1. Diffusion of Innovation

2. 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.

3. Why does this happen? Macromarketing 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
Successful products are those that become culturally anchored.

4. Micromarketing issues
Succesful new product development is an important element in achieving long term competitive superiority and profitability,especially in low growth markets
New product development plays an important role in market leadership and profitability. Market leaders normally have three times higher returns than firms with lower market shares
A successful new product can be the beginning of a whole new company

5. 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

6. 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

7. Diffusion of innovation
A process by through 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

8. Diffusion variables
Innovation
Communication
Time
Social system

9. 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

10. 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

11. 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

12. Types of Innovators
Cognitive – problem solving, cerebral, new mental experience
Sensory – fantasy, day dreaming, hedonistic, thrill seeking
Monomorphic - consumers who are innovators for one type of product
Polymorphic – consumers who are innovators for more than one type of product

13. Characteristics that encourage rejection
Value barrier
Usage barrier
Risk barrier

14. Speed of diffusion Competitive intensity Reputation of the supplier
Standardised technology
Vertical coordination
Resource commitments

15. 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

16. The Adoption – Decision Process Everett Rogers
Knowledge
Persuasion
Decision
Implementation
Confirmation

17. Adopter classes Innovators - 2.5% Early adopters – 13.5%
Early majority – 34%
Late majority – 34%
Laggards – 16%

18. 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

19. Parameters for innovativeness
Socio-economic variables
Personality and attitude
Communication variables

20. Socio – economic variables
Education
Literacy
Higher social status
Upward social mobility
Larger-sized units
Commercial orientation
Favourable attitude towards credit
Specialized operations

21. 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

22. 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

23. 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.