Dear Professor Investor, Why do some products have fast adoption rates whereas others do not?
- Marisa from Toronto
That is a great question, Marisa. I doubt I could offer a full explanation in 300 words or less, but I can give you a good place to start. Many things determine the adoption rate of a service or product solution, but as a starting point two (of the many) key factors impact adoption are: the size of the pain (i.e., the unmet market need) and the scale of the benefits offered by the new solution. Think of it as a big market with inelastic demand and ineffective substitutes.
If you find a product that has a large pain -- it is a need and not a want - it is likely that people will adopt it quicker. Let's look at aspirin versus vitamins as an example. Almost everyone in the world has the occasional headache, which creates a big market, and many of those people turn to aspirin to cure their headaches. Vitamins, in comparison, are often seen as a product that is "nice to have" but not a "must have," because they're not a necessity to function. This is encapsulated by the concept of elasticity of demand. An inelastic product, or something that we require in order to function, is likely to be adopted faster. An elastic product, or something you just want, is less likely to be adopted. Elasticity also impacts price. Air has the greatest price inelasticity, so people would pay anything to keep breathing. So would you be more likely to buy air or a chocolate bar when you can't breathe? Air is inelastic while a chocolate bar is elastic, as you will only buy it if you can but you don't need it to survive.
The second major influence on new product adoption is how your new solution is better than the existing alternatives. The "10x Rule" refers to how much better a new product should be in comparison to its substitutes. Your solution must be at least 10 times better, faster, prettier, or cheaper (etc.) than the available alternatives in order to overcome the market leader. The greater the solution, the faster the adoption. An example of this is email. Before email, we would send off physical mail to someone across the country and wait up to two weeks for a reply, whereas with email I can get a response in minutes. ince email is much faster than regular mail, it experienced an incredibly rapid adoption rate. So when you are evaluating your product, ask yourself, "Is this something I need or just want?" and "How much better or faster (etc.) is it compared to its closest substitutes?" If your product is a need not a want, and is at least 10 times better than the alternatives, you probably have the foundation for fast adoption.
There are many factors that influence product adoption. Elasticity of Demand & the 10x Rule are simply a good place to start your understanding. For more, I recommend reading the research of the original guru on product adoption: Everett Rogers (read: The Diffusion of Innovation). Doing so you will learn about the impact compatibility, complexity, trailability and more have on adoption rates. You might also give The Tipping Point by Malcolm Gladwell a read.
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