The PLC is tied closely to the concept of Diffusion of Innovation, which explains how information and acceptance of new products spread through a market. As we discussed in the Managing External Forces Tutorial, an innovation is anything new that solves needs by offering a significant advantage over existing methods (e.g., other products) customers use. Innovation can encompass both highly advanced technology products, such as new computer chips, and non-technological products, such as a new soft drink. In fact, the seminal work of the Diffusion of Innovation concept occurred in the 1950s when researchers in the agricultural industry observed how new corn seeds were adopted by farmers in Midwest U.S. states.
For marketers, a key concept to emerge from research on new product diffusion is the identification of adopter categories into which members of a market are likely to fall. These categories include:
- Innovators – These adopters represent a small percentage of the market that is at the forefront of adopting new products. These people are often viewed as enthusiasts and are eager to try new things, often without regard to price. While a useful test ground for new products, marketers find that Innovators often do not remain loyal as they continually seek new products.
- Early Adopters – This group contains more members than the Innovators category. They share Innovators’ enthusiasm for new products, though they tend to be more practical about their decisions. They also are eager to communicate their experiences with the Early Majority (next group) and, because of their influence, they are important to the future success of the product (i.e., act as opinion leaders).
- Early Majority – This represents the beginning of entry into the mass market. The Early Majority account for up to one-third of the overall market. The Early Majority like new things but tend to wait until they have received positive opinions for others (i.e., Early Adopters) before purchasing. Adoption by the Early Majority is key if a new product is to be profitable. On the other hand, many new products die quickly because they are not accepted beyond early trials by Innovators and Early Adopters and never reach mass market status.
- Late Majority – Possibly as large as the Early Majority, this group takes a wait-and-see approach before trying something new. Marketers are likely to see their highest profits once this group starts to purchase.
- Laggards – This is the last group to adopt something new and, in fact, may only do so if they have no other choice. Depending on the market this group can be large, though because of their reluctance to accept new products, marketers are not inclined to direct much attention to them.