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ACKNOWLEDGEMENTS

All praises and thanks are for ALMIGHTY ALLAH who is entire source of all
knowledge and wisdom to mankind.

Special praises for the HOLY PROPHET MUHAMMAD (P.B.U.H) who forever is
touch of knowledge and goodness for humanity as a whole on the successful completion of the
project. I would like to acknowledge my deep sense of gratitude and indebtedness to academic
assistance of my teacher Mr. Prof. Azeem without his continued guidance and timely advice the
completion of this report would have been difficult. He has been a source of continuous
encouragement throughout the execution of studies.

Words cannot say the gratitude that we feel for our parents, friends and the members of
my family whose affection and prayers have always been the key to my success.

I applaud the nice company of my best and true friends Mr. Ayaz Hafeez, Mr. Naeem
Wajid and all the class fellows during the past few months of MBA studies. I will always
remember my association and affinities with all of them and treasure the good days and happy
moments spent with them.

Finally I am also very thankful to all members of PAK SUZUKI MOTORS; with out
their guidance and help, it will be impossible for me to complete my report.

Thanks to all who helped me in completing my report.

I
Table of Contents:
COVER PAGE

ACKNOWLEDGEMENT

TABLE OF CONTENT

ABSTRACT

1 INTRODUCTION DIFFUSION

2 DIFFUSION PROCESS
3 CASE STUDY: PAK SUZUKI MOTORS
4 CONCLUSION
APPENDEX
REFERENCES
Abstract
Business organizations introduce new products in the market to beat competition and increase
profit. For high-technology products, continuous innovations promise better performance, feature
enhancements and quality improvement. Often, consecutive technology generations compete in
the market, which calls for synergistic decision-making on marketing variables. At around the
time of its introduction, the time path of prices for two competing technologies can show
interesting patterns vis-à-vis their sales. It is important to understand the influence of marketing
variables on consumer psychology to predict the adoption process of new technology. This paper
focuses on studying the relative changes in diffusion parameters and marketing decision
variables through sales models developed for multiple-generation products.
Introduction

Diffusion Process
Diffusion is the process by which a new idea or new product is accepted by the market. The rate
of diffusion is the speed that the new idea spreads from one consumer to the next. Adoption is
similar to diffusion except that it deals with the psychological processes an individual goes
through, rather than an aggregate market process. In economics it is more often named
"technological change".

There are several theories that purport to explain the mechanics of diffusion:

1. The two-step hypothesis - information and acceptance flows, via the media, first to
opinion leaders, then to the general population
2. the trickle-down effect - products tend to be expensive at first, and therefore only
accessible to the wealthy social strata - in time they become less expensive and are
diffused to lower and lower strata
3. The Everett Rogers Diffusion of innovations theory - for any given product category,
there are five categories of product adopters:
o Innovators – venturesome, educated, multiple info sources;
o Early adopters – social leaders, popular, educated;
o Early majority – deliberate, many informal social contacts;
o Late majority – skeptical, traditional, lower socio-economic status;
o Laggards – neighbors and friends are main info sources, fear of debt.
4. Crossing the Chasm model developed by Geoffrey Moore - This is basically a
modification of Everett Rogers' theory applied to technology markets and with a chasm
added. According to Moore, the marketer should focus on one group of customers at a
time, using each group as a base for marketing to the next group. The most difficult step
is making the transition between visionaries (early adopters) and pragmatists (early
majority). This is the chasm that he refers to. If successful, a firm can create a bandwagon
effect in which the momentum builds and the product becomes a de facto standard.
5. Technology driven models - These are particularly relevant to software diffusion. The
rate of acceptance of technology is determined by factors such as ease of use and
usefulness.
Diffusion Process
According to Rogers, the diffusion of innovations is “the process by which an innovation is
communicated through certain channels over time among the members of a social system.” To
understand that definition you must first understand some key terms. Innovation is used more
generally here to mean an item, thought, or process that is new. Good examples of innovation
would be automobiles, brain surgery, and a new kind of running shoe. It is important to realize
that something can be an innovation in one place and have already been accepted in another. The
other key term in the definition is diffusion. Diffusion is the process by which innovations spread
from one locale or one social group to another. People do not just welcome into their homes
every innovation that is put in front of them. Every person reacts differently in the ways that they
hear about, understand, and finally accept or do not accept an innovation. Before we dive right
into the process of diffusion of innovations it is important to take a look at where the research
and theories began.
Introduction

PAK SUZUKI MOTOR COMPANY LIMITED

Pak Suzuki Motor Company Limited (PSMCL) is a multinational automobile company part of
the Suzuki Motor Corporation (SMC) Japan. Suzuki is the 11th largest automobile manufacturer
in the world, employs over 45,000 people in 23 countries.

