AN ANALYSIS OF THE ADOPTION AND DIFFUSION MODEL
INTRODUCTION
There has been increasing interest in the field of consumer behaviour for the past three decades and goes as far back as the pioneering studies of cognitive, social, clinical, and humanistic psychology; behavioural decision-making theory; economics; communication science; sociology; and cultural anthropology in an attempt to analyse and understand the nature of the motives, goals and desires that prompt how the consumers in the market behave. in 1957 argued that consumer behaviour is best understood as problem-solving behaviour, and his functionalist approach was fundamentally concerned with the goals toward which consumers strive and the processes through which they seek to attain these goals. An improved understanding of the subject, asserted by (1990), might be used to: (1) more successfully manipulate and influence consumers’ use of products, goods, and services; and (2) an enhanced appreciation for the complexities of consumer behaviour might be used to more successfully serve as an advocate for consumers in their interactions in the marketplace.
An important phase for understanding consumer behaviour is the consumer decision-making phase. It is the stage related to the process when consumers face a set of choices until they make their final purchasing decision, and, because the issue addresses not only related to the process, but also to decision quality as the outcome of the process, it is with extreme care that the subject should be analysed as it provides important clues for product providers to acquire insights on consumers’ requirements.
BACKGROUND OF THE MODEL
There is a slight difference between adoption and diffusion. Diffusion is the process by which a new idea or new product is accepted by the market and 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. Otherwise, these concepts are taken as one and/or the other, paving the way for a more integrated discussion of the subject. The original diffusion research was done as early as 1903 by the French sociologist who plotted the original S-shaped diffusion curve (1995) and research on the subject is currently at a relatively mature stage (1990). There is also an extensive amount of academic research in marketing on the development and applications of new product adoption models. The most influential model in this stream of research, that pioneered a long subsequent line of research inquiry over four decades, is the Bass Model (1994).
The Bass Diffusion model on the adoption and diffusion of new products and technologies by and the later extensions of diffusion theory are used for market analysis and demand forecasting of new technologies. The Bass diffusion model is one of the tools to describe, and sometimes predict, the number of purchases for new consumer durable products. Bass diffusion theory is simple enough to allow a first assessment. There is no immediate need for further complex modelling. However care must be taken as the standard model is only one of the many models of technology diffusion. The dynamics of the innovation uptake curves, and how the technology or its application diffuse into the market, is a crucial analytic tool when assessing the business case for internal or external investments in new technologies. For early stage investments or internal business cases for new products, it is essential to have some understanding of the likely diffusion of the technology. By not having a mental model to test against reality, the amount of capital, time to market and the window of opportunity can be grossly misjudged (2006).
Known diffusion-focused research typically consists of the characteristics of an innovation which may influence its adoption, decision-making process that occurs when individuals consider adopting a new idea, practice, product or service, characteristics of individuals that make them likely to adopt an innovation, consequences for individuals and society of adopting an innovation and communication channels used in the information process. From these five elements stem the strength and weaknesses of the model, which will be discussed in detail further into the paper. (1995) Innovation Decision Process theory proposes that there are five distinct stages to the process of diffusion. The stages are:
Technology adoption as…
Based on…
Outcome stressed…
Common research method…
Consumer behaviour
Behaviourism
Market research
Economic theory
Purchase and installation behaviours
National and regional demographic surveys
The table above, adapted from the work of (2000), shows that seen as consumer behaviour, technology adoption can be measured in terms of units purchased or number of programs installed. This is consistent with behaviourist models: What users are thinking is secondary to their behaviour. General surveys at the state or regional level become useful benchmarks of adoption levels over time (see Becker, 1994). These demographic data then become valuable information in the hands of policymakers and administrators seeking to allocate resources in fair and effective ways. Marketers should help consumers move through the stages of adoption. Specifically, they are: (1) awareness, (2) interest, (3) evaluation, (4) trial and (5) adoption ( 2005). Rogers argued that the rate of diffusion is influenced by the product’s perceived advantage or benefit: riskiness of purchase, ease of product use, immediacy of benefits, observability, trialability, price, extent of behavioural changes required and return on investment in the case of industrial products. Below is the adoption process, as suggested by (1995).
(1995) Individual Innovativeness theory suggests that individuals react differently to change based on a stable trait or predisposition. He has developed a classification scheme of potential adopters based on their receptivity, and for him, membership in one of the five groups depends solely on the timing of a consumer’s adoption (first purchase, for many products) of that innovation, although innovativeness in trying new products is typically treated as an inherent character trait that applies across products. Below is a brief explanation of the five groups.
- Innovators – the risk takers who are willing to take the initiative and time to try something new.
- Early Adopters – tend to be respected group leaders, the individuals essential to adoption by whole group.
- Early Majority – the careful, safe, deliberate individuals unwilling to risk time or other resources.
- Late Majority – those suspect of or resistant to change and are hard to move without significant influence.
- Laggards – these are those who are consistent or even adamant in resisting change and needs pressure to force change into them.
