DIFFUSION OF INNOVATION CONSUMER BEHAVIOR

Drivers of Innovation Technology advances Changing customer needs Increased world-wide competition Shortening of product life cycles (Cooper 2001)

Innovation - definitions An innovation is … … an idea, practice or object that is perceived as new by an individual or other unit of adoption (Rogers 2003) … new if it has been on the market for five years or less, and includes extensions and significant improvements (Cooper 2001) … interchangeably used with the term “new product”

The product is the first of its kind on the market What is a new product? Newness can be defined in two senses: New to the company Firm has never made or sold this type of product before, but other firms might have New to the market The product is the first of its kind on the market (Cooper 2001)

All new products are new, but some are newer than others High 20 % 10 % New product lines Innovativeness New to the world products New to the Company 26 % 26 % Additions to existing product line Revisions / improvements to existing products 11 % 7 % Repositionings Low Cost reductions Low High New to the Market

Radical vs Incremental innovations Markets Customer need fulfillment per dollar Low High Newness of technology Technology Incremental innovation Market breakthrough Technological breakthrough Radical innovation (Chandy and Tellis 1998)

‘New-to-the-World Product’ Sony AIBO Launched in 1999 Success or Failure? Launch price $2500: prevented these robots from going mainstream and conquering the world! Production stopped in 2006!

‘New-to-the-World Product’ Honda Asimo Advanced Step in Innovative MObility Success or Failure? In October 2010: 10th anniversary!

‘New Product Line’ Founded in April 2004 by Stelios Haji-Ioannou Sold to Hellenic Seaways in August 2009

‘Line Extension’ Lipton Green

50% Most firms feature a mixed portfolio of new products: Line extensions and product improvements are common to almost all firms However, many firms stay clear of the most innovative categories: what % of firms do not develop new-to-the-world products? and, another 25% develop no new product lines. Higher technology industries launching more innovative products 50%

Golden New Product Failure Rules These condensed decision rules may seem intuitively right, but they are not: The faster, the better! Position a new product as a successor of …! Change your positioning frequently! A low price is key! A good new product sells itself! Aim for the mass-market to achieve success!

Risk Minimization! High failure rates and high costs make NPD risky, but NPD can be managed so that: the risks are minimized, and the profit maximized!

How many ideas needed for one successful launch? (www.mediamanagementcenter.org)

Investment risk over time (www.mediamanagementcenter.org)

Market Testing: When and How?

Adopter categories based on innovativeness Innovativeness is the degree to which and individual is relatively earlier in adopting new ideas than other members of a social system (Rogers, 1995) (Rogers, 1995)

Crossing the chasm model Moore: the firm should consider developing a value proposition that will work for pragmatists, and develop a launch strategy designed to reach pragmatists. Visionaries Look for: The newest thing Performance features It’s coolness Pragmatists Look for product that: Works pretty well Ease of use Is not so expensive (Geoffrey Moore 1991)

Tailoring marketing plan to intended adopters Innovators, early adopters Technical content Leading-edge nature of innovation Channels that enable high content and selective reach Early majority Communicate: Product’s completeness Ease of use Consistency with life No detailed technical info Channels with high reach and high credibility Late majority, laggards Communicate: Reliability Simplicity Cost-effectiveness Channels similar as early majority (Schilling 2011)

Trying to convince the mass of a new idea is useless Convince innovators and early adopters first! But, who will be the innovators and early adopters?

Innovators and Early Adopters First iPhone 5s buyer of the world: Jimmy Gunawan

Can we identify these innovators and early adopters in advance so as to focus our early marketing on them?

Profile Early Adopters of iPhone http://www.trendsspotting.com/blog/wp-content/uploads/2007/06/iphone.PNG Van Everdingen - Marketing of Innovations 2011

Van Everdingen - Marketing of Innovations 2011 Adopter categories Adopter category Characteristics Venturesome, financial resources, ability to understand complex knowledge, ability to cope with high uncertainty Innovators Opinion leaders, other adopters ask them for advice, decrease uncertainty, serve as role model Early adopters Adopt just before the average member, deliberate, important link in diffusion process, many informal social contacts Early majority Late majority Skeptical towards innovation, scarce resources, lower SES Laggards Traditional, limited resources, need certainty, tend to be suspicious Neighbors and friends are main info sources (Rogers, 1995) Van Everdingen - Marketing of Innovations 2011