Why Laggards Are Important
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Why Laggards Are Important

The article explores the market segment that got the least attention from both academics and practitioners, the laggards.

The article explores the market segment that got the least attention from both academics and practitioners, the laggards. Being the last to adapt a product or idea, laggards are ignored as irrelevant market players by many companies. Today, it’s difficult to find any technology start-up that doesn’t know about the technology adoption lifecycle in the marketplace. In his seminal work Diffusion of Innovations, Everett M. Rogers has laid down the process of consumer’s adoption lifecycle. Geoffrey Moore (2002) has also written on the subject and built on top on Rogers’ work but focussed mostly on technology industry. Mr. Rogers has segmented the market into five different groups: innovators, early adaptors, early majority, late majority and laggards.

Each segment has different characteristics, sizes and attributes. Companies have to focus on one consumer segment at the time as these consumer groups have different needs and desires. Obviously, innovators and early adaptors are the most important segments when launching a new product. While small, these segments are very important as they act as the entry point to bigger share of the market. Innovators and early adaptors are important influencers too as their opinions and product reviews are followed by other groups. According to Everett M. Rogers, early adapters are technologists that can see the potential of the new product. This group is more willing to pay higher prices for immature technology, suffer more pain form product malfunctions and defects. Other research also found that early adaptors have exploratory consumer behaviour seeking novelty while being characterized by tolerance to ambiguity and low dogmatism (Manning, Bearden & Madden, 1995).

Most of the research on the subject is overwhelmingly on the early adaptors. In comparison to innovators, laggards are generally defined as the last group or segment of consumers to adopt a product, service, or an idea of any kind. Laggards seem to be ignored by both academics and practitioners. Being considered an irrelevant segment by many marketers, laggards are treated like luddites by most companies. However, laggards are too big of a segment to be ignored. Everett M. Rogers calculated that laggards comprise about 16% percent of the market (1995). Other calculations put laggards at 21.9% of the market (Mahajan, Muller & Srivastava, 1990). While it’s difficult to come up with an accurate number, the consensus is that the percentage is not small. The understanding of laggards and their behaviour may help in gaining adoption by the late majority, laggards, and maybe those who are considered to be non-adapters.

Demographically laggards have been characterized by low level of education, low income, status and low social mobility (Uhl, Andrus & Poulsen, 1970). These findings are not surprising as spending 600$ on an iPhone or iPad is not the best way to spend ones tight money supply. The scarce financial resources may force many people to wait for the product price to come down before making a purchase. This wait makes many people laggards. However, this should not deter companies form persuing this segment. In fact, research suggests that laggards are as important (if not more) as innovators and early adaptors. A recent study by Jacob Goldenberg and Shaul Oreg suggests that laggards do indeed become innovators in some cases (2006).

The authors argue that some resistors engage in what they call leapfrogging effect. Leapfrogging is when consumers skip several product generations in order to get the most recent technology. To better illustrate the point let’s consider John who according to authors, enjoys listening to music every morning when he jogs. John has a 1985 Walkman that still uses cassettes. All of his music is recorded on cassettes and he prefers his Walkman over a portable CD player. Of course, his friends make fun of him but he gives little attention to that because he knows what he likes. By any standard John is a classical laggard.

At some point in time however, John becomes aware that his Walkman is not only outdated but its music quality is much more inferior to any available technology on the market. Or perhaps John’s Walkman just broke and it’s not worth repairing it. Regardless the reason, John has to upgrade. The question is which technology will john choose? A portable CD player, a mini disk or perhaps an mp3 player are all available options as john will be losing his entire music collection (since it is on cassettes) by selecting any upgrade. Since John has to rebuild his music collection from scratch, why not choose the latest technology? Not surprisingly, John goes out and purchases the latest iPad. Suddenly, John the laggard becomes an innovator by skipping a few product generations and adapting the latest technology. Just like John, most of laggards come to a point where they have to upgrade their products. What makes this group laggards is not that they never upgrade but that they upgrade less frequently than innovators. The only question is how far these laggards will upgrade?

The latest technology is usually more expensive. Obviously, in John’s case the expense does not come from device’s price (latest iPod) but from rebuilding his music collection. Thus, John may very well upgrade to the latest technology. To prove their point Jacob Goldenberg and Shaul Oreg surveyed 105 individuals aged between 26 and 60 and asked them about their inventory of portable music players. As expected, of those who owned a portable cassette player, 61% upgraded to a CD player, 6% skipped the CD player and moved to Mini-Disc, and 10% leapfrogged over CD and Mini-Disc to buy an mp3 player. The interesting fining is that 23% have not purchased any portable music player after the cassette. Therefore, 16% of those who owned a potable cassette payer leapfrogged, with another 23% waiting to do the same. This finding shows that laggards group is an important market segment that should not be ignored.

Until recently, companies have focused on innovators to promote new products while ignoring the biggest segment, laggards. While innovators segment is important, laggards segment is substantially much bigger. For instance, if 1% of laggards (which constitute 16% of the entire market) leapfrogged, companies would have increased their profits by 14% percent on average. If that number is increased by 10%, the profits would have jumped to 89% on average (Goldenberg & Oreg, 2006). If this is correct, and so far the research seems to support it, the focus of marketers should shift from innovators to laggards. The job becomes not how to sell to innovators, but how to persuade laggards to upgrade sooner rather than later.

The indirect benefits to companies form persuading laggards to upgrade sooner rather than later are even greater than direct benefits (increased profits). For example, when laggards leapfrog they find themselves surrounded by potential adaptors that can be influenced to upgrade to the latest technology.

The leapfrog effect may explain why iPad is so successful with consumers. Most likely many consumers who owned an old computer but never upgraded to a laptop (or any other portable devices such as an electronic reader) have now decided it’s the right time to upgrade and in the process transforming a great number of laggards into innovators and early adaptors for iPad.

References:

Everett, M. R. (1995). Diffusion of Innovations, 4th ed., New York , NY: Free Press,.

Moore, G. (2002). Crossing the Chasm, Revised ed., New York , NY: Harper Paperbacks.

Manning , K. C., Bearden, W. O., Madden, T. J. (1995). Consumer innovativeness and the adoption process. J. Consum. Psychol. 4 (4).

Mahajan, V., Muller, E., Srivastava, R.K. (1990). Determination of adopter categories by using innovation diffusion models.

Uhl, K.,Andrus, R., Poulsen, L.(1970). How are laggards different? An empirical inquiry. JMR, J. Mark. Res.

Goldenberg, J., Oreg, S. (2006). Laggards in disguise: Resistance to adopt and the leapfrogging effect. ScienceDirect. Retrieved August 2, 2010, from www.sciencedirect.com

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