STRENGTHS
The major strength of point of view comes from the fact that it can be applied to different types of situations, i.e. the learning of a new practice, the use of a new tool, the launch of a new product, etc., which also reflects in the huge amount of relied academic and professional literature. The wealth of information available on the model is overwhelming, and a research will prove that the areas it touches reach as far as health care, information technology and even in a sociological context. In the marketing sphere, Rogers’ approach is mostly applied in strategic marketing with respect to understanding consumer behaviour since it provides a rather good qualitative understanding of both the structure and the rate of the diffusion of a new product on a market, helping therefore managers or analysts – who are facing problems of innovation management – to take strategic business decisions (1999), another area of the model’s strength.
The relative advantage of the products and services usually being innovated is also one of the strengths of the adoption and diffusion model. After all, only those products and services which are perceived as valuable to the consumers and the industrial sectors are being successfully diffused and adopted by the market. Products such as cellular phones, fax machines, and ATM cards, have a strong relative advantage and although the cost ratio is high to the innovation of these products, the consumer and industrial demand for it is high, because of the main reason that these products are fast becoming necessities to everyday and business life. Other strengths found for this model are: (1) an approach to diffusion promotes a collectivity of technical experts devoted to improving the quality of the products and services offered in the market; (2) there is evident coordinated efforts at technology transfer; (3) a limited ability to gain adoption of innovations not popular but important for societal well-being; (4) an advancement of needed changes in the current market system; (5) encouragement of local initiative in small firms; (6) local control of product and service development; and (7) motivation for self-reliance.
Another strength lies in that since the process of adoption of innovations is a cognitive process (1995), the people are given the time to go through the five stages of awareness, interest, evaluation, trial and adoption. According to (2003), in the awareness stage, the consumer becomes cognizant of the innovation but lacks information about it. The interest stage reflects the stimulation needed for the consumer to seek information about the new product. The evaluation stage takes place when the consumer evaluates the new product in relation to established goals and financial resources. A decision is made whether to try the new product. The consumer tries the new product in the trial stage to help gauge the value of the product or service. The adoption stage occurs when the consumer decides to make full and regular use of the new product. Sources of information are an important part of the adoption process and different sources are valued more highly at different stages.
WEAKNESSES
There are still weaknesses to Rogers’ model. For one, it is still difficult to use his paradigm further in the marketing process (considered in its whole) – in particular if one wants to do analytic or predictive marketing – due to the fact that his approach is fundamentally empirical and non quantitative, therefore the adoption and diffusion model are not one hundred percent reliable sources of marketing knowledge in gleaning consumer behaviour and how it affects their decision-making process. The key problem is that there still does not exist, up to current knowledge, any precise mathematical description of the nature of the cornerstone of Rogers’ model, i.e. the characteristic “Gaussian type” curve that describes the rate of diffusion of an innovation inside a given population, that is to say the function N(t) that measures the number of new people of the considered population that is accepting such an innovation at time t illustrated in the figure below (2006).
The characteristic Gaussian type diffusion rate in Rogers’ model
Further, current standard models of product and service diffusion processes lack an explicit decision-theoretical foundation on the micro level. Indeed, the main equation of the standard Bass model (1969) operates totally on the level of macro variables: it traces the total number of adopters and non-adopters within the population over time. The two parameters in the equation might be interpreted as the processes of how the first adopters are impersonally “persuaded” and how non-adopters “imitate” the first adopters (2000). Although some refinements have been added to the equations in the last few years (1997; 1993), step-by-step specifications of the adoption process at the micro level are still missing.
In the early stages of a diffusion process, not much interpersonal communication exists to help spread information about the innovation, since few consumers have had the opportunity to adopt it and talk about it. Therefore, the early stages of diffusion rely heavily on impersonal information flows. These flows, typically the firm’s marketing strategies or other purposeful propagation efforts, have been the basis of several marketing research. Only certain ‘innovative’ consumers (Rogers’s Innovators and Early Adopters) tend to rely primarily on impersonal sources of information to make adoption decisions. In other words, only consumers who are naturally “innovative” with respect to a particular product category will tend to respond to introductory marketing activities such as media advertising, billboards, couponing, public relations, and sampling for products in that category (1994). This only shows that there is a slowdown to the flow of information, especially those classified as impersonal, in the early stages of the process, thereby constricting the process of adoption and diffusion.
Critics of this model have also pointed out a weakness in that the model is an overly simplified representation of a complex reality. A number of other phenomena can influence innovation adoption rates. One of these is that customers often adapt technology to their own needs, so the innovation may actually change in nature from the early adopters to the majority of users. A second is that disruptive technologies may radically change the diffusion patterns for established technology by starting a different competing S-curve. Finally, oath dependence may lock certain technologies in place, as in the QWERTY keyboard (2006).
USEFULNESS OF THE MODEL
As evidenced by the discussions above, the adoption and diffusion model is a useful tool for understanding consumer behaviour in the market. This links to the processes of decision-making of consumers and the industrial sector in how they select the products and services that they purchase and avail of. However, a major significance of the product adoption process is that not all consumers pass through the adoption process with the same speed. The speed of adoption depends upon whether the product is compatible with current lifestyles and if consumers with high discretionary incomes are willing to try the new product offering. Other important factors are the degree of functional, physical, financial, social, psychological, and time risks in purchasing the product. The decision-making process considers the advantages that the product has over competitive offerings on the market, the ease of product use, and the importance of the product to the user ( 2003).
