Diffusion of Innovations Marketing 547 Diffusion of Innovations

Diffusion of Innovations Definitions Diffusion -- Process by which something spreads Innovations -- A product as perceived as new by the consumer Diffusion of Innovations -- Process by which products perceived as being new by consumers spread across a society

Diffusion of Innovations Definitions Cont. Why Study Diffusion? Useful for planning purposes Help reduce number of new product failures (which is now estimated to be about 90%-95%) Given the current environment, there is a strong reliance on the development and introduction of new products

Diffusion of Innovations More on Innovations The innovation continuum -- dependent on: effect on consumption (including usage) behavior degree to which the innovation is a technological breakthrough Continuous Dynamically Continuous Discontinuous

Diffusion of Innovation The Diffusion Process Process via which the adoption of an innovation is spread by communication to members of a target market over a period of time.

Diffusion of Innovation The Innovator Consumer Categories 1) The innovator (the first 2.5%) 2) The early adopter ( the next 13.5%) 3) The early majority (the next 34%) 4) The late majority (the next 34%) 5) Laggards 2 3 4 5 1

Diffusion of Innovation The Innovator (continued) The nature of innovativeness Seems to be product related Demographic correlates Personality correlates Communication patterns Usage behavior Who should managers target?

Diffusion of Innovation The Adoption Process Awareness Knowledge Evaluation Symbolic Rejection Trial Rejection Trial Adoption

Diffusion of Innovation The Diffusion Curve Percent of Adopters Time of Adoption

Diffusion of Innovation The Diffusion Curve (continued) Theories of Diffusion ( Why is the curve S-shaped?) Social Interaction Marketing Program & Competitive Affects Other Curves (diffusion processes)?

Diffusion of Innovation Factors Affecting the Rate of Diffusion Relative Advantage Compatibility Simplicity Observability Trialability Perceived Risk

Diffusion of Innovation Marketing Management & Diffusion Continuous Innovation Discontinuous Innovation Diffusion rate Fast Slow Few Identifiable Segments Well-Defined Price Low (Penetration) High (Skim) Channels Intensive Selective Ads Symbolic, Image Informational Promotion Price-Based Trial-Based

Communication & Word-of-Mouth Process of exchanging information and conveying meaning between two or more parties via a chosen medium Types of Communication Impersonal Interpersonal Formal Informal (WOMC)*

Communication & Word-of-Mouth Definition of Word-of-Mouth Communication WOMC Process of exchanging information and conveying meaning about market offerings between consumers Negative WOMC can really harm a brand – managers should protect against it! The WOMC environment in the 21st Century Consumer trust of “mass media” Consumer accessibility to WOMC

Communication & Word-of-Mouth WOMC Process Mass Media Opinion Leaders (OLs) – those who influence others (intentionally or unintentionally) E-fluentials Other agents of change (e.g., someone who may have an ax to grind; someone who is “delighted” with a brand’s performance) Gatekeepers Followers

Communication & Word-of-Mouth Managing WOMC Identify & target OLs Create OLs Simulate WOMC (with advertising) Stimulate WOMC (with advertising & sponsorships)