• The 1st in Pakistan


• Pioneer in Pakistan Automobile Industry
• Largest Dealership Network
• Highest Market Share
• Suzuki has become a house hold name

PSMCL is the largest automobile company in Pakistan employing over 3,000 direct/indirect staff
across Pakistan. Our most valued asset is our employees; we provide a challenging and
conducive environment with a chance of tremendous growth opportunities, as we believe in
continuous learning and development of our employees & their continuous effort and hard
working made us market leader, we are committed to continue the same
MEHRAN 800 cc

Unrivalled in its class, Mehran is Pakistan’s largest selling car. More smart features like head
turning lamp, matching front grill and a two spoke steering wheel gives it the tidy look.
Functional economy, peak performance or unmatched fuel efficiency, Mehran VXR is the leader.
How MEHRAN is successfull

As per research on Diffusion I recognized five qualities that determine the success of MEHRAN

1) Relative advantage
This is the degree to which an innovation is perceived as better than the idea it supersedes by a
particular group of users, measured in terms that matter to those users, like economic advantage,
social prestige, convenience, or satisfaction. The greater the perceived relative advantage of an
innovation, the more rapid its rate of adoption is likely to be.

There are no absolute rules for what constitutes “relative advantage”. It depends on the particular
perceptions and needs of the user group.

2) Compatibility with existing values and practices


This is the degree to which an diffusion is perceived as being consistent with the values, past
experiences, and needs of potential adopters. An idea that is incompatible with their values,
norms or practices will not be adopted as rapidly as an innovation that is compatible.

3) Simplicity and ease of use


This is the degree to which an innovation is perceived as difficult to understand and use. New
ideas that are simpler to understand are adopted more rapidly than innovations that require the
adopter to develop new skills and understandings.

4) Trial ability
This is the degree to which an innovation can be experimented with on a limited basis. An
innovation that is trial able represents less uncertainty to the individual who is considering it.

5) Observable results
The easier it is for individuals to see the results of a product, the more likely they are to adopt it.
Visible results lower uncertainty and also stimulate peer discussion of a new idea, as friends and
neighbors of an adopter often request information about it.

These five qualities make a valuable checklist to frame focus group discussions or project
evaluations. They can help identify weaknesses which can be addressed when improving
products or behaviors.

Reinvention is a key principle in Diffusion of Innovations. The success of an innovation


depends on how well it evolves to meet the needs of more and more demanding and risk-averse
individuals in a population (the history of the Mehran is a perfect example). A good way to
achieve this is to make users into partners in a continuous process of redevelopment.

Now many car companies, corporations and rural research institutes are examples of
organizations that seek to make users active partners in improving innovations by supporting
user communities or by applying participative action research techniques. Many computer games
are now built with the intention that they will be modified by enthusiastic users.
The concept of reinvention is important because it tells us that no product or process can rest on
its laurels: continuous improvement is the key to spreading an innovation.

The importance of peer-peer conversations and peer networks

The second important insight is that impersonal marketing methods like advertising and media
stories may spread information about new innovations, but it is conversations that cause them to
be adopted.

Why? Because the adoption of new products or behaviors involves the management of risk and
uncertainty. It’s usually only people we personally know and trust – and who we know have
successfully adopted the innovation themselves – who can give us credible
reassurances that our attempts to change won’t result in embarrassment, humiliation, financial
loss or wasted time.

Early adopters are the exception to this rule. They are on the lookout for advantages and tend to
see the risks as low because they are financially more secure, more personally confident, and
better informed about the particular product or behaviour. Often they will grasp at innovations on
the basis of no more than a well worded news article. The rest of the population, however, see
higher risks in change, and therefore require assurance from trusted peers that an innovation is
do-able and provides genuine benefits.

The emphasis on peer-peer communication has led diffusion scholars to be interested in peer
networks. Many diffusion-style campaigns now consciously attempt to utilise peer networks, for
instance by using Popular Opinion Leader techniques or various “viral marketing” methods.
These methods – which are becoming increasingly popular – aim to recruit well-connected
individuals to spread new ideas through their own social networks.

Understanding the needs of different user segments


Diffusion researchers believe that a population can be broken down into five different segments,
based on their propensity to adopt a specific innovation: innovators, early adopters, early
majorities, late majorities and laggards.
Liana VURV 1300 cc / 1600 cc

A high-grade dashboard where luxury meets sporty functionality. Neatly laid out instruments. A
surprisingly spacious Liana cabin, tastefully colour-coordinated in beige and black, surrounds the
driver and passengers in relaxing ambiance. The Liana VURV is tailored for driving experience
that are both refreshing and relaxing
Their product LIANA is not yet used by any variable of diffusion process and following
suggestion to convert them as a user known as diffusion as adoption.

