Definition
Diffusion of innovation as described by Bessant and Tidd(2007) is how an innovation or new ideas are transferred through a period of time among members of the society. Low-cost carriers and their paradigm innovation such as the one we have chosen (Southwest Airlines) is in the ‘Early Majority stage’ in the Rogers Diffusion Curve and in the ‘Growth’ section of the Product Life cycle curve.
In 2013, low cost airlines’ seat capacity in Europe increased by 14% whereas the full service airlines increased by 1% (OAG,2013). Nevertheless, given the increasing trend of customer preferences toward the low cost airlines industry, the full service airlines still hold larger proportion of market share. As according to strategy& data (2015), low cost airlines account for 25 percent of the global airline industry.
"Early majority"
During 1990’s customers preference increased significantly towards LCC (low cost airlines). The diffusion of this innovation was seen when the other low-cost airlines started to follow the model. For example, Ryan Air and Easy Jet in the UK, AirAsia and Jetstar Airways in Asia. (Venkatesh, 2013)
How long did it take to diffuse?
After Southwest introduced a new business model which is low-cost airline, many carriers started to follow. They charged low price and the competition became intense. High number of carriers felt the pressure from this entry and there was an increasing share of low cost airline in comparison to the whole market. The fierce competition reflected a cost sensitivity of consumer behaviour. (Baker, 2014)
challenges / barriers