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VENUGOPAL ARRAVELLI

VENKAT SWAMINATH CHANNA


susheel
VASUDHA
UBAD KHAN
 The diffusion of an innovation is the spread
of a product, process, or idea perceived as
new, through communication channels,
among the members of a social system over
time. Innovations can be a new product or
output, a new process or way of doing
something, or a new idea or concept. The
“newness” of an innovation is subjective,
determined by the potential adopter.
 The product will reach a maturity stage where little growth will be
seen & some products may also reach a decline stage, usually
because the product category is being replaced by something
better. For example, typewriters experienced declining sales as
more consumers switched to computers or other word processing
equipment.
 The product life cycle is tied to the phenomenon of diffusion of
innovation. When a new product comes out, it is likely to first be
adopted by consumers who are more innovative than others—they
are willing to pay a premium price for the new product and take a
risk on unproven technology.
 It is important to be on the good side of innovators since many
other later adopters will tend to rely for advice on the innovators
who are thought to be more knowledgeable about new products for
advice.
example, IBM did not invent the personal
computer, but entered after other firms showed
the market to have a high potential. Products can
be new to the segment—e.g., cellular phones and
pagers were first aimed at physicians and other
price-insensitive segments. Later, firms decided
to target the more price-sensitive mass market.

The diffusion of innovation refers to the tendency


of new products, practices, or ideas to spread
among people.  Usually, when new products or
ideas come about, they are only adopted by a
small group of people initially; later, many
innovations spread to other people. 
The saturation point is the maximum
proportion of consumers likely to adopt a
product.
 INNOVATORS - are first to buy and
typically described as venturesome,
younger, well educated, financially
stable, and willing to take risks.

 EARLY ADOPTERS - are local opinion


leaders who read magazines and who are
integrate into the social system more
than the average consumer.
 EARLY MAJORITY - solid, middle-class
consumers who are more deliberate and
cautious

 LATE MAJORITY - described as older, more


conservative, traditional, and skeptical of
new products
 Laggards OK, we will
◦ Resist change buy X.
◦ Conservative If I
◦ Like tradition have to
◦ Often older & lower in buy it I
socioeconomic status will.

 Non adopters
◦ Refuse to change
No
way!
Market Market Market Sales
Introduction Growth Maturity Decline

Total Industry
Sales
+
Total Industry
Profit
$0
Tim
– e
Stage customers:
Early Adopters Early Majority Majority Laggards
Encourage Discourage

1. Relative 1. Value barrier


advantage 2. Usage barrier
2. Compatibility 3. Complexity
with past usage 4. Risk barrier
3. Simplicity of use
4. Observability
5. Trialability
6. Divisibility
1. Trickle Up and Trickle Down
The transmission of influence between socioeconomic groups
can be described as a trickle-down process from higher to
lower groups (the traditional view) or a trickle-up process.
Occasionally, a trickle-up direction occurs. For example,
innovators and early adopters of jeans and of bluegrass and
rock music were those in lower socioeconomic classes.

2. Trickle Across
Since the post World War II period, a leveling effect in
socioeconomic status has occurred which makes trickle-down or up
effects less relevant. Mass media now communicate information on
innovations to all classes. A more likely process of diffusion is one
that occurs across groups, regardless of socioeconomic status,
known as a trickle-across effect.
Diffusion in organizations

TWO TYPES OF INNOVATION-DECISIONS

collective innovation decisions

Authority innovation decisions


 Two-Step Flow of Communication

COMPANY
MESSAGE

OPINION
LEADERS

TARGET AUDIENCES
■ OBSERVABILITY - is the opportunity for
buyers to see the newness (+)

(Field test
..
② Compatibilitywith existing habits, values
and consumption behavior, similar usage
as existing products

COMPLEXITY - is a disadvantage for new


products which slows diffusion and may be
offset by simplifying usage or through
extensive education
80 to 90% Fail. Why?
1. Performance & Price
New product failures generally offer the
same or worse performance … than
competing products with … the same or
higher price
 2. Inadequate Market Analysis
New Product
Success
• Offer a unique benefit (a differential
advantage)
• Solve a consumers problem or provide an
opportunity, a reward