Mals Musings: Understanding the Science of Customer Behavior
Business is about solving problems, and the problems of our customers are the source of our success. Unfortunately, the nature of the problem changes as the environment evolves.
By on Mar 16, 2010Business is about solving problems, and the problems of our customers are the source of our success. Unfortunately, the nature of the problem changes as the environment evolves. Smart executives realize that the antidote to constant change is innovation. Innovation allows needs to be met continuously. It is impossible to achieve differentiation without innovation. Innovations matter.
However, the ability to successfully introduce the innovation to the market is sometimes more important than the innovation itself. The attitude of customers to innovation is a topic that is well researched within and outside our industry. The lessons learnt have allowed some executives to make their innovations count.
A few decades ago, Professor Rogers shared some insight about the nature of innovation diffusion. The theory was that customers varied in their attitude to risk, and this correlated to their likely time of adoption of innovations.
The first group of customers to adopt were the innovators. They were carefree and always wanted to be the first to adopt. He also revealed that they represented 2.5% of the market.
According to Rogers, they were followed by early adopters (representing 12.5% of the market) who are quick to adopt but exercise a more thorough examination than their predecessors. As a result, their adoption or otherwise had a profound impact on the rest of the market.
This group is followed by the early majority (34% of the market), although the relationship between this group and their predecessors is the focus of many investigations.
The last two groupslate majority and laggardsmake up the rest of the market. These two groups are the most risk averse and the last to adopt.
This theory has been shown to apply to everything from language to electronics. More recently, studies have shown that this principle applies equally to innovation in our sector. A study over two years showed that the innovators and early adopters did use a significantly higher proportion of a new product post-launch while the latter adopters used relatively higher proportions of older established products.
The ability to categorize customers according to their adoption category was identified as a key success factor. Some organizations have cultivated relationships with the innovator/early adopter section prior to a launch of an important innovation. This differs from the popular practice of using KOLs because of the number of customers involved and the scope, although some of the principles are similar.
Equally interesting is the way some established brands gained success by focusing their efforts on the risk averse groups of customers. They succeeded because these customers conservativeness lends itself to established brands. The science behind customer behavior is as robust as the science that underpins the products we sell.