9

Diffusion of Innovation

Do not wait for the best idea, implement the better idea,
still better and the best will follow.
God grant me the serenity to accept the things I cannot change,
change the things I can, and the wisdom to know the difference.

This chapter gives an understanding of:

• Duffusion and its process
• Types of innovation
• Classification of adopters
• Diffusion enhancement strategies
 CHAPTER 9

Diffusion of Innovation

9.1 Introduction
Diffusion is process by which a new product is accepted and spreads through a market. It is a
group phenomenon, in which first an idea is perceived, then it spreads throughout the market,
and then individuals and groups adopt the product.

Definition
Diffusion is a process by which the acceptance of an innovation/new product, a new idea, a new
service, is spread by communication to members of a social system over a period of time.

9.2 Innovation
An innovation is an idea, practice, or product, perceived to be new by an individual or a group.
A product is said to be an innovation when it is perceived by the potential market as a change,
and not by a technological change brought in it.
New products or new services have been classified as under:

Firm Oriented
If the product is new to the company, it is said to be new.

Product Oriented
It focusses on the features inherent in the product and the effect it has on the consumer’s
established usage pattern. This leads to three types of product innovation—continuous,
dynamically continuous, discontinuous innovation.

Market Oriented
It stresses on how much exposure consumers have on the new product:
(i) It can be new if purchased by a small percentage of customers in the market.
(ii) It is new if it has been for a relatively short period in the market.

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DIFFUSION OF INNOVATION 79

Consumer-oriented Items
It is based on the consumer’s perception of the product. If he judges it to be new. For example,
the Polaroid camera can be considered as an innovation, because a whole lot of people who
constitute the market, use it, and can get photographs in minutes. Microwave oven for exam-
ple is an innovation. It does wonders for cooking and warming of foods. Similarly, mobile
phones (cell phones) can be considered an innovation. Not only are they popular, but they were
unthinkable a decade or two back. Innovation can be of various degrees. For instance, a micro-
wave oven is more of an innovation than sugar-free cola. In innovation, behavioural changes
take place. These behavioural changes can be small, modest, or large. The innovation can be
continuous or, dynamically continuous or, discontinuous.
Continuous innovation
In this type of innovation, minor behavioural changes are required for adoption of the product,
from ordinary cookware to Teflon-coated cookware, where minor behavioural changes are re-
quired. A modified product, e.g., a new scuba watch, new car model or, low-fat yogurt, etc.
Dynamically continuous innovation
Communicator behavioural changes are required for the adoption of the product. Products in
this category include compact disk players, cellular phones, erasable ink pen and disposable
diapers.
TV has led to related innovation
Table 9.1 T.V. has led to related innovation

Discontinuous Dynamically Continuous

innovation continuous innovation innovation

Black and white TV Colour TV Remote control

Portable pocket TV Various cabinet styles
Stereo TV Instant on flat screen
Giant screen TV Electronic tuning
Cable ready TV Stereo sound
Picture in picture TV

Video cassette recorder Video walkman

Video camera

Discontinuous innovation
Here the adoption of the product requires major behavioural changes and the product is new,
and requires high involvements of the user, along with extended decision-making, which consists
of the following steps:

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Table 9.2 Stages in adoption and decision-making

Stages in adoption process Steps in extended decision-making

Awareness Problem recognition

Interest Information search

Evaluation Alternative evaluation

Trial Purchase

Adoption Post-purchase evaluation

9.3 Diffusion Process

Diffusion process is the manner in which innovations spread throughout the market. Spread
refers to the purchase behaviour where a product is purchased with some continuing regular-
ity. Spread of innovation can be of three types as shown in the Fig. 9.1.

Fig. 9.1 Three types of innovation spread

The diffusion process follows a similar pattern, overtime, irrespective of the social group
or innovation. The typical diffusion process shows a slow growth or adoption. It later rises
rapidly, and then a period of slow growth is noticed. In fast diffusion process, the product
clicks immediately. The spread of innovation is very quick. People patronise the product
immediately, and later on there is again slow diffusion.
In slow diffusion process, the product takes a lot of time to diffuse or spread, and the
consumer follows a pattern of adoption slowly by getting acquainted with the product.
These studies show that the products take a certain amount of time, from when it gets
introduced to its saturation. The marketeer therefore has to understand what determines the
spread of innovation in a given market segment, and how do the early buying consumers differ
from those of late purchasers.

