The Complete Guide to Product

Adoption: from Product Life Cycle to

Customer Decision Journey

Contributed by David Tang on May 27, 2013 in Strategy, Marketing, & Sales

Product Adoption is a compelling and important topic. It affects every single business.

There are numerous whitepapers, frameworks, and discussions focused on Product

Adoption. They discuss various elements, from market conditions to product attributes to

tactical engagement. The purpose of this article isn’t to present anything new. Rather, it’s

an attempt to synthesize various established frameworks from reputable strategists and

businesses to present a comprehensive, holistic look at Product Adoption.

Let’s start at the highest level–the market.

1. Select the Right Market

Segment

At the macro level, we have

market forces at play. This

concept is captured best by

the Product Life Cycle . The

essence of this framework is

that a product will go through

4 stages of development from

creation to obsolescence.

The Product Life Cycle is

often mapped against the

Consumer Adoption Curve

(one of the best known marketing frameworks). By doing this, we can determine the ideal

market segment to go after at each stage of the product’s lifecycle.

To use this framework, we need to determine two things:

1. What stage in the Product Life Cycle we are in.

2. What segment on the Consumer Adoption Curve to go after.

Each stage of the Product Life Cycle is typified with a unique set of

characteristics. Likewise, different strategies are best suited for the different stages. They

are as follows:

Introduction. In the initial stage, pricing is critical. We need to address the key

question that drives Pricing Strategy : do we want to penetrate or to skim the

market? Penetrating the market implies stronger consumer adoption, but at the

trade off of higher margins and possibly profits.

Growth. In this stage, the focus shifts to Customer Satisfaction, so that we can build

customer loyalty and drive repeat purchases. As portrayed in the diagram above, we

are now at the brink of breaching the Early Majority market.

Maturity. Depending on the competitive dynamics in the industry, companies will

elect to employ one of three strategies: Maintain, Defend, or Innovate.

Decline. In the final stage of the product’s lifecycle, we need to make the decision to

focus on innovation or make a calculated exit.

By knowing what phase of the lifecycle we are in, we have identified the general corporate

strategy. We can now also identify the prevailing customer group, as defined by the

Consumer Adoption Curve. There are five distinct customer groups, each characterized by a

set of beliefs, motivations, and behaviors:

Innovators. Innovators are the first to adopt a new product. They are willing to

take risks, youngest in age, have the highest social class, have great financial

liquidity, are very social and have closest contact to influential sources and

interaction with other innovators.

Early Adopters. This is the second fastest category of individuals who adopt an

innovation. Early Adopters have the highest degree of opinion leadership among the

other adopter categories. They are typically younger in age, have a higher social

status, have more financial lucidity, advanced education, and are more socially

forward than late adopters.

Early Majority. Individuals in this category adopt our product after a varying

degree of time. This time of adoption is significantly longer than the Innovators and

Early Adopters. Early Majority tend to be slower in the adoption process, have above

average social status, have contact with Early Adopters, and seldom hold positions of

opinion leadership or influence.

Late Majority. Late Majority folks will adopt an innovation after the average

member of society. They approach a new product with a high degree of skepticism

and only after the majority of society has adopted the product already. They are also

typically skeptical about an innovation, have below average social status, very little

financial lucidity, in contact with others in late majority and early majority, very little

opinion leadership.

Laggards. These guys are the last to adopt. These individuals typically have an

aversion to change and tend to be advanced in age. Laggards typically tend to be

focused on “traditions,” likely to have lowest social status, lowest financial fluidity, be

oldest of all other adopters, in contact with only family and close friends.

Please note the customer group percentages displayed in the image above (e.g. 2.5% for

Innovators) are merely illustrative. These percentages are only accurate in the case of a

normal distribution and thus do not apply to all situations.

Thorough Product Life Cycle analysis provides us with the backbone to our overall product

marketing strategy.

The drawback of Product Life Cycle is that it is only a market-focused framework. It doesn’t

address other critical drivers to adoption, such as the Product itself and Consumer

Psychology.

You may have your overarching marking mix right, but if you fail at the tactical and

execution level, your product will fail.

2. Architect the Right Product

What product attributes drive rapid market diffusion and consumer adoption? Tough

question.

