Thursday, January 14, 2010

Product Adoption Fundamentals

The Technology Adoption Lifecycle is a model that describes a market’s acceptance of a new technology in terms of the types of consumers it attracts throughout its useful life. It is probably the most well established model in “new product marketing” because it provides useful insight at all stages of market development.

The underlying thesis of the Technology Adoption Lifecycle is that innovations are absorbed into any given user base in stages corresponding to psychological and social profiles of segments within that user community. The process can be represented by a bell curve with definable stages; each associated with a definable group, and each group making up a predictable portion of the whole community.

The prescription for success in introducing a new product or technology into any community is to work the curve from left to right, focusing first on the innovators, growing that market, then moving on to the early adopters, growing that market, and so on. To do this effectively, it is necessary to know and understand the psychological characteristics of each group of buyers.

The psychographics of each group in the adoption process influences the development and dynamics of the market. For example, each group places a different value on product intangibles, and on endorsements or references from other groups. As products move through the adoption process, intangibles and user references assume more importance. Often, pioneering new products lose their initial prominence because a new entrant is more successful in product positioning based on a more effective mix of intangibles. This can be the case even if the second product is not technically superior.

The concept of dynamic change in the perceptions of products is reinforced by the concept of the adoption process. In 1957, researchers at Iowa State College were able to track the diffusion of information and purchase patterns of a new product: hybrid seed corn. They found that purchase and use (or adoption) behavior fell into understandable patterns. They found that five "segments" of an adoption population could be described. They noted the different characteristics of persons in these five groups, and hypothesized about the way word-of-mouth influences purchase behavior.

Five groups were identified as follows:

• Innovators--2.5% of the population

• Early Adopters--13.5%

• Early Majority--34%

• Late Adopters--34%, and

• Laggards--16%

The research demonstrated a number of elements of purchase behavior, including the dynamic nature of how products are purchased. Innovators, for example, are motivated by being first, while late adopters are primarily interested in a bullet-proof product.

The primary value of the research was the development of the idea of an "adoption process." New product acceptance could finally be understood and even diagramed.

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