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The rate of spread of innovation depends on a number of factors listed below:

1. Type of group: Some groups who are young, affluent and highly educated, accept
changes faster than the old, traditional and poor groups. This shows that the target
market is an important determinant of the rate of diffusion.
2. Perceived risk: The more the risk associated with changing to new innovation, the
slower is the rate of diffusion. The risk consists of the product not performing as
expected, the risk of the consequences of change-over, and the risk of reverting back
to the old product, if not satisfied with the innovative product.
3. Type of decision: An individual vs. a collective decision. Individual decisions head to
faster diffusion than collective ones.
4. Marketing effort: This also affects the diffusion process. More aggressive marketing
effort, consisting of high and continuous advertising expenditure, diffuses faster than
otherwise.
5. Trial: The trial can be taken at low cost and low risk, the diffusion is faster. Some
products can be borrowed, rented or, their trial can be taken at retail outlets. These
products like medicines, and other low-priced items have faster diffusion.
These days even car outlets are giving free trials and rides to prospective cus-
tomers to make their new models of cars diffuse faster.
6. Fulfilment of felt need: The faster a need is satisfied or fulfilled by a product, the
greater is the rate of its diffusion.
7. Compatibility: The more the product is compatible with the beliefs, attitudes and
values of the individual or group the faster the diffusion—vegetables soup for veg-
etarians, ordinary microwave, no roasting.

Low Easy
risk trial

High Change
observ- from target
ability market

Low Individual
Rapid
complexity adoption
diffusion
decision

Large Extensive
relative marketing
advantage effort
High Strong
compati- felt
bility need

Fig. 9.2 Rapid rate of diffusion

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8. Relevant advantage: The advantage could be of price, quality, ease of handling prod-
uct quality. To have quick diffusion, the product must offer either a price advantage
or a performance advantage. Washing machine is expensive, but a labour saving
device.
9. Complexity: If the product is complex (difficult to understand and use) the diffusion
is slower. The product may be complex but it must be easy to understand. Complexity
may be because of many attributes (attributes complexity which are difficult to
understand). The other complexity may be trade off complexity. The trade off takes
place between cost of purchase and economy. Convenience vs. space or speed of cooking
vs. quality of cooking, as in microwave ovens.
10. Observability: The more easily the positive effects of the products can be observed,
the more discussion takes place and faster the diffusion process, e.g., cell phones.

Fig. 9.3 Slow diffusion

Fig. 9.4 Fast diffusion

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Classification of Adopters
Adopters can be classified into five groups based on the time when they adopt:
Innovators: The first 2.5 per cent to adopt innovation.
Early adopters: The next 13.5 per cent to adopt.
Early majority. The next 34 per cent to adopt.
Late majority: The next 34 per cent to adopt.
Laggards: The final 16 per cent to adopt.
Innovators (2.5%)
Innovators are venture some risk takers. They are younger, more educated and socially mobile.
They have the capacity to absorb risk associated with the new product. They are cosmopolitan
in outlook, are aware and make use of commercial media, and eager to learn about new products,
are progressive, ready to use new products.
Early adopters (13.5%)
They take a calculated risk before investing and using new innovations. They are opinion
leaders and provide information to groups, but they are also concerned about failure. There-
fore, they weigh advantages and disadvantages of the product before plunging in for a pur-
chase.
Early majority (34%)
They tend to be more continuous and use the product after the innovators and early adopters
seem to be satisfied with it. They are elders, well educated and less socially mobile. They rely
heavily on inter-personal source of information. They constitute 34 per cent of the consumers.
Late majority (34%)
They are doubtful and sceptical about the innovation of new products. They tend to use the
product not so much because of innovation, but because of other pressures—non-availability of
the product and social pressures. They have less social status, and are less socially mobile than
previous group. They are average in age, education, social status, income. They make little use
of media (Magazine etc.). They rely heavily on informal sources of information.
Laggards (16% of a Market)
They are more traditional. They possess limited social interaction and are oriented to the past.
They adopt the innovations with great reluctance. They have the least education, lowest social
status and income. They possess no opinion leadership and are in touch with other laggards
and donot subscribe to many magazines.
Market strategy related to diffusion
There are differences in the early purchasers or innovators and late purchasers (Laggards).
The strategy for the target market adopted, is a “moving target market” approach. First the
general target market is selected, and then the focus shifts to innovators, early adopters, early
majority, late majority and laggards. This takes place as the product keeps getting acceptance
from the consumers. There is then a change in the media and advertising themes for different
target groups.

