Who do you think will be the first group of people (or firms) buying from your company? What do you think will be their
effect on your business? And how do you think you can reach these people?
The first customers may be valuable and encouraging for your new business, but they may also mislead you to think you have nailed it. If you are selling something innovative, certain customer groups will buy from you just so they can try something new. While they can provide useful feedback, you should not necessarily expect that the mainstream will buy from you as well. People have different attitudes towards novelty, and that makes their buying behavior different.
A theory called “Diffusion of Innovations” explains these behaviors1. One of its central arguments is that there are five types of adopters each with different behaviors towards buying novel products and services, namely Innovators, Early adopters, Early majority, Late majority, and Laggards.
Five types of adopters
Innovators are risk takers who like to buy novel products, even when they involve uncertainty regarding their full functionality and realized use value. They have money and lots of friends who also belong to this type of adopters. This is the smallest of the five groups.
Innovators might find out about your product via any specialized channel or community and buy it for the sake of trying out something new. They are typically the first to try new things, but they may become your potential customers just as fast as they became your customers.
Early adopters is a bigger but a little bit slower group of potential customers than innovators. They are highly educated individuals with large social networks and typically seen as opinion leaders. They can be reached via specialized media and scientific communities before launching the product for the mainstream market through more general channels such as social media and mass marketing methods.
If early adopters like your product, there is a good chance that they will communicate it to the larger crowds. Yet, having early adopters on board doesn’t mean you have made it. You have to know whether they are buying from you because they are curious or if you actually solve their problem. Instead of offering something that people really need, you might just be targeting a so-called phantom market that doesn’t exist, as explained in this Harvard Business Review article.
To get to this point requires a lot of hard work in making your offering fit the exact needs of the customers. The gap between early adopters and this group is sometimes called the “chasm”2. Most entrepreneurs are never able to cross the chasm and hence they fail to achieve exponential growth (assuming they want to).
The early majority looks for observable advantages of using a product, and these come typically in the form of testimonials, reviews, and recommendations from early adopters.
Early majority consists of people who take much more time than innovators and early adopters to buy novel products. They don’t easily accept change, yet they do see the value of great products. One reason for them to wait is an expected decrease of the price. This group is considered the first major wave of buyers as they count for about 1/3 of the overall market.
Late majority starts buying novel products only when most people are already using them. They are more skeptical than the average consumer and don’t typically have money to invest in things that don’t make a substantial contribution to their lives.
Like early majority, this group is about 1/3 of the overall market. They can be best reached through less aggressive channels such as word-of-mouth and direct marketing.
Laggards buy novel products only when they have to. They are very skeptical, reluctant to change, and they appreciate traditions. On average, laggards are the oldest people of the five groups. Their social network consists mainly of family and close friends.
This group is about the same size as early adopters. Like late majority, laggards are best reached through less aggressive channels such as word-of-mouth and direct marketing.
A theory called “Diffusion of Innovations” explains how novel products and services are adopted by distinct groups of people. These groups differ in their buying behaviors, because they have different attitudes toward innovations, different types of and positions in their social network, and different amount of disposable income.
It is important for managers and entrepreneurs to find out who the customers are, why they are (not) buying from them, and whether the target market actually exists.
Like I mentioned above, this theory was later extended by the idea of “Crossing the Chasm“, which refers to overcoming the gap between early adopters and early majority (also known as visionaries and pragmatists2). You can learn more about how to deal with this issue here (coming soon).
1Rogers, E. 2003. Diffusion of Innovations, 5th ed., Free Press, New York, NY.
2Moore, G. 2014. Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers, 3rd ed., Harper Collins, New York, NY.