Diffusion of Innovation

Diffusion of innovation and subsequent adoption is impacted by socio-economic, cultural technological as well as legal factors; it is also impacted by individual determinants like psychological variables and demographics; these are all forces are in most cases “uncontrollable” by the marketer.

There are also the more relevant forces, related to the innovative product and /or service which constitute what is called the “controllable”, and which are in the hands of the marketer; these could be in the form of marketing communication or interpersonal communication etc and could be used by the marketer in a manner that facilitate quicker and easier acceptance of the innovative offering. Apart from these, there are also certain characteristics that an innovation possesses that can impact the diffusion and adoption process. Researchers have identified certain factors that can act as triggers and some that can act as barriers to the diffusion and adoption process.

Product Adoption Process

Introduction

Research shows that consumers differ in how quickly they decide to adopt (buy) a product after they become aware of it. Everett M. Rogers’ theory Diffusion of Innovation, explores what type of person, adopts products at each stage of the product life cycle. Under Rogers’ Diffusion of Innovations theory, a product will encounter five types of purchasers as it moves through its life cycle.

The diagram below explains the categories in Roger’s Diffusion of Innovations Theory

Diffusion of Innovations: Innovator Stage

Roger’s Diffusion of Innovations theory states that Innovators are the first to purchase a product and make up 2.5% of all purchases of the product. Innovators purchase the product at the beginning of the life cycle. They are not afraid of trying new products that suit their lifestyle and will also pay a premium for that benefit. Sales to innovators are not usually an indication of future sales as innovators simply buy because the product is new.

Diffusion of Innovations: Early Adopters Stage

The next group of purchasers are called Early Adopters and they make up 13.5% of purchases. This group of purchasers adopt early but unlike innovators, adoption is after careful thought. Early Adopters are usually opinion leaders in their circle (of friends, family and colleagues) so adoption by this group is crucial for the success of the product. Early adopters help the product’s journey in becoming “socially acceptable”.

Diffusion of Innovations: Early Majority Stage

The Early Majority are a cautious group of purchasers, making up 34% of purchases. The Diffusion of Innovations theory states that this group will not buy a product until it has become “socially acceptable”. Early majority purchases are needed for the product to achieve wide spread acceptance.

Diffusion of Innovations: Late Majority Stage

Late Majority make up another 34% of sales and they usually purchase the product during the late stages of the product’s life cycle. They are more cautious than the early majority and will only buy after the majority of people have purchased the product.

Diffusion of Innovations: Laggard Stage

According to the Diffusion of Innovations theory the final group of people to purchase a product are called Laggards. Laggards make up 16% of total sales and purchase the product near the end of its life. Some laggards will never purchase a product, whilst others will buy it because their existing product is broken and it can not be repaired or replaced with an identical product. Laggards may wait to see if the product will get cheaper and by the time they purchase the product a new version of the product is often on the market.

Diffusion of Innovations Conclusion

All of the five groups described above will have opinion leaders that the group like to follow. Opinion leaders are people who are good at selecting the next big thing such as the latest fashion trend or electronic gadget. The challenge for firms is to persuade opinion leaders to adopt their product. Identifying opinion leaders can be challenging, as product type will dictate the product adoption behaviour of a person. For example a person may be an innovator for IT products but a laggard for kitchenware products.

Triggers to the Diffusion of Innovation/Adoption Process:

There are certain product and service characteristics that affect the diffusion process and can influence consumer acceptance of new products and services; the five factors that can impact the diffusion process and the rate of adoption are relative advantage, compatibility, complexity, trialability, and observability.

a) Relative advantage: The relative advantage of the innovative product/service offering over already existing products/services accelerates its rate of adoption by the target market. The degree to which customers perceive a new product/service as superior to similar existing products determines the relative advantage. A product/service that provides advantage over other existing products is indicative of being superior to existing alternatives, and thus higher in terms of “value”. The more radical a change, and the higher the relative advantage, the faster would be the diffusion. The relative advantage may lie in terms of it being a modified product (with better features, attributes, benefits, form etc), or at a lower price (better deals, discounts, terms of payment, warranty and exchange), or more accessible in terms of availability (physical store format, or virtual electronic format), or better communication. Thus, while product-based advantages are more attractive in nature, the other components of the marketing mix like price, place and promotion can also provide a basis for relative advantage. Examples of innovations that provide relative advantage are, flash drives versus compact discs, laptops versus computers, or digital libraries versus traditional libraries, ATMs versus bank teller counters.

