number of adopters out of the main market population

Innovator Diffusion Equation External influence of innovators Internal influence of innovators

Majority Diffusion Equation Internal influence of majority External influence on majority influence of innovators on majority

Optimization Method Objective function : MIN (err^2) S.T. Constraints: Pi ≥ 0; Qi ≥ 0; Qm ≥ 0; Qim≥ 0 Err^2 : Sum of Squares of the deltas between the model and actual data.

US MRI – Model Graph Change of Dominance

Model Fit Results SerTechnologyCountryModel Fit 1MRI UK94% 2MRI US96% 3PCI AUS96% 4PCINY- US 100% 5StentsNZ 99% 6PTCANZ 96% 7StatinsUK 99% 8AspirinUS 94% 9ACEUS 96% 10CCBUS 99%

CD time results It takes 5-10 years to achieve mainstream market dominance

Early Adoption Parameters Internal influence (Qi) is much higher than external influence (Pi) Boca-a-boca

Word of Mouth Beats Promotion! Copyrights reserved to Ronen Arbel >>> Promoção

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The chasm between early and main adopters Internal Effect of innovators [Qi] is always higher than their effect on majority adopters [Qim]

Comparison to consumer electronics products Similar patterns in various high-tech markets

Summary The dual market phenomenon exists! The average CD time is 5-10 years chasm between early and mainstream adopters Word of mouth effect is 10X Promotion

Health Industry Implications Support internal communications focused meetings, in adjunction to the professional conferences. key opinion leaders share their experience and thoughts with their colleagues However, mass –market promotion, such as Direct- to Consumer advertising, is probably a waste of resources in the early adoption stage

The Fall into the Chasm Copyrights reserved to Ronen Arbel

Crossing the Chasm - Indigo Copyrights reserved to Ronen Arbel Atravessando o Abismo

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Crossing The Chasm tips Mainstream early adopters Identify the early and mainstream segments product mix is different for mainstream adopters: – Product : Higher Quality and Performance – Price : Lower – Promotion : word of mouth (per segment) – Place : relevant for each segment

Advantages of Digital Printing Copyrights reserved to Ronen Arbel HP Ranks No. 1 in U.S. High-volume Digital Press Market PALO ALTO, Calif., April 18, 2007

Implications for your Project Identify early adopters segment Identify mainstream adopters segment Decide how this affects your product and marketing plan Copyrights reserved to Ronen Arbel

The Human Factor Copyrights reserved to Ronen Arbel