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Diffusion enhancement strategies

The idea is to find out the diffusion inhibitors and to eliminate them for the enhancement of
diffusion. For this, the diffusion determinants are analysed, and diffusion strategies framed,
as given in Table 9.3.
Table 9.3

Diffusion Diffusion Diffusion

determinant inhibitor enhancement strategies

1. Type of group Conservative traditonal Try other markets, modern and consumer.
2. Perceived risk High Give guarantees, reduce risk by endorsing
with credible sources.
3. Type of decision Group decisions Choose media to reach all deciders and
provide conflict reduction themes.
4. Marketing effort Limited Extensive and aggressive marketing effort.
5. Trial Difficult Distribute free samples to early adopters.
Use high service outlets.
6. Fulfilment of felt need Weak Show importance of benefits, use extensive
advertising.
7. Compatibility Conflict Stress attributes consistent with values and
norms.
8. Relevant advantage Low Lower the price—redesign the product.
9. Complexity High Use extensive marketing effort. Use skilled
sales force. Use demonstration of product.
10. Observability Low Expose the product more through promotion
and advertising.

These diffusion inhibitors have to be analysed, and strategies formulated accordingly.

Adoption and Diffusion Through Marketing Strategy

Marketeers have been trying to influence consumers to adopt new innovations. This is done
through free samples and price promotions. Advertising is done extensively when the results
are not found positive by distribution of free samples and promotions. Sometimes price
promotions and free samples are backed by advertising techniques. Sometimes change agents
are used to overcome resistance to adoption. For medical products, hospitals, clinics and
physicians of repute are used as change agents.
Rate of Diffusion. The rate of diffusion can be low or high. Marketeers have 2 options
that can influence the rate of diffusion.
Skimming Strategy. This strategy used for major innovations and when the product
is in great demand. Prices are set high and it has slow rate of diffusion. The strategy aims at
skimming the cream of the market i.e., to take advantage and get the profits in abundance.
The segment is small and specific. The segment is price insensitive. It has its own lifestyles
and demographic characteristics, awareness and information advertising is used in this case.
The distribution is done from selective outlets.

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Penetration Strategy. In this, there is rapid and widespread diffusion as the product
is of low value and is within the reach of many. The product is sold to a General Market by an
intensive campaign. The distribution is extensive and the product used is general. It is used in
new products which are not major innovations like cold drink, health drinks, coffee etc. The
advertising is widespread and other means of promotion are also used.
The distribution is extensive and covering as many outlets as possible. The price is low
and the product is available. The strategy keeps changing with its position on the diffusion
curve. All electronic products of major innovation start with the skimming strategy and gradu-
ally move down to penetration strategy. The price of computers, television sets, microwave
ovens etc., start with a high price and as the product is adopted and many more competitors
come in the skimming strategy is changed to penetration strategies. Some products start with
a penetration strategy and raise their prices with the widespread acceptance of the product in
the market.
Table 9.4 Marketing strategies and rate of diffusion

Rate of diffusion Slow Fast

Marketing Strategy Skimming Penetration

Price High Low
Market Segmentation Target market is specific and small Target market is large
lifestyles and demographics are difficult to specify by
considered lifestyles and demographics
Promotion Information and Advertising backed Repetitive advertising use
by personal selling and sales promotion of imagery and symbols
Distribution Selection through prominent stores Intensive very large
number of outlets
Product Discontinuous Continuous
Characteristics Innovations Innovation

Questions
1. Explain innovation and diffusion. Discuss the stages in the adoption process.
2. What are various types of diffusion? List and explain the factors that are responsible for
the spread of innovation.
3. What are the classification of adopters? Illustrate and explain with the help of a dia-
gram.
4. What market strategy must be adopted for the spread of innovation or diffusion
enhancement?

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