MARKETING STRATEGIES: How customers adopt innovation

One of the biggest challenges entrepreneurs face is how to introduce a new product, service or way of doing business.

At the heart of the entrepreneurial endeavour is the creation of something which upsets the status quo.

In order to carve out a place in the market the entrepreneur will create a new component of value, whether through an innovation in product, process or business concept.

In doing that they may enter an environment where the target customer is unfamiliar with the product, service or way of doing business.

Think back to traditional local village or suburban shopping. In our local shopping centre we had our own butcher, baker, hardware store, hairdresser, doctor, dentist, delicatessen and dry goods store.

Imagine how things changed with the arrival of the supermarket, department store, shopping mall and doctor’s clinics with multiple doctors or category killers like Toys R Us, Home Depot and Bunnings.

The way we shopped and the frequency of shopping changed, with take up of new ways of shopping resisted and slow to be accepted.

New technologies have seen a similar trend as they replace old ways of doing things.

Think of vinyl records and the introduction of CDs, film cameras were replaced by digital cameras and high definition TVs replaced traditional analogue TV technology.

The marketing difficulty with innovations is that there is no past experience to leverage.

So unlike the normal buying experience, where there are lots of sources of information available, when something new comes along we are on our own.

And without a reliable source of data on customer experiences most individuals will shy away from buying.

For many the risk of making a wrong decision, of wasting their money and of having a poor experience causes them to hang back until others have proved the value of the innovation. 

There are others who value trying something new, even at the risk that it may be immature, maybe with deficiencies and perhaps with only limited functionality.

For them it is being at the forefront, being one of the early customers and having the satisfaction of being a pioneer that excites them.

There are those who don’t wish to be on the leading edge but are happy to follow relatively quickly once the early few have shown the innovation has some value.

That gradual acceptance of new innovations and risk profiles and motivations of customers has been labelled the Innovation Adoption Curve. 

The challenge facing entrepreneurs is that each of those groups has a different way of looking at the market.

The appropriate message for one group will not work for the next. For example, while innovators are keen to explore new innovations most want a solid proven product or service before they are willing to consider buying.

The closer the new innovation is to the current product or service the less perceived risk is faced by the customer.

You would expect the market to move quickly through the adoption cycle with innovations that are somewhat familiar or obvious in their use.

We would also expect the perceived risk to be lower with a smaller financial outlay or less exposure to criticism from family, friends and peers. 

From a marketing viewpoint it is important that we understand how customers perceive risk in innovations and address that in our marketing messages.

As we move through the adoption curve we need to adjust the marketing messages to bring in the next group.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.