Diffusion of innovation

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Diffusion of innovation

  1. 1. DIFFUSION OFINNOVATION
  2. 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. 3. Why does this happen?Marketing 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.
  4. 4. Marketing issues Successful new product development is an important element in achieving long term competitive superiority and profitability, especially in low growth markets A successful new product can be the beginning of a whole new company
  5. 5. THE VALUE CHAINContemporary firms are being attacked bycompetitively on every dimension and from everydirection. The only way to survive this onslaught is tocreate a ‘value chain’ to serve the customer, which willserve to differentiate the successful firm from itscompetitors and will provide competitive superiorityon the critical attributes of importance to the consumer
  6. 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. 7. Diffusion of innovation A process by 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. 8. Diffusion variables Innovation Communication Time Social system
  9. 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. 10. INNOVATIONS INCLUDE BOTH AHARDWARE AND A SOFTWARECOMPONENT The hardware are the physical and tangible aspects of a product. The software is the understanding consumers’ values and lifestyles
  11. 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. 12. Types of Innovators Cognitive – problem solving, cerebral, new mental experience Sensory – fantasy, day dreaming, 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. 13. Speed of diffusion Competitive intensity Standardised technology Vertical coordination Resource commitments
  14. 14. 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
  15. 15. The Adoption – Decision Process Knowledge/Awareness Interest Evaluation Trial Decision Confirmation
  16. 16. Adopter classes Innovators - 2.5% Early adopters – 13.5% Early majority – 34% Late majority – 34% Laggards – 16%
  17. 17. 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
  18. 18. Parameters for innovativeness Socio-economic variables Personality and attitude Communication variables
  19. 19. Socio – economic variables Education Literacy Higher social status Upward social mobility Larger-sized units Commercial orientation Favourable attitude towards credit Specialized operations
  20. 20. Personality and attitude Empathy  Ability to cope with Ability to deal in uncertainty abstraction  Favourable attitude Rationality towards education Intelligence  Favourable attitude Favourable attitude towards science towards change  High aspirations
  21. 21. Communication variables Social participation  Exposure to interpersonal Interconnectedness with the communication channels social system  Knowledge of innovations Cosmopoliteness  Opinion leadership Change agent contact  Belonging to highly Mass media exposure interconnected systems
  22. 22. 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.

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