1. DIFFUSION OF
INNOVATION

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. 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. 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. THE VALUE CHAIN
Contemporary firms are being attacked by
competitively on every dimension and from every
direction. The only way to survive this onslaught is to
create a ‘value chain’ to serve the customer, which will
serve to differentiate the successful firm from its
competitors and will provide competitive superiority
on the critical attributes of importance to the consumer

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. 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. Diffusion variables
 Innovation
 Communication
 Time
 Social system

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. INNOVATIONS INCLUDE BOTH A
HARDWARE AND A SOFTWARE
COMPONENT
The hardware are the physical and tangible
aspects of a product. The software is the
understanding consumers’ values and lifestyles

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. 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. Speed of diffusion
 Competitive intensity
 Standardised technology
 Vertical coordination
 Resource commitments

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. The Adoption – Decision Process
Knowledge/Awareness
Interest
Evaluation
Trial
Decision
Confirmation

16. Adopter classes
 Innovators - 2.5%
 Early adopters – 13.5%
 Early majority – 34%
 Late majority – 34%
 Laggards – 16%

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. Parameters for innovativeness
 Socio-economic variables
 Personality and attitude
 Communication variables

19. Socio – economic variables
 Education
 Literacy
 Higher social status
 Upward social mobility
 Larger-sized units
 Commercial orientation
 Favourable attitude towards credit
 Specialized operations

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. 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. 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.