Speaker 1: Hello, everyone, welcome to Business School 101. Do you notice that whenever a new technological product or innovation comes out, there are always a group of consumers who would like to order it immediately to experience that new technology, no matter how expensive it is? In contrast, there is another group of consumers who would like to wait for months or even years because they either are not interested in or feel suspicious about any technological changes. So how to understand this difference among consumers? In 1962, the American sociologist, Dr. Everett Rogers published the book Diffusion of Innovations. In this book, he classified consumers into distinguished groups based on their purchasing behavior. Today, the model is well known as the technology adoption life cycle. This model comprehensively describes the adoption or acceptance of a new technological product or innovation. In the book Crossing the Chasm, Jeffrey Moore, an American organizational theorist, elaborates the marketing techniques to successfully target mainstream consumers based on customer groups in the diffusion life cycle. So what is the technology adoption life cycle? Where is the chasm, and how to cross it? In this video, I will discuss these questions with you. Section 1. The Technology Adoption Life Cycle. Based on demographic and psychological characteristics, consumers fall into one of the five adopter groups, namely, innovators, early adopters, early majority, late majority, and laggards. Each group represents a unique psychographic profile, such as a combination of psychological and demographic traits. Therefore, marketing to these groups requires completely different strategies from those of other groups. Marketers, by better understanding the differences among the groups, can better target all of these consumers with the right marketing techniques. So let's discuss these groups individually. Group 1. Innovators. The first group of consumers who would like to buy the new product is innovators. Innovators often have an engineering mindset and pursue new technology proactively. They frequently seek out new products before the products are officially introduced into the market. It makes up some 2.5% of total market potential. This group of consumers enjoys playing with new technology and trying out the different features and coming up with new applications for the technology. This group doesn't mind having bugs in what they buy, as a matter of fact, they enjoy finding the bugs and reporting them. Group 2. Early adopters. Followed the innovators, early adopters are the new products or technologies' second group of users. As the name suggests, they are eager to buy early into a new technology or product concept. They make up roughly 13.5% of the total market potential. Unlike innovators, their demand is driven by their imagination and creativity, rather than by the technology per se. They recognize and appreciate the possibilities the new technology can afford them in their professional and personal lives. Since early adopters are not influenced by standard technological performance metrics, but by intuition and imagination, the firm needs to communicate the product's potential applications in a more direct way than when it attracted the innovators. Attracting the early adopters to the new offering is critical to opening any new high-tech market segment. Group 3. Early majority. The new products or technologies' third group of consumers is called the early majority. They make up approximately 34% of the total market potential. These consumers normally are pragmatists and are most concerned with the question of what the new technology can do for them. Their main consideration in deciding whether or not to adopt a new technological innovation is a strong sense of practicality. Before adopting a new product or service, they weigh the benefits and costs carefully. Consumers in the early majority are aware that many hyped new product introductions will fade away, so they prefer to wait and see how things shake out. They like to observe how early adopters are using the product. Early majority consumers rely on endorsements by others. They seek out reputable references such as reviews in prominent trade magazines or YouTube channels. Because the early majority makes up roughly one-third of the entire market potential, winning them over is critical to the commercial success of the innovation. They are on the cusp of the mass market. Once the early majority decide to enter the market, a hurting effect is frequently observed. Group 4. Late majority. The late majority are the new products or technologies' fourth group of users. This group comprises primarily the conservatives. Like the early majority, they are a large customer segment, making up approximately another 34% of the total market potential. They share all the concerns of the early majority. In addition, they believe far more in tradition than in progress. Customers in the early majority group are comfortable with their ability to handle a new technological product if they decide to purchase it. In contrast, members of the late majority are not. As a result, these conservatives prefer to wait until something has become an established standard and invest only at the end of a technology life cycle. Even then, they want to see lots of support and tend to buy from large, well-established companies only. Being the market leader is therefore an important prerequisite to win over the late majority. Group 5. Laggards. Laggards are the last group in the technology adoption stages. This group of consumers is comprised of the skeptics. This segment constitutes 16% of the total market potential. These people simply don't want anything to do with new technology. The only time they ever buy a technological product is when it is buried deep inside another product. These skeptics have a strong belief that disruptive innovations rarely fulfill their promises. They are almost always worried about unintended consequences. From a market development perspective, laggards are usually regarded as not worth pursuing. However, their criticism of the product feature set and performance provides valuable feedback for technology companies. Section 2. The Chasm. As can be observed, the technology adoption life cycle has a bell curve. The divisions are approximately equivalent to where standard deviations would fall. In addition, you can find a gap between early adopters and early majority groups in the technology adoption life cycle. This gap represents the chasm that the technology has to cross. It creates a challenging dilemma for technology companies. Since the leap from the early adopters to the early majority means the transition from the early market to the mainstream market, crossing the chasm is of utmost importance to truly achieve market success with a newly launched product or technology. For example, Fisker Automotive, a California-based designer and manufacturer of premium plug-in hybrid vehicles, fell into the chasm because it was unable to transition to early adopters, let alone the mass market. Between its founding in 2007 and 2012, Fisker sold some 1,800 of its Karma model to innovators. However, it was unable to follow up with a lower-cost model to attract the early adopters into the market. In addition, technology and reliability issues for the Karma could not be overcome. By 2013, Fisker had crashed into a chasm, filing for bankruptcy. In contrast, Tesla Motors, a fierce rival of Fisker at one time, was able to overcome the chasm. The Tesla Roadster was a proof-of-concept car that demonstrated that electric vehicles could achieve an equal or better performance than the very best gasoline-engine sports cars. The 2,400 Roadsters that Tesla built between 2008 and 2012 were purchased by innovators. Next, Tesla successfully launched the Model S and Model X, sold to early adopters. The Tesla Model S received a strong endorsement as the 2013 Motor Trend Car of the Year and the highest test scores ever awarded by Consumer Reports. Those awards helped Tesla in crossing the chasm to the early majority because consumers would feel more comfortable considering and purchasing a Tesla vehicle. Today, Tesla has crossed the chasm between early adopters and the early majority, launched its more affordable models, Model 3 and Model Y, and became one of the most popular and reputable auto brands in the world. Section 3 – How to Cross the Chasm According to Moore, successfully crossing the chasm can be achieved by targeting a very specific niche market within the early majority. The sole goal of the organization in its attempt to cross the chasm should be to secure a beachhead in a mainstream market to create a pragmatist customer base that is referenceable. Segmenting is everything here. Companies should focus all marketing resources on one specific segment at a time and make sure to become the market leader in that specific segment before moving on to the next one. This is a so-called big fish, small pond approach. In addition, tech companies need to make sure to offer a complete solution and provide high-quality service for their consumers, especially the innovators and early adopters. Their user experience with the new product or new technology will ultimately determine whether they will enthuse their peers and other groups of consumers as well. Once you have established a strong word of mouth reputation within the first two groups of consumers, you are more likely to successfully cross the chasm. Alright that's all for today's topic. So how do you think about the technology adoption cycle and the chasm between the early adopters and the early majority? Please leave your thoughts in a comment below. I hope that you guys have enjoyed this video, and if you did, make sure you give it a thumbs up and subscribe to my channel. Thanks for watching, and I will see you next time.