b) Compatibility: The compatibility of the innovative product and service offering with the existing backgrounds, behavior and lifestyle patterns of consumers also affects its adoption by the consuming public. The compatibility of a product/service measures how closely it relates to needs, value systems and norms, lifestyles, culture etc. The higher the level of compatibility, the quicker the diffusion; and the lower the compatibility, the slower the diffusion. A product will diffuse more quickly if it does not require consumers to change their values, norms, lifestyles, cultures and day to day behaviors.

Continuous and dynamically continuous innovations are higher on compatibility than discontinuous innovations. Fast food in the form of pizzas, burgers, noodles etc. took considerable amount of time to get diffused into the Indian society, as it contrasted heavily with the dal roti meal concept. The pace of adoption quickened in the 1990s and more so in the 2000s with the new generation, and their preference towards packaged foods and fast food. Another example that can be mentioned here is, coconut oil as a medium of cooking would be incompatible to people staying in North India. Even if positioned as “healthy and natural cooking medium”, it would be slow to penetrate and may even fail if launched in North India. The same would penetrate easily in South India, as it is culturally more compatible.

c) Complexity: The level of complexity in a product purchase and usage also affects the diffusion process. An innovative offering would be easily diffused when there is ease of understanding, purchase and use. The easier it is to understand and use a product, the more likely it is to be accepted quickly, and vice versa.

While speaking of complexity, technological complexity acts as a barrier to diffusion. People resist adoption of new products because of fear of complexity in purchase and usage. This is well understood by high tech industries. Let us take the example of the electronic goods industry, eg microwave owens or vacuum cleaners. While designing their communication, the marketer illustrates ease of use, so as to encourage quicker acceptance; prospects are provided with demos and trials; once purchased, arrangements are made for providing installation at home. Another example is the

mobile phone industry; realizing the problem of complexity, simpler models are introduced for those who desire the mobile set just for making and receiving calls and sms’es.

It would be noteworthy to mention here that the youth are more techno savvy and have accepted electronic goods like MP3s and 4s, laptops, I-pods, ATMs etc much faster than the older generation. This is because the former have been able to deal with the complexity with a higher level of comfort than the older generation.

d) Trialability: The ease with which the product or service can be tested and tried also determines the rate of acceptance. The higher the degree of trialability, the greater would be the rate of diffusion.

This is because the prospects get an opportunity to try the product/service, assess it and decide to accept/reject it. Trialability can be encouraged by providing free samples, or providing smaller packs and smaller-than-average sizes, (for FMCG and household goods) or even through demos and test runs (for consumer durables). Consumers could try out the innovative offering, evaluate it and then decide on a purchase commitment by accepting/rejecting it. Trials leading to purchase can be encouraged through guaranty and warranty schemes. Such trials encourage a product/service to be diffused easily.

e) Observability: Observability refers to the ease with which the product can be observed.

Observability in an innovative product refers to the degree to which a product/service’s benefits can be observed, imagined and perceived by a potential consumer. The higher the degree of observability, the greater the chances of the innovative offering being accepted by the prospects.

Those new product offerings that are

i) Tangible,

ii) Have social visibility, and

iii) Whose benefits are readily observed (without much time gap), are more readily diffused than those that are intangible, or have no social visibility or whose benefits accumulate over long periods of time.

Thus, relative advantage, compatibility, complexity, trialability, and observability have an impact on the rate of diffusion. While all these factors relate to the product, they are dependent on consumer perception. A product/service offering that is relatively superior to existing ones, is more compatible to existing consumption behavior and usage, is less complex, easy to use and observable, is more likely to be purchased quickly by the public, than when it is not.

Barriers to the Diffusion of Innovation/Adoption Process:

There are also certain factors that negatively affect diffusion of innovation and subsequently the adoption process. These barriers have been dealt with extensively by consumer researchers and incorporated even in models on innovation resistance. They could range at the micro level from product characteristics, to the more macro, socio-cultural, economic, situational and technological forces.

