Theory of diffusion of an innovative/new product idea

The marketing literature today suggests that new product ideas or innovation take time to diffuse and get adopted in the market place. The pace at which they diffuse differ from one market to another depending on factors like the extent to which an economy is open to new products, media, transportation, warehousing and distribution network. It also depends on customer awareness and knowledge.

The theory and the process of diffusion of new products/innovation was first propounded by Everett M Rogers. According to this theory, people differ in terms of their risk-taking and in their attitude towards change. This affects their willingness to try and adopt a new product. Based on these two parameters and the time they take to try a new product, customers can be grouped as following:

1. Innovators
2. Early Adopters
3. Early Majority
4. Late Majority
5. Laggard

It is important to understand the attributes of these adopters and also how the process works in any market.
(a)Innovators: Innovators in any product market situation are 2.5% of the total market. These individuals are high on risk-taking and hence more open to change. They are more aware and are perceived as opinion leaders in the market. In fact, they hold the same opinion about themselves. Others look up to them for guidance and recommendation. They are brand switchers. Once the innovators have bought the new product or brand and feel satisfied, they talk it out to their friends, neighbors and relatives and peer group.
(b)Early Adopters: The next in line to buy the new products after the innovators are the early adopters who constitute 13.5% of the total market. They have the same characteristics as innovators but take a little more time to buy and adopt the new product than the innovators.
(c)Early Majority and Late Majority: This constitutes 68% of the market and hence represents a significant proportion of the market. These customers wait for positive recommendations from innovators and early adopters who are perceived as opinion leaders by them. They are moderate on risk-taking.
(d)Laggards These constitute 16% of the total market and have high resistance to change. They are averse to risk-taking and until it is 100% safe to use the product, the generally do not buy it. They are loyal to their existing brands and products.

The marketer needs to understand these characteristics of the target market and accordingly plan the communication strategy for each of these groups. This theory also suggests that a firm should research the demographic, psychographics and media habits of innovators and early adopters and direct its effort to make them its advocates.

This categorization is applicable in Industrial marketing and Rural marketing.

The “How to use� product can play an important role in the product diffusion in markets in India, where the awareness level and literacy rate is still low, this is a useful strategy to diffuse a product.

Finally, as Kotler puts it, five characteristics influence the rate of adoption of innovation. These are:

(a)Innovation’s Relative Advantage
It is important to appreciate that higher the perceived advantage of an innovation over the existing alternatives or product, faster is the pace of its adoption and diffusion. This advantage has to be tangible. For example, personal computer is being adopted faster because of their multiple advantages to the user-word processing, computations and financial planning to name just a few. In Industrial marketing, the cost advantage that pet bottles and tetra packs offered over the metal cans and glass bottles made them a common packing material for liquid products like edible oils, soft drinks and milk.
(b)Innovation’s Compatibility
This refers to the extent to which an innovation is compatible to users’ values and experiences. Consider the examples of personal computers, again, which match the values and experiences of the professionals –a growing segment in India
(c)Innovation’s complexity
The more complex the innovation is to understand, the more time it will take to get diffused in the society.
(d)Innovation’s Divisibility
The degree to which innovative products can be used on a multiple basis. More the users and more the purchase options available, faster is the diffusion of innovation.
(e)Innovation’s Communicability
This refers to the degree to which benefits of an innovation can be observed and communicated to others. For example, if a doctor observes a distinctive improvement in his heart patient after being treated by a new technique-angioplasty, and communicates it to his fellow colleagues in the profession, then faster will be the diffusion of this innovation in treating angina patients.