But, good thing we have the Rogers’ Five Factors framework. Credit goes to Everett Rogers,

who also created the Consumer Adoption Curve.

Rogers’ Five Factors proposes

there are 5 product-based factors

that drive adoption.

Relative Advantage.

This is the degree to

which our new product is

better than the

incumbent. This

advantage can be non-

economic (e.g. social

status, prestige). The

greater the relative

advantage, the faster the

adoption.

Compatibility. This factor accounts for the degree to which our product is

consistent with the customers’ existing values and experiences. The greater the

compatibility, the faster the adoption.

Complexity. This is the degree to which our product is difficult to understand and

use. The primary way to overcome complexity is education, but it is important to

assess how willing the customer is to be educated. The greater the complexity, the

slower the adoption.

Trialability. This factor measures the degree to which our product can be

experimented with on a limited basis. This factor is most important when our

product is in the early stage of its lifecycle–when uncertainty about the product’s

benefits are at its highest. The greater the trialability, the faster the adoption.

Observability. This is the degree to which potential customers can see others using

our product. For instance, highly observable products include cars and cell

phones. Difficult to observe products include medicines and home appliances. Many

companies leverage social media marketing–and specifically target “influencers”–to

increase their observability factor. The greater the observability, the faster the

adoption.

Let’s walk through an example of this analysis. Look at the telephone. Every home has a

phone. It’s something we take for granted, something that’s necessary part of our daily

lives, something we can’t imagine living without. One would assume it was adopted very

quickly. Yet, the reality proves otherwise…

The telephone was invented by Alexander Graham Bell in 1876. By 1900, 25 years later, it

would only be found in 10% of the households in the US. By 1935, 60 years after its

invention, it could only be found in 30% of households. In fact, it wasn’t until the 1980s

that the telephone reached 90% of US households.

Why was the adoption rate so exceedingly slow for this wonderful, useful invention?

A look at the Five Factors sheds some light. The Relative Advantage for the phone was low

when it was introduced. It was expensive–both installation and ongoing fees were high–and

you had few people you could call. It was also highly incompatible with the norms of the

time. The idea of speaking into a metal box was foreign and frightening. The technology

used in the phone was incredibly Complex and difficult to understand. People wondered,

can it transmit diseases? Can I get electrocuted? Does it only speak English? Trialability

was low–only the very wealthy and businesses had telephones installed. In fact, in its early

years, the only factor the telephone had going for it was Observability, since people could

the telephone wire running into a house.

3. Understand the Customer

If you are targeting the right market with the right marketing mix, have a compelling

product that fosters adoption, the third essential element to analyze is the customer. What

makes the customer tick? Rogers’ Five Factors touched a bit on this already, but let us take

a deeper look into Consumer Psychology.

In my last article ( Why People Won’t Buy Your Product Even Though It’s Awesome ), we

discussed three key principles of behavioral economics that drive consumer adoption:

Losses Loom Larger than Gains

Reference Points Matter

The Endowment Effect

You can read that discussion here .

4. Complete the Customer

Journey

In most cases, the product you’re

selling is not an impulse

purchase. The path to purchase is

a long process–it’s a journey that

can take from several days to

several months. This journey is

captured in a framework

developed by McKinsey & Co

called the Customer Decision

Journey.

The Customer Decision Journey

proposes that the customer goes

through four phases in a cyclical process. Each phase represents a potential marketing

battleground where companies compete for the customer’s purchase and loyalty.

These phases along the customer’s journey are:

Initial Consideration. When the customer first conceives the notion of buying a

product, she will develop an initial set of brands to consider buying. Brands in the

initial-consideration set are three times more likely to be purchased than brands that

aren’t in it. This means that Brand Awareness is vital. In this phase, we should focus

on push marketing.

Active Evaluation. In the evaluation phase, the customer is seeking information

and shopping around to make an informed purchase decision. She will ask for

recommendations from friends and family, read reviews online, go to the store to test

out products, and so forth. This phase empowers both the customer and the

company. How are companies empowered? Companies have the opportunity to

enter the consideration set–and even force out companies in the Initial Consideration

Set. Big brands can no longer take their position for granted. With increased online

and social presences, companies are increasing the number of touch points with the

customer–thus increasing their influence over the customer’s purchase decision in

the Active Evaluation phase.

