As all business strive to create a product or service that is valuable, one of the most challenging aspects they face is making their product known and profitable. Even the best marketing strategies can sometimes fall short from meeting the demand of consumers in the marketplace. One way business can better understand their consumers is to use the diffusion of innovation theory. In 1962, a sociologist, E.M. Rogers developed the Diffusion of Innovation theory as a way to explain how new technology, services, and products are adopted by consumers. The theory helps businesses understand how trends occur in the marketplace and can help determine the success of a product. Additionally, understanding the theory may help business predict how products will be dispersed into the marketplace in waves of acceptance, versus a straight path.
Every industry has a different type of consumer. These consumers embrace and respond to innovation differently. Through the diffusion of innovation, consumers are referred to as adopters and are placed into categories depending on their responses to a new product. The five adopter categories are:
The Innovators: The first people to try a product. These are consumers who are interested in trying a new product and respond well to new technology. They makeup 2.5 percent of the adopters and are crucial towards the launch of something new.
The Early Adopters: These are people who enjoy trying something new, but do not want to be the first to do it. They makeup 13.5 percent of the adopters, and are generally responsive to providing constructive criticism.
The Early Majority: These consumers do not always like to take a risk, but will so if rewarded with free samples, success stories, or engagement. The 34 percent that fall in this category may need more convincing to try the new product, and rely heavily on case studies and reviews.
The Late Majority: Once enough people have tried the product, the late majority will join in after much thought and consideration. Proof that the service is beneficial or worth their time will be essential, as they are not always open to change. These adopters also make up 34 percent of consumers.
The Laggards: The last group of consumers to adopt are the laggards. They makeup 16 percent of consumers, and will require statistics, data, and testimonials before trying a new product or service.
Taking into account the five adopter categories, businesses can then apply the theory into a decision-making process of customer engagement using the following five adoption steps:
Knowledge: This occurs when a customer first hears of a product or is exposed to the product.
Persuasion: The customer will seek out more information to confirm interest in a product.
Decision: The customer weighs the pros and cons of a product before deciding to move forward.
Implementation: The customer uses the new product.
Confirmation: The final and shortest step is when the customer confirms their final decision about the innovation, deciding to continue to use or abandon the product.
While the diffusion of innovation theory was coined in 1962, businesses can apply the same concept to their strategy in 2019. Technology continues to influence the consumer marketplace, allowing businesses to utilize analytics and data to better predict the outcome of new innovation. Using online marketing on platforms like Instagram, Facebook, and Twitter, companies can utilize influencers, ads, or traffic estimators to reach adopters throughout every stage of diffusion.
For example, to have a dramatic impact on increasing a website’s signup rate, businesses can simply add the number of likes and users already signed up next to the signup button. Also, an initial launch strategy and messaging must appeal to innovators and early adopters. Once there is a number of case studies, testimonials, and respected innovators singing your praises, then it’s time to approach the majority. The laggards will follow.
Diffusion of innovation is all about understanding trends, and factoring in consumer tendency groups like influencers, early adopters, and those "laggards" that vex company marketing executives so much.
Economists have credited the diffusion of innovation theory for major - even historic - advancements in history, including the on-ramping and commercial usage of the printing press, paper, explosives, and other consumer and business innovations.
The theory is built around the notion that consumers respond to innovation trends differently, and are thus placed in different consumer categories. For businesses looking to roll out new products, diffusion of innovation can help spell the difference between a successful product launch and a failed one.
What Is Diffusion of Innovation?
Diffusion of innovation is a theory built on the premise that any commercial consumer marketplace has different types of customers, who vary on their enthusiasm for a particular product, and for trying out that product.
The theory also presupposes that so-called innovative products stream [or "diffuse"] out into the marketplace not on a straight path, but in wave after wave of consumer acceptance, starting with innovators, then moving on to early adopters, early majority, late majority, and laggards at the end of the line.
The goal, at least in business, is to convince the most individuals possible to embrace a new product, service or idea, even if it goes against their better judgment, and even if they have to exhibit behavior they haven't exhibited before. As the theory goes, if the consumer accepts the notion that a product, service or idea is innovative, they're more likely to engage with the product as it diffuses [or spreads] through the marketplace.
Diffusion of acceptance was a theory developed only in the last 50-plus years, in 1962 by E.M Rogers, a U.S.-based sociologist who originated the theory and who created the now iconic marketing term "early adopter."
This adoption happens in phases, leveraging different types of consumers, as companies take advantage of the fact that some people embrace new, innovative things sooner than others, based on individual characteristics.
Five adopter categories
When citing the diffusion of innovation, economists place consumers into five different adopter categories, as follows:
The innovators. First in line are the innovators - the individuals who are up for trying anything new. The innovators are an easy "get" for companies looking for consumers to try something new.
