Understanding Product Adoption

Why is Product Adoption Critical: A fundamental indicator of business performance is the churn or in other words the absolute number of customers that the business loses over a given period. Churn is often the result of a dissatisfied customer. Product adoption is the opposite of churn. From a customer lens, Product adoption is the process of discovering and using a product, understanding its value, and becoming a regular user through habit building.?From a business performance metrics standpoint - The lower the churn rate better the business performance and the higher the product adoption rate better the business performance. On the one hand, Customer Acquisition Costs have increased by over 55% and on the other hand, If a company can retain 5% of customers, it can boost its profit by 25-95%. This market reality has led to a new business strategy called Product Led Growth that relies on using your product as the main vehicle to acquire, activate, and retain customers.

The 5 Stages of Product Adoption: Marketing guru Philip Kotler elucidated a 5 step process for consumer adoption: ?awareness, interest, evaluation, trial, and adoption. This essentially maps to 5 stages of product adoption.

Let’s explore this with an example. With ServiceNow’s Tokyo release, a new product “Enterprise Asset Management” (EAM) is getting launched.?

While the example provided is for a product, this can easily apply to any new feature or innovation that a product releases into the market.

Now that we understand the Product Adoption stages, it is imperative to know the kind of stakeholders that one needs to consider.

Innovation Adoption Lifecycle and Crossing the chasm: In 1962, Everett M Rogers came up with a concept called “Diffusion of Innovations”

1. Innovators– are not afraid of trying new products that suit their lifestyle and will also pay a premium for that extra benefit.

2. Early Adopters - are usually opinion leaders & naturally adopt products after the innovators.

3. Early Majority – They first wait for society to adopt the product. The early majority usually have some status in society.

4. Late Majority- They usually purchase the product at the late stages of the majority within the consumer adoption life cycle.

5. Laggards – They usually purchase the product near the end of its life. They wait to see if the product will get cheaper. ?

Geoffrey A. Moore (1991), in his book –“Crossing the Chasm: Marketing and Selling High Tech Products to Mainstream Customers” stated that, there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists).

According to Moore, the marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. Given that we now understand the process and the stakeholders, it’s time to figure out how we can get customers and prospects “Hooked”.

Getting Hooked: Nir Eyal’s?seminal book “Hooked: How to Build Habit-Forming Products” helps us understand what is at the heart of habit-forming technology.?

The Hooked Model is a way of describing a user’s interactions with a product as they pass through four phases: a trigger to begin using the product, an action to satisfy the trigger, a variable reward for the action, and some type of investment that, ultimately, makes the product more valuable to the user. As the user goes through these phases, he builds habits in the process. For more details check the below link.

Four Laws of Behavior Change: James Clear in his book Atomic Habits explains the science of how habits work. According to him, any habit can be divided into 4 steps: cue, craving, response, and reward.

Cue - The cue triggers your brain to initiate a behavior. Craving - without craving a change—we have no reason to act. Response - The response is the actual habit you perform, which can take the form of a thought or an action Reward - Rewards are the end goal of every habit

He then uses these 4 steps to propose what he calls the Four Laws of Behavior Change

The 1st law (Cue)?-?Make it obvious. The 2nd law (Craving)?-?Make it attractive. The 3rd law (Response) - Make it easy. The 4th law (Reward) - Make it satisfying.

For more details check the below link.

PS: While there is an onus on the product teams to build products that users get hooked to, it is imperative that as solution consultants or advisors, we need to follow techniques such as the 4 laws of behavior change to encourage product adoption.