World Library  
Flag as Inappropriate
Email this Article

Diffusion (business)

Article Id: WHEBN0000242495
Reproduction Date:

Title: Diffusion (business)  
Author: World Heritage Encyclopedia
Language: English
Subject: Technology, Management, Uptake, Mass-market theory, Opinion leadership
Collection: Cultural Trends, Management, Marketing, Product Management, Technological Change
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Diffusion (business)

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 (the reciprocal process as viewed from a consumer perspective rather than distributor) 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".

Contents

  • Theories 1
  • Rate 2
    • Models 2.1
  • See also 3
  • References 4

Theories

There are several theories that purport to explain the mechanics of diffusion:

  1. The two-step hypothesis - information and acceptance flows, via the media, first to opinion leaders, then to the general population
  2. the trickle-down effect - 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
  3. The Everett Rogers 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.
  4. Crossing the Chasm model developed by Geoffrey Moore - 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.
  5. Technology driven models - 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:

  1. 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
  2. Trial/Repeat models - number of repeat buyers is a function of the number of trial buyers.
  3. Deterministic models - assess number of buyers at various states of acceptance - later states are determined from calculations to previous states.
  4. Stochastic models - recognize that many elements of the diffusion process are unknown but explicitly incorporate probabilistic terms.

See also

References

  • Bass, F. M. (1969). "A new product growth model for consumer durables". Management Science, 15, 215-227.
  • Bass, F. M. (1986). "The adoption of a marketing model: Comments and observations". In V. Mahajan & Y. Wind (Eds.), Innovation Diffusion Models of New Product Acceptance. Cambridge, Mass.: Ballinger.
  • Moore, Geoffrey. Crossing the Chasm: Marketing and Selling Hightech Products to Mainstream Customers (1991, revised 1999, 2000, 2001, 2002) New York: Harper Collins.
  • Moore, Geoffrey. Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution (2005) New York: Penguin.
  • Rogers, Everett M. "New Product Adoption and Diffusion". Journal of Consumer Research. Volume 2 (March 1976) pp. 290–301.
  • Rogers, Everett M. Diffusion of Innovations, (5th ed.). (2003) New York: Free Press.
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 


Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.