The early adopters. Next up are the early adopters, who are intrigued by the notion of trying something new, but they just don't want to be first in line to try it. Give the early adopter a good reason to adopt a new idea, or a new product, and show them the idea or the product works, then they're happy to climb aboard.
The early majority. With the early majority, the diffusion of innovator theory starts to point to the followers - people who don't like to lead, to take risks, and be the first to try out new ideas. More so than the early adopters, they really need proof that a new product, service, or idea works before trying it. Companies try to attract the early majority with strong examples of success, by using case studies, free samples, and customer success stories.
The late majority. The late majority consumer abhors change and will usually wait and wait before trying a new product. They won't do so until they see verifiable proof that the product works, and they'll usually wait until a clear majority of consumers have tried the product and approve of it.
The laggards. Last in line are the laggards, named so for good reason - they lag behind every other consumer in trying out a new product, service or idea. The laggard needs the ultimate level of proof and evidence that a product truly works. Usually, that comes in the form of user testimonials, hard data and statistics, and peer pressure from the other four consumer categories.
According to data from Lean Monitor, the early and late majority consumers are most abundant, at 34% each. Laggards make up 16% of the consumer profile, while early adopters [13.5%] and innovators [2.5%] bring up the rear - thus showing the importance of companies getting the early customer awareness phases right.
Why Is Diffusion of Innovation Important for Business?
No doubt, diffusion of innovation can be important to business as a tool to convince different levels of consumers to engage with their products and services.
Rogers says so in his tome, "Diffusion of Innovation", which was released in 1962.
In it, Rogers uses data from hundreds of studies on the theory to create a five-part business decision-making process on customer engagement: knowledge, persuasion, decision, implementation and confirmation.
Let's break them down one at a time, and see how each apply to business decision-making in applying the diffusion of innovation theory:
- Knowledge. Rogers' points to knowledge as the initial touchpoint of the diffusion of innovation theory. Knowledge matters because it represents the first time a potential customer experiences [sees or hears about] the new idea, product or service for the very first time. In the knowledge phase, knowledge must continue and accelerate, as the more a consumer sees or hears about an idea, the more likely they are to engage with it. In this phase, companies need to get the word out, viral and otherwise, about a new product.
- Persuasion. Once a consumer hears about a product, a company's new goal is to persuade them to use it and buy it. After accumulating knowledge and becoming intrigued with a product, the consumer is open to being persuaded. The more upside a company can convey about a product in this phase, the better the odds of a sale.
- Decision. In this phase of the diffusion of innovation theory, it's time for the consumer to make a decision. He or she is well aware of the product now, and has been given almost everything he or she needs to know before making a purchase decision. Rogers notes that it's difficult, at this point, for a company to "read" the consumer and see which direction he or she is heading. Ads and outreach remain a good strategy, but in the end, Rogers finds, consumers make buying decisions based on irrational decisions, thus making "decisions" the most difficult phase for companies looking to sell a product, service, or idea.
- Implementation. Even when the consumer decides to make the purchase, the company isn't out of the woods yet. The consumer still needs to be convinced the product is useful, and may still need to be educated on the finer points of the product, so as to maximize the product engagement experience, and in the real world, avoid having the product returned for a refund. The challenge for the company is to provide the right information in a post-sale environment. The good news is the consumer wants to keep the product, and wants to learn more so it's used correctly, so it's up to the company to up the ante on access to good product and data information, and make sure the customer gets it.
- Confirmation. The last and shortest phase in the diffusion of innovation process is confirmation. In this phase, the consumer wants to confirm, usually with friends, family and via internet product review sites, that the product is doing what it's intended to do. This is a good opportunity for companies to garner repeat customers, so good customer service in a post-sale scenario is vital.
Disadvantages of Diffusion of Innovation Theory
Like any scientific or economic theory, there are potential downsides and limitations to diffusion of innovation that company decision-makers need to know about:
- An uphill climb. By and large, consumers aren't great risk-takers, so it can be a chore for companies to steer them toward new ideas and new products. There's a great risk of failure in bringing new ideas to the marketplace, and while diffusion of theory provides companies a roadmap - there's no guarantee of success.
- Cultural limitations. Companies unveiling new innovations often don't take culture into consideration. For example, in the 1950's, health care workers were stunned that locals in a Peruvian village rejected the benefits of boiled water to their nutrition and health. They had grown accustomed to cold water and liked it over hot water. It's great for a company to bestow the virtues of a great idea, but be careful where you express that idea, as cultural norms may reject it.
- The numbers are against you. As the data suggest, company marketers have plenty of early and late majorities, and a heavy dose of laggards. Yet there are precious view innovators and early adopters to push a product along to widespread commercial acceptance. This isn't necessarily Rogers' fault - it's just a fact of life that there are more risk-averse consumers than risk-taking consumers.