Diffusion (business)
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Diffusion is the process by which a new
idea In common usage and in philosophy, ideas are the results of thought. Also in philosophy, ideas can also be mental representational images of some object. Many philosophers have considered ideas to be a fundamental ontological category of being ...
or new
product Product may refer to: Business * Product (business), an item that serves as a solution to a specific consumer problem. * Product (project management), a deliverable or set of deliverables that contribute to a business solution Mathematics * Produ ...
is accepted by the
market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...
. The rate of diffusion is the speed with which the new idea spreads from one
consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. T ...
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.


Theories

There are several theories that purport to explain the mechanics of diffusion: * The two-step hypothesis – information and acceptance flows, via the media, first to
opinion leaders Opinion leadership is leadership by an active media user who interprets the meaning of media messages or content for lower-end media users. Typically opinion leaders are held in high esteem by those who accept their opinions. Opinion leadership com ...
, then to the general population * 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. *The
Everett Rogers Everett M. "Ev" Rogers (March 6, 1931 – October 21, 2004) was an American communication theorist and sociologist, who originated the ''diffusion of innovations'' theory and introduced the term ''early adopter''. He was distinguished professor em ...
Diffusion of innovations Diffusion of innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread. Everett Rogers, a professor of communication studies, popularized the theory in his book ''Diffusion of Innovations''; the book ...
theory – for any new idea, concept, product or method, there are five categories of adopters: **
Innovator Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entity ...
s – venturesome, educated, multiple info sources; **
Early adopter An early adopter or lighthouse customer is an early customer of a given company, product, or technology. The term originates from Everett M. Rogers' ''Diffusion of Innovations'' (1962). History Typically, early adopters are customers who, in ad ...
s – social leaders, popular, educated; **Early majority – deliberate, many informal social contacts; **Late majority – skeptical, traditional, lower socio-economic status; **Laggards – neighbors and friends are main info sources, fear of debt. *The Chasm model developed by Lee James and Warren Schirtzinger - Originally named The Marketing Chasm, this model overlays Everett Rogers' adoption curve with a gap between early adopters and the early majority. Chasm theory is only applicable to discontinuous innovations, which are those that impose a change of behavior, new learning, or a new process on the buyer or end user. And the pre-requisite for a chasm or gap to exist in the adoption lifecycle is the innovation must be discontinuous. * 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 behavioral 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 model *
Coolhunting Coolhunting is a neologism coined in the early 1990s referring to a new kind of marketing professionals who make observations and predictions in changes of new or existing "cool" cultural fads and trends. Coolhunting is also referred to as "tre ...
*
Diffusion (anthropology) In cultural anthropology and cultural geography, cultural diffusion, as conceptualized by Leo Frobenius in his 1897/98 publication ''Der westafrikanische Kulturkreis'', is the spread of cultural items—such as ideas, styles, religions, technolog ...
*
Diffusion of innovations Diffusion of innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread. Everett Rogers, a professor of communication studies, popularized the theory in his book ''Diffusion of Innovations''; the book ...
*
Early adopter An early adopter or lighthouse customer is an early customer of a given company, product, or technology. The term originates from Everett M. Rogers' ''Diffusion of Innovations'' (1962). History Typically, early adopters are customers who, in ad ...
*
Marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...
*
Marketing management Marketing management is the Organizational studies, organizational discipline which focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of a firm's mar ...
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Marketing plan A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan so that goals may be achieved. While a marketing plan contains a list of actions, without a sound strategic founda ...
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New Product Development In business and engineering, new product development (NPD) covers the complete process of bringing a new product (business), product to market, renewing an existing product or introducing a product in a new market. A central aspect of NPD is prod ...
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Percolation Percolation (from Latin ''percolare'', "to filter" or "trickle through"), in physics, chemistry and materials science, refers to the movement and filtering of fluids through porous materials. It is described by Darcy's law. Broader applicatio ...
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Product life-cycle management In industry, Product Lifecycle Management (PLM) is the process of managing the entire lifecycle of a product from its inception through the engineering, design and manufacture, as well as the service and disposal of manufactured products. PL ...
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Technology Adoption Lifecycle The technology adoption lifecycle is a sociological model that describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. The process of adoption o ...
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Technology lifecycle The technology life-cycle (TLC) describes the commercial gain of a product through the expense of research and development phase, and the financial return during its "vital life". Some technologies, such as steel, paper or cement manufacturing, ...


Footnotes

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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, Massachusetts: Ballinger. * 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. Cultural trends Innovation Product development Product management Technological change de:Diffusionstheorie