How Laggards Keep AOL in Business

AOL Continues to Rely on LaggardsOver the years, we have talked many times in this space about the Product Life Cycle (PLC) and its implications for marketing decision making. For instance, back in February of this year we discussed how a number of once popular beers were entering the Maturity stage of the PLC, while way back in 2010 we saw how the video rental business was quickly fading into the Decline stage.

While considering issues products face when they enter a certain stage of the PLC is quite useful, what may be even more interesting is examining the characteristic of customers who make purchases within each stage. We can do this by looking at buyer characteristics associated with the five Adopter Categories. When evaluating buyers in each of the Adopter Categories, many marketers find consumers classified as Laggards to be quite interesting. What distinguishes these consumers from those in other categories is that they are the last to adopt an innovative product because they are reluctant to change from what they are accustom to using. The reasons these buyers continue to purchase a product that has seen its best days are numerous. One reason is that Laggards view switching to something new as requiring too much effort on their part to learn about the new product.

Another reason Laggards resist changing is that newer products are just not readily available to them and getting access to these products would be very costly. A good example of this can be found with customers still using dial-up for Internet access, such as customers living in remote areas who continue to pay for dial-up through online pioneer AOL. According to this story from Time, AOL still relies on 2.3 million dial-up subscribers who, on average, have been customers for over 14 years. What is even more fascinating is that the AOL division responsible for dial-up is a true cash cow. In fact, the story states that nearly all of AOL’s third quarter profits come from this division.

The story also suggests that the reason these customers cling to dial-up has more to do with access than to choice. Consequently, the story does not paint a particularly good picture of the service being offered, as customers interviewed for this story consider the service to be very slow. Yet, the complaints of customers should not be a surprise. As we note, one of the primary strategies for companies who still provide products in a declining market is to spend less on products while charging higher prices. This “milking strategy” can go on for some time, so expect AOL to rely on the financial support of dial-up customers for many years to come.

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