2. Introduction
• What is new product and services?
- Revolutionary new
or
- Minor product variation
• For Consumer,
- Increased opportunity to satisfy personal social and environmental
needs and add to their quality of life.
4. Diffusion and Adoption of Innovation
• Diffusion is a macro process concerned with the spread of
a new product from its source to the consuming public.
• Adoption is a micro process that focuses on the stages
through which an individual consumer passes when
deciding to accept or reject a new product.
5. NEW PRODUCT AND THE DIFFUSION OF INNOVATION
• Some aspects related to product purchase and brand
loyalty:
• Knowledge aspect
• Persuasion aspect
• Decision aspect
• Implementation of the decision
• Confirmation
7. INNOVATION
• Firm oriented innovation:
Treats the newness of a product from the perspective of
company producing or marketing it.
• Product oriented innovation:
Focuses on the feature inherent in the product itself and on
the effects these features are likely to have on consumers
established uses patterns
- Types:
• Continuous innovation
• Dynamically Continuous innovation
• Discontinuous innovation
8. Example of Product oriented innovation
Discontinuous
innovation
• Cell Phone
Dynamically
Continuous
innovation
• Send/receive email
• FM
• MP3
• Camera
Continuous
innovation
• Bluetooth headset
• WiFi
• Android system
• Duos sim card
• Software
9. INNOVATION
• Market oriented innovation:
Judges the newness of the product in terms of how much
exposure consumer have to the new product.
• Consumer oriented innovation:
Newness is based on consumer’s perception of the product
rather than on physical features or market realities
10. Channels of Communication
• How quickly an innovation spreads through a
market depends to a great extent on
communication between marketer and consumer as
well as communication among consumers i.e.
W.O.M.
• Correct communication channels used during the
process of diffusion, oriented towards behaviour
and preferences of the target category of adopters
• Internet, TV, radio, banners, Sms, News papers, e-
Commerce.
11. Social System
• Diffusion of new product usually take place in social setting
• Social system = physical + social + cultural environment
• May influence entire society to accept or reject new product
• Characteristics of Modern Social System:
• Positive attitude of members of the social system towards changes
• Progressive technologies
• Positive attitude towards science and education
• Rational relationships rather than on emotional ones
• high level of homogeneity of the social system
• high level of compatibility of innovation
12. Time
• Proper timing of introduction of innovation
into the market
• Amount of purchase time:
Refers to the amount of that elapses between
Consumers initial awareness of a new product
or service and point at which they purchase or
reject
13. Adoption
• Adoption is a major step in the diffusion of
innovation
• Its is how consumer decides whether or not
to try and adopt innovative product/services.
15. Rate of adoption
• How long it takes a new product/services to be adopted by
members of social system
• Diffusion of new product/services has become more fast and short.
Time required for electronic products to penetrate 10 % of the mass market in UK
PRODUCT NO. OF YEARS
TELEPHONE 38
CABLE TELEVISION 25
VCR 9
WIRELESS DATA SERVICS 6
• Penetration policy low introductory price to penetrate the
market and quickly establish market leadership
• Skimming policy product available at high price initially but
gradually lowers the price to attract additional market segment
16. Product characteristics that influence diffusion
Characteristics Definition
Relative advantage Degree to which potential customers perceive a
new product as superior to existing substitute.
Eg. HDTV over standard TV
Compatibility Degree to which potential consumers feel a new
product is consistent with their present needs
value and practices
Eg. Gillete Mach3 Turbo over disposable razor
17. Product characteristics that influence diffusion
Characteristics Definition
Complexity Degree to which a new product is difficult to
understand or use
E.g. Disposable razors
Trialability Degree to which a new product is capable of being
tried on a limited basis
E.g. Free trial software
Observability Degree to which a products attributes can be
observed, imagined to potential customers.
E.g. Laptop
18. STAGES OF ADOPTION PROCESS
AWARNESS
• First exposure
INTEREST
• Show interest and searches for more
information
EVALUATION
• Mental trial
TRIAL
• Uses the product on a limited
basis
ADOPTION/
REJECTION
• Decides to use / reject
19. Adoption process and information sources
• Advertising and media stories may spread information about new
innovations, but it’s conversations that spread adoption.
• Because the adoption of new products or services involves risk and
uncertainty.
• It’s usually only people we personally know and trust and who we
know have successfully adopted the innovation themselves
• Early adopters are the exception to this.
• But now a days there is change in the relative importance of
information sources in the later stage of purchase decision process
person seeking information from another sources e.g. discussion
forum, chat rooms and blogs on web.
20. Profile of Consumer Innovator
Consumer Innovator
Relatively small group of consumers who are the earliest
purchasers of a new product.
Who has high levels of the education, social
interaction, opinion leadership, optimism, cosmopolitanism
and social status compared to those in the population who
adopt later.
27. Characteristic Innovator Noninnovator
Product Interest More Less
Opinion Leadership More Less
Personality
Dogmatism Open minded Closed minded
Need for uniqueness Higher Lower
Perceived risk Less More
Variety seeking Higher Lower
Purchase and Consumption Traits
Brand loyalty Less More
Usage More Less
28. Media Habits
Total magazine exposure More Less
Special – Interest magazine More Less
Television Less More
Social Characteristics
Social integration More Less
Group memberships More Less
Demographic characteristics
Age Younger Older
Income Higher Lower
Education More Less
Occupational Status Higher Lower
