1. Diffusion of Innovations
Marketing 547
Diffusion of Innovations

2. 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

3. 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

4. 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

5. 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.

6. 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

7. 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?

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

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

10. 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)?

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

12. 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

13. 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)*

14. 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

15. 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

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