With this huge increase in interest on the subject diffusion research was being done globally. At
these point researchers saw similarities in all of the studies being done in different fields and
realized that it is one basic communication process. With all of this research going on it made
logical sense for marketing agencies to begin their own studies involving adoption and diffusion
of new products. These studies have continued on through the past few decades answering many
questions about the diffusion of innovation process as well as coming up with new questions to
be answered in the future.

ELEMENTS OF DIFFUSION

There are four main elements to the diffusion of innovations: (1) the innovation, (2) its
communication, (3) in a social system, (4) over a period of time.
• Innovation – any item, thought, or process that is viewed to be new by the consumer
• Communication – the process of the new idea traveling from one person to another or
from one channel to the individual.
• Social System – the group of individuals that together complete a specific goal
(adoption)
• Time – how long it takes for the group to adopt an innovation as well as the rate of
adoption for individual

Innovation
When studying the diffusion of innovations it is important to understand that you are not
just looking at the spread of an innovation through a society but rather the spread of different
kinds of innovations through a society. As stated earlier, an innovation is an item, thought, or
process that is new to a certain area but not necessarily to the world. There are three main types
of innovations that are diffused in different ways.

• Continuous Innovation
This type of innovation is a simple changing or improving of an already existing product
where the adopter still uses the product in the same fashion as they had before. An
example of a continuous innovation is now seen in the automobile industry as it continues
to change and develop.
• Dynamically Continuous Innovation
Here the innovation can either be a creation of a new product or a radical change to an
existing one. Here the consumption patterns of people are altered some. An example of
this type of innovation would be compact discs.
• Discontinuous Innovation
This is a totally new product in the market. This is the big idea innovation. In this
situation, because the product has never been seen before, there are total changes to
consumers buying and using patterns.
After discussing the three types of innovations natural progression moves us straight to the five
different characteristics variables of diffusion. Each characteristic affect the rate of adoption of a
innovation differently. Like a lot of things in life, the innovation does not have to be better or
easier to use than the product it is competing with but only be perceived to be better or easier to
use by the consumer. This idea of perception is stronger than information is seen throughout the
advertising world.

• Relative Advantage
This characteristic expresses to what extent the new product is better than the one it is
replacing. Of course the first thought would be greater profit potential. Although profit
does fit into the equation, relative advantage can be judged on other factors like ease of
use and storage as well .
• Compatibility
No matter how superior or efficient an innovation is it will not be successful if it does not
take into consideration local values and customs of the adopters. Compatibility is the
level of which an innovation fits into the specific society. The smoother the innovation
fits into the culture, the faster the rate of adoption. The diffusion of certain types of birth
control pills in certain areas is unattainable due to religious beliefs and cultural values.
• Complexity
This type of innovation is the extent of how difficult it is for an adopter to understand and
use an innovation. It is very logical to think that the harder an innovation is to use, or at
least perceived to use, the less likely that an adopter would be to consume it. A
contemporary example would be the Internet. Although the Internet is easy to use, for
someone who has never been on a computer it is extremely intimidating.
• Divisibility
This refers to the ability of the consumer to give the innovation a test run before deciding
whether to adopt it or not. Being able to try out a product before purchase helps increase
the rate of adoption drastically.
• Communicability
This characteristic is simply stated as the idea that when an innovations benefit does not
directly or immediately solve or fix a consumers problem or need it will not diffuse
through a society as quickly compared to an innovation that is more of solution to a
problem. A fictional example that helps understand this principle would be a new drug on
the market that you would take everyday to ward off headaches before they come.
Although the drug may work, because the results do not fit into our first problem then
solution ideal, it would take more time for it to be adopted.
Conclusion
It is important to note that these five characteristics are not the only ones that affect the rate of
adoption. Also the adoption of an innovation is not always a positive occurrence. Over-adoption,
where adopters act irrationally without all the information or without full comprehension of an
innovation can actually be harmful to the diffusion process.

With an understanding of the Product Diffusion process, you can target your marketing efforts
intelligently, getting the best returns from your effort. More than this, you can maximize the
chances of success for your product, for example, by pinpointing the most influential target
clients right at the start of your marketing effort.
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References:

1. Rogers, Everett M. (1964). Diffusion of Innovations.


2. http://www.marketingteacher.com
3. Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (Marketing researcher)
(2008), Principles of marketing
4. "Marketing Management: Strategies and Programs", Guiltinan et al., McGraw Hill/Irwin,
1996
5. http://www.cim.co.uk/resources/understandingmarket
6. PAK SUZUKI MOTORS COMPANY