The Critical Role of Market Segmentation: Evidence from the Audio Player Market

The Determinants Of Diffusion Of Innovation

Transforming an invention into an innovation (which requires successful commercialisation) is often a difficult task. The introduction of a new product is only the first step in a long process that will or will not lead to a sustainable demand for this new product. Diffusion of innovation is a major determinant of sustainability of new products. However, the diffusion paths of innovations may differ strongly. It is, therefore, crucial to understand the particular characteristics of each individual innovation to influence the process of diffusion (Rogers, 2003). Rogers (2002) identifies five characteristics that affect the adoption of a particular innovation. First of all, the relative advantage of the new product or, in other words, the degree to which users see the innovation as being better than previously existing products. The second characteristic, compatibility, refers to how the innovation is consistent with the existing habits and values of consumers. A third characteristic, complexity, assesses the ease of use of the innovation. The last two characteristics, trialibility and observability, refer to the ability consumers have to, respectively, try and observe the innovation. All these characteristics, which are intrinsic to each innovation, play an important part in the diffusion path of new products and, ultimately, are a determinant of the successful adoption of the innovation (or, to be more precise, of whether the diffusion of innovation will reach a sufficient scale for the new product to be viable and sustainable).