When an innovation is introduced into a market, it takes a number of year to ‘diffuse’ and penetrate the market. The adoption typically looks like an S-curve as shown in the following chart. The adoption curve provides a useful way to break down customers in five segment: innovators, early adopters, early majority, late majority, laggards.
Innovators are the first to adopt new products and services. They are technology freaks par excellence, and like experimenting and playing around to find out what they can do with their new toys. Innovators typically represent a few percent of the target user base.
Early adopters also invest early on in new technologies, not as technologists, but to address their concrete problems.
- They typically represent about 10% of the target population.
- In companies, early adopters are opinion influencers. Often they will not be decision makers themselves, but are key to convince others. Early adopters are usually at the centre of extensive communication networks, for instance internal management circles, industry fora, or are very sociable individuals in their private sphere.
- When a critical mass of early adopters has developed, the process of technology diffusion becomes self-sustaining and like a snow-ball effect, it spills over to the early majority. On the other hand, competing and incompatible standards slow down the rate of adoption and the transition from early adopters to the early majority.
The early majority is happy to wait and see until a main stream of users and technical standards have materialised under the influence of the early adopters. Only then are they ready to invest in innovation to satisfy concrete needs.
- They typically represent 40% of the target market. In corporate life, these are decision makers who need to be convinced by references before they allocate budget.
- The early adopters and early majority usually have higher socioeconomic status than later adopters. Being financially better-off than late adopters, buying pricey technology early is less risky to them. Studies have also shown that the early adoption of innovation tends to strengthen their economic position and widen the gaps between the higher and lower individual in a system. Paradoxically, the individuals who adopt first generally need the benefits of the innovation comparatively less than later adopters.
The late majority has similar characteristics and expectation as the early majority, except that they are risk averse and uncertain about their ability to master innovation.
- As a consequence, they prefer to wait until products have been further developed and designed for the mass market, and provide an increased level of user-friendliness compared to previous generations.
- The late majority is made of followers and represents 30%- 40% of the target market.
Laggards are technology averse and resistant to change. If they buy technology at all it is because the technology has become so pervasive that they have little choice not to use it. As a market, they are usually of limited interest to technology sellers as they require low price, a lot of support and their profitability is the lowest. Laggards amount to about 10% of a total market.