An increased understanding of the diffusion and adoption model promises to yield important findings on the effects of habit, loyalty, competitive strategies, and variety-seeking on consumer behaviour over time. The adoption and diffusion model could also serve to: minimize, if not manage the uncertainties unique to market environments, ranging from whether the product or service will work or will be effective, to whether consumers or the industrial sector will buy or patronize it; assess the market potential of an innovation; understand consumer behaviour and adoption patterns for innovations; incorporate the consumer insights into the product development process; capture value from a technological innovation via licensing the innovation to others, joint venturing with established players, or going it alone; and employ the best distribution, pricing, and promotion tactics for launching products and services into the marketplace. (1995) claimed that the adoption and diffusion model is the definitive source for learning strategies aimed at gaining adoption of complex and controversial technologies. The diffusion of innovations approach relies upon well-established theories in sociology, psychology, and mass communications to develop a concise and easily understood approach to consumer acceptance of new technologies.
Marketers should put theory into practice by targeting consumers through using the adoption and diffusion model to assess appropriate development and promotion plans. The field needs to assume that both adoption categories and preferences for product and services categories are important. Primarily, there is a need to look at what the consumers and the industrial sector prefer and have adopted on the macro level. Then should come the examination of particular customer segments in the general area of operation, as there are significant differences in the buying behaviour depending on the geographic location of the consumers and the industry. Additionally, recognizing the influence of social comparison processes on technology transfer is another essential contribution of the diffusion of innovations model beyond the risk communication techniques.
Understanding the adoption and diffusion model also helps the marketing field in adapting strategies by taking the consumer or the industrial sector, or both, whoever is the target market, into consideration. For example, by understanding that a number of different messages compete for the potential customers’ attention, it could be learned that to be effective, advertisements must usually be repeated extensively. It could also be possibly learned that consumers will sometimes be persuaded more by logical arguments, but at other times will be persuaded more by emotional or symbolic appeals. By understanding the consumer and the industrial sector in how they adopt and diffuse the products and services that they utilize, and gaining knowledge into consumer and industrial decision-making process for products and / or services, marketers will be able to make a more informed decision as to which strategy to employ. All in all, the adoption and diffusion model is quite useful in gathering such information from the consumers and the industrial sectors, despite its evident weaknesses, which in time could be remedied, if only future in-depth research will be done on the subject that aims to improve the limitations and weaknesses of the adoption and diffusion model.
IMPLICATIONS FOR PRODUCT/SERVICE PRICING
An understanding of the strength and weaknesses of the adoption and diffusion model and an evaluation of its usefulness in gaining knowledge into consumer/industrial decision making processes for products/services has several implications for product/service pricing. One is that with the flexibility of the model, a sufficiently good qualitative understanding of both the structure and the rate of the diffusion of a new product on a market is available for consideration in the process of placing prices on the product or the service. The model also makes the pricing process easier, as one of its numerous advantages is the involvement of high-demanding consumer and industrial products and/or services. Additionally, because there is local control of product and service development, the pricing phase is made much easier to go through and produce more reliable results. As pointed out in the previous discussions, the model is a useful tool for understanding consumer behaviour in the market in incorporating the consumer insights into the product development process. As the product development process involves important aspect of pricing, the adoption and diffusion model helps employ the best possible pricing tactics for launching products and services into the marketplace. Therefore, pricing is also affected by the amount of effectiveness of the adoption and diffusion process of the particular product or service. Giving a product or service the right price depends on the extent of its ability to diffuse and be adopted in the target market segment. Thus pricing is variable and dependent on the adoption and diffusion model to be correctly attached to the product and/or service.
CONCLUSION
Rogers’ Diffusion of Innovations (1995) includes a final chapter on the consequences of innovations. In this chapter he examines the value implications of different innovations. Because not all innovations should be adopted, technologies need to be critically evaluated from utilitarian and moral perspectives before they are integrated into peoples’ lives. Surveys in the US, the UK and Australia in 2000 cite adoption rates of no more than 14 per cent, even for `mature’ innovations. More surprising, they show abandonment rates as high as 90 per cent among those that do choose to adopt. These findings suggest that the marketing field is doing something seriously wrong; people accept that innovation is good for but the profession does not have a successful means of making it happen (2000). The implication of the model for product and/or service pricing is that the latter is variable and dependent of the former if the business is to put a correct tag to the products and/or services that they sell/offer. In the bottom line, the successful adoption and diffusion of products and services innovations are contingent to customers’ acceptance. Diffusion of innovation model are important tools for effectively assessing the merits of investing in technologies that are new or novel and do not have prima facie, predictable patterns of user up-take, but it is more important to note that essentially, the diffusion process is dependent upon the characteristics of the innovation and the characteristics of the innovators. The skill and foresight of the company in bringing the products and services to the market and getting it adopted by consumers and the industrial sector is also seen as a vital factor in the process.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment