Diffusion (business)
Encyclopedia
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
".
Idea
In the most narrow sense, an idea is just whatever is before the mind when one thinks. Very often, ideas are construed as representational images; i.e. images of some object. In other contexts, ideas are taken to be concepts, although abstract concepts do not necessarily appear as images...
or new product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
is accepted by the market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
. The rate of diffusion is the speed that the new idea spreads from one consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
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
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
it is more often named "technological change
Technological change
Technological change is a term that is used to describe the overall process of invention, innovation and diffusion of technology or processes. The term is synonymous with technological development, technological achievement, and technological progress...
".
Theories
There are several theories that purport to explain the mechanics of diffusion:- The two-step hypothesisTwo-step flow of communication- Basic Overview :Also known as the Multistep Flow Model is a theory based on a 1940's study on social influence that states that media effects are indirectly established through the personal influence of opinion leaders...
- information and acceptance flows, via the media, first to opinion leadersOpinion leadershipOpinion leadership is a concept that arises out of the theory of two-step flow of communication propounded by Paul Lazarsfeld and Elihu Katz. This theory is one of several models that try to explain the diffusion of innovations, ideas, or commercial products....
, then to the general population - the trickle-down effectTrickle-down effectThe trickle-down effect is a marketing phenomenon that affects many consumer goods. Initially a product may be so expensive that only the wealthy can afford it...
- 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 - The Everett RogersEverett RogersEverett M. Rogers was a communication scholar, sociologist, writer, and teacher. He is best known for originating the diffusion of innovations theory and for introducing the term early adopter....
Diffusion of innovationsDiffusion of innovationsDiffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures. Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations...
theory - for any given product category, there are five categories of product adopters:- Innovators – venturesome, educated, multiple info sources;
- Early adopters – social leaders, popular, educated;
- Early majority – deliberate, many informal social contacts;
- Late majority – skeptical, traditional, lower socio-economic status;
- Laggards – neighbours and friends are main info sources, fear of debt.
- Crossing the ChasmCrossing the ChasmCrossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers or simply Crossing the Chasm , is a marketing book by Geoffrey A. Moore that focuses on the specifics of marketing high tech products during the early start up period...
model developed by Geoffrey MooreGeoffrey MooreGeoffrey Moore is a Silicon Valley based high technology consultant, venture partner at Mohr Davidow Ventures and author.His books are derived from his Silicon Valley consulting work at The McKenna Group and The Chasm Group , and earlier work by Everett Rogers on adopter categories and diffusion...
- This model overlays the Everett Rogers' adoption curve with a 'chasm'. 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. Technologies or products that cannot cross this chasm will die or remain niche. If successful, a firm can create a bandwagon effect in which the momentum builds and the product becomes ubiquitous. - Technology driven modelsTechnology acceptance modelThe Technology Acceptance Model is an information systems theory that models how users come to accept and use a technology. The model suggests that when users are presented with a new technology, a number of factors influence their decision about how and when they will use it, notably:* Perceived...
- These are particularly relevant to software diffusion. The rate of acceptance of technology is determined by factors such as ease of use and usefulness.
Rate
According to Everett M. Rogers, the rate of diffusion is influenced by:- The product's perceived advantage or benefit.
- Riskiness of purchase.
- Ease of product use - complexity of the product.
- Immediacy of benefits.
- Observability.
- Trialability.
- Price.
- Extent of behavioural changes required.
- Return on investment in the case of industrial products.
Models
There are several types of diffusion rate models:- Penetration models - use test market data to develop acceptance equations of expected sales volume as a function of time. Three examples of penetration models are:
- Bass trial only model
- Bass declining trial model
- Fourt and Woodlock model
- Trial/Repeat models - number of repeat buyers is a function of the number of trial buyers.
- Deterministic models - assess number of buyers at various states of acceptance - later states are determined from calculations to previous states.
- Stochastic models - recognize that many elements of the diffusion process are unknown but explicitly incorporate probabilistic terms.
See also
- Bass diffusion modelBass diffusion modelrightThe Bass diffusion model was developed by Frank Bass and describes the process of how new products get adopted as an interaction between users and potential users. It has been described as one of the most famous empirical generalisations in marketing, along with the Dirichlet model of repeat...
- CoolhuntingCoolhuntingCoolhunting is a term coined in the early 1990s referring to a new breed of marketing professionals, called coolhunters. It is their job to make observations and predictions in changes of new or existing cultural trends...
- Diffusion (anthropology)
- Diffusion of innovationsDiffusion of innovationsDiffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures. Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations...
- Early adopter (marketing)
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Marketing managementMarketing managementMarketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities...
- Marketing planMarketing planA marketing plan may be part of an overall business plan.Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use....
- New Product DevelopmentNew product developmentIn business and engineering, new product development is the term used to describe the complete process of bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible or intangible...
- PercolationPercolationIn physics, chemistry and materials science, percolation concerns the movement and filtering of fluids through porous materials...
- Product Life Cycle ManagementProduct life cycle managementProduct life-cycle management is the succession of strategies used by business management as a product goes through its life-cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.Product life-cycle Like human beings,...
- Technology Adoption LifecycleTechnology Adoption LifeCycleThe technology adoption lifecycle is a sociological model developed by Joe M. Bohlen, George M. Beal and Everett M. Rogers at Iowa State University, building on earlier research conducted there by Neal C. Gross and Bryce Ryan...
- Technology lifecycleTechnology lifecycleMost new technologies follow a similar technology maturity lifecycle describing the technological maturity of a product. This is not similar to a product life cycle, but applies to an entire technology, or a generation of a technology....