Ultimate Guide To:Product Adoption Curve
More than 90 percent of SaaS startups fail within three years. There are many reasons behind this high rate, and one of the major ones is low rates of product adoption.
A product is adopted when customers buy and engage with it. So when you have no product adoption, you have zero demand for your product, zero revenue, and zero growth. To avoid such a disastrous scenario, you need to understand the types of customers that adopt your product at different stages. Read more to learn about them and their place in the product adoption curve.
What Is Product Adoption?
What if you put your product out into the market, and no one buys it? This means that customers don’t see the value behind your product and that you have no product adoption. Product Adoption is thus the general phrase used for the process in which users buy your products and make them a part of their lives.
A new customer has to go through the onboarding and adaptation processes before starting to use your products to their fullest potential. When new customers start using your services to accomplish their business/marketing goals and realize the value of their features and capabilities, you can say that they have “adopted” the products.
Why Is Product Adoption Important?
Product adoption is what builds and maintains an active customer base. If you’re successful at product adoption, then:
- You’re able to sell your products. This is the most fundamental goal of any business, and product adoption is the only way in which you can make a profit off of your new products.
- You get high retention. When users adopt your product, they make it a part of their routines. Since they know the value that your products bring, they’re more likely to stick around and pay for the renewal of their subscriptions. This means that you have an engaged customer base and don’t have to keep acquiring new customers to maintain revenue.
- You get a position within the market. The SaaS market has grown five times in only seven years, and this growth has happened with the addition of many new startups with similar products and offers. To get ahead, you need to have a sound support system of loyal customers. These customers, who have gotten used to your products, will get your name heard in their communities. This will create a reputation that many other brands in the SaaS industry don’t have.
- You get more upsells. If customers know the quality of your products, they’re more likely to trust you when you tell them that they could pay a little more for even better features and services.
Product Adoption Curve Steps
What is the Product Adoption Curve? The product adoption curve separates customers into five different categories based on when they purchase and start using your products. This curve is helpful as it lets you understand the types of users that your sales and marketing teams will be dealing with at different stages of your product’s release. And just like it is with every SaaS strategy, understanding your customers’ characteristics and needs will increase your chances of succeeding.
The first people that buy your newly released product are called innovators. As their name suggests, these people like to be the first to use new technology in the SaaS industry. They don’t care about the perfection of your product, and they could even be satisfied with a beta version as long as they’re trying out the newest technology on the market. This group only makes up 2.5% of your adoption curve, which is expected since not many people have the knowledge and skillset to test out brand new products.
The innovators in your adoption curve…
- Can help you develop your products. These are usually tech-savvy people that are open to helping you improve. Your brand can depend on their feedback to optimize your newly released product.
- Will demand for better prices or even freemiums. Innovators know that you’re new in the market and that you need their support to kickstart market penetration. That’s why they request better prices and even free versions of your products, which is a downside of this small group.
- Will ignore the mistakes and bugs in your product and be overall more tolerant. They know that your product is in its initial stages and will treat your brand accordingly.
While innovators usually account for 2.5% of the customers on companys’ adoption curves, your percentage could be higher. If you reach a larger tech audience before launch, you may up that number.
The next group is similar to the innovators: called the “early adopters,” these customers are looking for new technologies that can get them ahead of the early and late majority. These early buyers look at your products as investments that could bring high profit by solving their crucial pain points. They’re okay with taking risks, and thus they can pay the price you set for your product even if it’s not entirely catering to their needs yet. Though they don’t rush into purchases like the innovators, they can still try out new, imperfect products.
The early adopters in your curve…
- May want quicker time-to-value than innovators and request customized solutions for their needs. While this is challenging, it also gives your brand a chance to create new use-cases for your products.
- Can help you position your new product in the market. Your sales and marketing teams can position your brand as the solution to specific industry pain points by using their success stories.
- Can give you ideas that will provide the missing elements to your new product, giving it an edge over other competing new releases.
The early adopters increase your product adoption percentage to about 16% with the innovators.
The “early majority” may be early, but they’re not a part of the early market. This is because your product has been tested and approved by the innovators and early adopters, and the early majority isn’t taking a risk by jumping on your brand’s train early. Thus, they’re a part of the “mainstream” market.
The customers in the early majority aren’t as well-informed about technology as the innovators, and they aren’t as courageous as the early adopters in terms of taking high stake risks. These people want to find proven and trusted solutions that will solve their issues. They’re also called “pragmatists” because they’re focused on the usefulness and perfection of your product. So, at this point, you should have a product that has gone through multiple revisions.