While product characteristics like relative advantage, compatibility, trialability, and observability, do boost the rate of diffusion and adoption, perceived complexity in purchase and usage of innovative offerings, retard the process. Innovations could also meet resistance from socio-cultural, economic, situational and technological forces. The innovative offering may not with compatible with social norms, values and lifestyle; or may not go well with the economic strata; or be technologically complex, leading to fear to usage, obsolescence and risk. The basic barriers to the diffusion process and subsequent adoption are as usage, value, risk and psychological factors.

a) Usage: “Usage” as a barrier to innovation diffusion and adoption is said to exist when the social system (the target market) finds it incompatible to the existing usage and consumption behaviors and thus, finds it difficult to accept and use; in other words, they .find it to be incompatible with their existing behaviors. The barrier is more psychological, based on deep rooted values, beliefs, attitudes and perception, resultant in such behavior of non-acceptance and non-usage. For example, people are often reluctant to enter into online monetary transactions for fear of loss of privacy and fraud.

Communication from the marketer based on rational and informational may not be sufficient to overcome such a barrier; he would need to use credible spokespersons, celebrities and experts to motivate people to change their existing lifestyle patterns and resultant behavior, and adopt the innovation.

b) Value: Consumers could also resist acceptance of an innovation, as they may feel low about the perceived value; consumers may perceive the new product/service offering to be the same as existing offerings, and “nothing new” or “better in value.” For example, while assessing mobile charges, people compare the post-paid plans with the pre-paid plans in terms of rental as well as call charges, and conclude that the former are cheaper, inspite of rental being high.

The perceived lack of value may be i) the product/service does not provide much benefit over the existing alternatives; ii) the product/service is costly, and doesn’t seem to be of worth the price.

Consumers’ perception of “high price” always takes over the perception over product value or product benefit; in fact, values is always assessed in terms of price; also, price is a “catchy” issue than the benefits attached; price appears more tangible, than benefits; and, consumers generally tend to know more quickly about price, than they do about the benefits that the product brings along with it.

c) Risk: Risk also acts as a barrier to diffusion of innovation. Consumers show reluctance to use an innovative product/service offering out of fear of taking risks. There could be six types of risks that a consumer could face, viz., functional risk (would the product perform as expected), physical risk (would the product usage and or consumption pose a threat), social risk (would it cause risk of social embarrassment), financial risk (would the product will be worth the cost), psychological risk (would the innovation hurt consumers’ ego), and time risk (would it lead to wastage of time spent while making the purchase).

The perceived risk barrier acts as a big barrier to the diffusion and adoption process; consumers are fearful of purchase, usage and consumption of innovative offerings, and thereby continue to patronize the existing alternatives, rather than adopt new ones (for fear of making a wrong decision).

In order to overcome this problem, the marketers could make use of both marketing communication (via audio-visual or print media, or company salespersons), as well as interpersonal communication (opinion leadership, word-of-mouth communication). Trials (free or discounted) as well as interpersonal communication with peers, colleagues and friends can also encourage personal experience by the consumer and help overcome this risk.

1. d) Psychological factors: Psychological factors also prevent a consumer from adopting a new product/service offering. These factors relate to a person’s background, attitude and belief, perception, values, lifestyles, culture etc. They may find the innovation to be psychologically threatening. The two common threats are i) tradition barrier, and ii) image barrier.

Tradition barrier relates to socio-culturally accepted norms of behavior that are regarded as “right and appropriate,” by the consumer segment. Anything that is new and does not support traditional patterns is regarded as psychologically threatening; this includes usage and adoption of innovative products and services. For example, wearing western outfits is a taboo for women in the

Middle East, and as such they would never attempt to wear skirts or trousers. Another example, Kelloggs Cornflakes, found it difficult to penetrate the Indian soil, primarily because it was positioned as a quick breakfast cereal to be had in cold milk, as opposed to the traditional Indian concept of cornflakes or cereal in hot milk.

Image barrier refers to the consumer’s attitude and feelings about the product/service offering, the brand, or the dealer, or even the country of origin. It also relates to personality and self image (actual and ideal). Consumers’ may resist adoption of new products/services if they are patriotic and ethnocentric; or if they do not regard the innovation or the marketer/dealer to be of their “class” in terms of socio-economic status or even quality. Thus, marketers try to come up with variants in offerings, and have separate names for separate variants depending upon the segment(s) for which they are aimed.