Moment of Purchase. This is the point in the time when the customer goes to the

retailer and makes the purchase. Even at stage of the journey, companies can still

influence the purchase. This is done through in-store marketing and influence of

store salesmen.

Post-purchase Experience. After the purchase, the customer builds expectations

based on her experience that will impact her next purchase journey. This creates the

circular nature of the journey. In this phase, our goal is to foster customer loyalty,

which will drive repeat purchases and word-of-mouth marketing. Likewise, if the

customer is dissatisfied with the purchase, she will become a negative influence on

the purchase decisions of others. This is not limited to her immediate circle of

friends and family either. For instance, she can post a negative review on a

prominent website, which will be read by countless potential customers in the Active

Evaluation stage.

If our goal is to reach an emerging market, there are certain nuances that should be

highlighted and understood. Though the overarching process is the same, the emphasis in

marketing is different when comparing a customer in an emerging market versus a

customer in an established market. For instance, in an established market, customers often

rely on online reviews when making purchase decisions. In emerging markets, online sites

are not yet trusted by the customer. Learn more about this topic in this article: Craft a

Successful Strategy for Emerging Markets .

5. Maximize the Online Experience

The Internet is becoming more and more crucial in the Customer’s Decision

Journey. Because of the Internet, the number of customer touch points has increased

significantly.

In the online experience, there are 5 categories of customer touch points. They have varying

levels of importance along the path to purchase:

Paid . This category includes paid display and search advertising.

Social. This category refers to interactions with the customer though social media

(namely, Facebook, Twitter, LinkedIn, and Youtube).

Email. Email marketing typically takes the form of recurring

newsletters. Newsletters are essentially the online form of offline store circular.

Referral. This category refers to external websites that “refer” customers to your

website.

Direct. This refers to your own website. It encompasses the customers who go

directly to your website.

Here is the typical flow of online interaction with the customer through her journey. At the

start, the goal is to create Brand Awareness. This is typically achieved through investments

in paid advertisements. As the customer begins to actively evaluate her various product

choices, Social and Email begin to play a more important role. Through social media,

companies can directly engage and influence customers. Email marketing is an effective

method of building rapport with a customer. Once a customer has subscribed to our

newsletter, we can send regular newsletters to constantly remind her of our company and

products. The customers that are most likely to make a purchase are Referral and Direct

visitors. Afterwards, in the post-purchase phase, Social and Email continue to play

important roles in nurturing that customer bond.

Of course, the relationship between the touch point and decision journey varies by industry

and varies by geography. Google created a useful tool that captures these differences:

Customer Journey to Online Purchase .

In summary, Product Adoption is driven by a number of factors. We need to…

1. Select the Right Market Segment;

2. Architect the Right Product;

3. Understand the Customer;

4. Complete the Customer Journey; and

5. Maximize the Online Experience.

Proper analysis involves both strategic and tactical planning–and ties all efforts and

thinking together. As Sun Tzu proclaimed:

Strategy without tactics is the slowest route to victory. Tactics without strategy is the

noise before defeat.

Interested in business strategy? Check out Flevy’s collection of business frameworks and end-to-end business

toolkits , most created by former consultants of top tier consulting firms.

This article only presents high level takeaways from the business frameworks

referenced. For a more in-depth discussion, I recommend checking out the following:

Product Life Cycle (PowerPoint presentation)

Rogers’ Five Factors (PowerPoint presentation)

Psychology of Product Adoption (PowerPoint presentation)

Pricing Strategy (PowerPoint presentation with Excel model)

Value-based Pricing Strategy (PowerPoint presentation)

Consumer Decision Journey (McKinsey article)

About David Tang

David Tang is an entrepreneur and management consultant. His current focus is Flevy , the marketplace

for premium business documents (e.g. business frameworks , presentation templates , financial models ).

Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans

corporate strategy, marketing, operations, change management, and IT; both domestic and international

(EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer

Products/Retail, High-Tech, Life Sciences, and Business Services. You can connect with David here on

LinkedIn .

Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational businessdocuments. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All rganizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn.

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