Consumer and The Diffusion of Innovation

Amity Business School
Consumers and the Diffusion of

Innovations
CHAPTER
FOURTEEN
Consumers and the
Diffusion of Innovations
Learning Objectives
Chapter Fourteen
3
Slide
What Is Shown or Stated in This Ad That Is Designed to Attract

Consumers to This New Product?
Chapter Fourteen
4 4
Slide
New Flavor
Chapter Fourteen
5 5
Slide
Diffusions of Innovation
• How are new products and services
accepted?
Chapter Fourteen
6 6
Slide
The process by which

the acceptance of an
innovation is spread by
Diffusion
communication to
Process
members of a social
system over a period of
time.
Chapter Fourteen
7
Slide
Elements of the Diffusion Process
The Innovation
The Channels of
Communication
The Social System
Time
Chapter Fourteen
8
Slide
The Innovation
• Firm-oriented definitions
– Product is “new” to the company
• Product-oriented definitions
– Continuous
– Dynamically continuous
– Discontinuous
Chapter Fourteen
9
Slide
What Kind of Innovation Is Shown Here, and Why?
Chapter Fourteen
10 10
Slide
Continuous Innovation – The Product is Modified
Chapter Fourteen
11 11
Slide
The Innovation
• Market-oriented definitions
– Based on consumer exposure
• Consumer-oriented definitions
– Consumer judges it as “new”
Chapter Fourteen
12
Slide
The Innovation Amity Business School
Product Characteristics
Relative • Degree to which consumers consider it superior

Advantage to existing substitutes
• Degree to which consumers feel it is consistent

Compatibility with their present needs, values, and practices
• The degree to which it is difficult to understand

Complexity or use
• The degree to which it can be tried on a limited

Trialability basis
• The degree to which its benefits can be

Observability observed, imagined, or described
Chapter Fourteen
13
Slide
Channels of Communication
• Channels of communication
– Marketer to consumer
– Consumer to consumer
– Influential impersonal sources
14
The Social System

• Modern social systems accept more innovation due to their:
– Positive attitude toward change
– Advanced technology and skilled labor force
– Respect for education and science
– Emphasis on rational and ordered social relationships
– An outreach perspective where members interact with outsiders
– A system where members can see themselves in different roles
15
Time
• Purchase Time
• Adopter Categories
• Rate of Adoption
16
Adopter Categories
Category 1 - Category 2 – Category 3 – Category 4 – Category 5 –

Innovators Early adopters Early Majority Late Majority Laggards
• First to • Will buy • Members • Second • Very last

buy the mini of the 1st ½ half of the to
mini netbook of the “mass purchase
netbook shortly “mass market” the mini
after its market” who would netbook, if
introductio who would purchase at all
n purchase the mature
the mini mini
netbook netbook
17 17
Diffusion Curves for Adopter Categories - Figure 14.5
18 18
Discussion Question
• Which adopter category are you?

• Does it differ with different product
categories?
• How about your parents, what
category are they?
• Is age a factor in innovation
behavior?
Chapter Fourteen
19
Slide
Rate of Adoption
Product Number of years

• How long does it
Pager 41
take a new
Telephone 38
product to be
Cable television 25
adopted by the
Fax machine 22
members of a
VCR 9
social system?
Cell pone 9
PC 7
Time Required for Electronic Products to

Penetrate 10 percent of UK market
Table 14.3
Chapter Fourteen
20 20
Slide
The stages through

which an individual
consumer passes in
Adoption arriving at a decision to
Process try (or not to try), to
continue using (or
discontinue using) a new
product.
Chapter Fourteen
21
Slide
Stages in Adoption Process Amity Business School
Table 14.4
NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE
Awareness Consumer is first exposed to the Eric sees an ad for a 23-inch thin LCD HDTV in a
product innovation. magazine he is reading.
Interest Consumer is interested in the product Eric reads about the HDTV set on the
and searches for additional manufacturer’s Web site and then goes to an
information. electronics store near his apartment and has a
sales person show him the unit.
Evaluation Consumer decides whether or not to After talking to a knowledgeable friend, Eric
believe that this product or service will decides that his TV will fit nicely on top of the
satisfy the need –a kind of “mental chest in his bedroom. He also calls his cable
trial.” company and finds out that he can exchange his
“standard” cable box at no cost for an HDTV
cable box.
Chapter Fourteen
22
Slide
Stages in Adoption Process Amity Business School
Table 14.4 (continued)
NAME OF WHAT HAPPENS DURING EXAMPLE

STAGE THIS STAGE
Trial Consumer uses the product Since the HDTV set cannot be “tried”
on a limited basis like a small tube of toothpaste, Eric
buys the TV at this local electronics
store on his way home from work.
The store offers a 14-day full refund
policy.
Adoption If trial is favorable, consumer Eric loves his new HDTV set and
(Rejection) decides to use the product on expects many year of service from it.
a full, rather than a limited
basis – if unfavorable, the
consumer decides to reject it.
Chapter Fourteen
23
Slide

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Amity Business School

Consumers and the Diffusion of

What Is Shown or Stated in This Ad That Is Designed to Attract

The process by which

Elements of the Diffusion Process

What Kind of Innovation Is Shown Here, and Why?

Continuous Innovation – The Product is Modified

Relative • Degree to which consumers consider it superior

• Degree to which consumers feel it is consistent

• The degree to which it is difficult to understand

• The degree to which it can be tried on a limited

• The degree to which its benefits can be

The Social System

Category 1 - Category 2 – Category 3 – Category 4 – Category 5 –

• First to • Will buy • Members • Second • Very last

Diffusion Curves for Adopter Categories - Figure 14.5

• Which adopter category are you?

Product Number of years

Time Required for Electronic Products to

The stages through

Table 14.4 (continued)

NAME OF WHAT HAPPENS DURING EXAMPLE

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