Diffusion of Innovation

1. Diffusion of Innovation Module III: By Srikanth Venkatswamy

2. Module III: Diffusion of Innovation • The adoption Process • Classification of Adopters • Diffusion of Consumer Innovations • Diffusion of Industrial Innovations

3. The Adoption Process

4. The Adoption Process “Adoption is the decision of an individual to become a regular user of a product” Kotler. The adoption Process: “the Mental process through which an individual passes from first hearing about a innovation to final adoption” Diffusion: Refers to the spread of a new idea from the source of invention or creation to its Ultimate users or adopters

5. “An innovation refers to any good, service or idea that is perceived by something as new” Innovation takes time to spread

6. Awareness Stages in the Adoption Process Interest Evaluation Trial Adoption 6

7. NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE Awareness Consumer is first exposed to the product innovation. Jayaram sees an ad for a new MP3 player in the magazine he is reading. Interest Consumer is interested in the product and searches for additional information. Jayaram goes to an electronics store and has a salesperson show him a unit. Evaluation Consumer decides whether or not to believe that this product or service will satisfy the need--a kind of “mental trial.” After talking to a knowledgeable friend, Jayaram decides that this MP3 player will allow him to easily download the MP3 files that he has on her computer. He also feels that the unit’s size is small to fit backpack. The price is affordable Stages in Adoption Process 7

8. NAME OF STAGE WHAT HAPPENS DURING THIS STAGE EXAMPLE Trial Consumer uses the product on a limited basis Since an MP3 player cannot be “tried” like a small tube of toothpaste, Jayaram buys the MP3 player from a store, which offers a 30-day full refund policy. Adoption (Rejection) If trial is favorable, consumer decides to use the product on a full, rather than a limited basis--if unfavorable, the consumer decides to reject it. Jayarama finds that the MP3 player is easy to use and that the sound quality is excellent. He keeps the MP3 player. Stages in Adoption Process 8

9. Roger Model of Five Stages in the Innovation-Decision Process

10. Knowledge – person becomes aware of an innovation and has some idea of how it functions, • Persuasion – person forms a favorable or unfavorable attitude toward the innovation, • Decision – person engages in activities that lead to a choice to adopt or reject the innovation, • Implementation – person puts an innovation into use, • Confirmation – person evaluates the results of an innovation-decision already made.

11. Rejection Discontinuation or Rejection Evaluation Pre-existing problem or Need Adoption or Rejection Awareness Interest Evaluation Trial Adoption or Rejection Post adoption or Postpurc hase Evaluation Discontinuation An Enhanced Adoption Process Model 11

12. Adoption of Innovations Early Majority Late Majority Percentage of Adopters Early Adopters Innovators Laggards 34% 34% 16% 13.5% 2.5% Late Early Time of Adoption 12 Ugra Raj Enterprises Privated Limited

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14. Profile of Innovator 14

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16. Innovators: Description 16 • 2.5% of population • Venturesome • Very eager to try new ideas • Acceptable if risk is daring • More cosmopolite social relationships • Communicates with other innovators

17. Early Adopters: Description • 13.5% of population • Respected • More integrated into the local social system • The persons to check with before adopting a new idea • Category contains greatest number of opinion leaders • Are role models 17

18. Early Majority: Description 18 • 34% of population • Deliberate • Adopt new ideas just prior to the average time • Seldom hold leadership positions • Deliberate for some time before adopting

19. Late Majority: Description 19 • 34% of population • Skeptical • Adopt new ideas just after the average time • Adopting may be both an economic necessity and a reaction to peer pressures • Innovations approached cautiously

20. Laggards: Description 20 • 16% of population • Traditional • The last people to adopt an innovation • Most “localite” in outlook • Oriented to the past • Suspicious of the new

21. Adoption Process The stages through which an individual consumer passes in arriving at a decision to try (or not to try), to continue using (or discontinue using) a new product. 21

22. Communi- cability Relative Advantage Influences Divisibility Compatibility Complexity Diffusion Of Consumer Innovation: Roger-5 factor Model

23. Rogers 5 Factor model : Consumer innovation • Relative Advantage. This refers to the degree to which the innovation appears superior to existing products • Compatibility. This refers to the degree to which the innovation fits the values and experiences of the potential consumers.

24. Complexity. This refers to the degree to which the innovation is difficult to understand or use. • Divisibility. This refers to the degree to which the innovation can be tried on a limited basis. • Communicability. This refers to the degree to which the results of using the innovation can be observed or described to others

25. Trialability is the degree to which an innovation may be experimented with on a limited basis. New ideas that can be tried on the installment plan will generally be adopted more quickly than innovations that are not divisible. An innovation that is trialable represents less uncertainty to the individual who is considering it for adoption, who can learn by doing.

26. Diffusion of Industrial Innovations Industrial innovation is of two types: • Products • Processes These are quite sensitive to factors of price, quality, technology The rate of diffusion varies widely depending on the industry.

27. Mansfield Four Factors The speed with which a new industrial product ,or process is adopted according to E .mansfield: • Economic Advantage: New products or processes, that are perceived to be more profitable will be adopted more rapidly than those with lower expected return. • Commitment: The commitment towards the customer requirements and beyond will make the degree of adoption more feasible.

28. Mansfield Four Factors • Uncertainty: The roles of risk, uncertainty and learning in the adoption of new technologies are reviewed. Although they have been emphasized in many commentaries about the adoption process, they have been directly addressed in only a minority of the large process relating to the adoption of innovations. Risk, uncertainty and learning play a number of distinct roles in the process of adopting new technologies.

29. Mansfield Four Factors • Risk reduction: The results show that the extent to which a organization-side has pursued a strategy aimed at positioning the innovation in the marketplace or has focused on reducing the risk of adoption has a positive and significant effect on the probability of innovation adoption. The evidence collaborates that not only adopter-side variables significantly influence innovation, but supply-side variables as well.