The early majority…
- Makes up for a big portion of the market and provides the most significant growth potential. Therefore, if you can cross the chasm (explained below) and impress the early majority, you can say that your product is satisfying the demands of the market (or that you’ve found a product-market fit.)
- Follow the references from other customers. Referral marketing strategies are beneficial while attracting customers from the early majority.
- Wants to ensure that your product is finalized, that it’s the right choice, and delivers the value it’s promising. They may take longer to purchase as they read more about your products, make comparisons, and try out the demo version. Your inbound marketing strategy will help attract these customers by providing them with the case studies and comparison posts they’re looking for.
Unfortunately, selling to the early majority isn’t very simple. Before accessing this big portion of the market, you have to cross the chasm.
The biggest challenge of attracting customers from the early majority is that they depend too much on references. They’re more precautious and want to spend their money on a tested and trusted product. While you can use the success stories of early adopters to increase your brand’s credibility, this strategy is not guaranteed to be effective for the early majority. This technique may attract other early adopters, but it’s unlikely to attract people from the next group.
This is because people trust the word of people from their customer group. So, customers in the early majority trust the success of other customers in the early majority, not the innovators or early adopters. However, since there’s no “early majority” that you can go to for referrals yet, and since you can’t go to the early adopters for their success stories, it seems almost impossible to cross the chasm.
But it’s not! You just have to target a specific section of the early majority. It will take some time to secure the interest of this section without referrals, but focusing your marketing efforts on them will lead you to success. If you know how to use the customer acquisition funnel, you’ll acquire a starting customer base from which you can get referrals.
Even after you’ve finalized your product and reached the majority of your target customer base, there’ll be people just becoming aware of your brand or products. This may be due to their lack of knowledge, or it may be due to their apprehension about new technology. These types of people are a part of the “late majority.”
The late majority…
- Want to stay on track. They don’t care about being in front of their competitors; they just don’t want to be left behind. So, they won’t approach you when you’re new to the market.
- Are sensitive about pricing. They weren’t that keen on trying out new stuff anyway, so any obstacle in front of sales, be it high prices or unsatisfactory performance, could lose their interest.
- Need to have your product assembled quickly. If it’ll take them a while to integrate your solutions into their business, and if products have steep learning curves, they won’t hesitate before leaving them aside.
However, these challenges don’t mean that you should just disregard their demand. While it’s harder to sell to the late majority, there’s a reason why they’re called a “majority:” they make up an additional 34% of the market.
Unlike other groups in your adoption curve, the laggards create a group that slows down your products’ and company’s progress. They’re the people who purchase your products once the hype has died down. Although they make up 16% of your adoption (even more than early adopters!), you don’t want to sell to them too much.
But how can a customer group be bad for your product? There are a few reasons why…
- Laggards resist change and innovation. Even if it’s good, any change you make to your product will cause them to complain.
- Laggards are prone to being detractors who make negative remarks about your product to their colleagues. So, they create the opposite effect of referrals and may hamper your brand’s reputation.
- Laggards are big skeptics, and they won’t be convinced easily by your promises. Selling and retaining them requires more effort (and money) than other customers.
If the people buying your products are laggards, you should stop trying to sell to new customers, focus on retaining existing ones and start working on new products.
How To Increase Product Adoption Rate
If customers don’t understand your products, they’ll stop using them. 80% of users say that they delete an app or software if they don’t get how to use it. And if customers stop using your product or delete it off their desktops, they haven’t adopted it, even if they’ve paid for their subscriptions.
To prevent losing customers due to confusion, focus on improving your onboarding. There are a few steps you can follow to do this:
- Get feedback from existing users. They’ve noticed the missing elements in your onboarding process and will have recommendations.
- Create personalized onboarding guides. Users may find standardized flows boring (and most tend to skip through them) so create pop-ups that appear as users navigate through features they haven’t used before.
- Try to lead users to their “aha” moment with your onboarding guides. Lead them to the features that will make them realize the value behind your product.
- Have your customer service team ready to help. It’s best if people can get answers to their questions quickly. Otherwise, they’ll give up on trying to understand.
Track Product Usage Metrics
Optimizing your products will almost always result in more adoption. This is especially true when you’re trying to attract the early and late majority. Since these customers are looking for perfected and trusted products, you need to have a revised product at hand.
To optimize your product, you need to track some of the essential product usage metrics, such as the product activation rate, customer engagement score, and feature usage. Tracking your feature usage enables you to select the features you’ll keep and the ones you don’t need. Your customer engagement score will tell you about the number of critical actions that a customer completes. Your activation rate will tell you how many of these customers completed an action that led them to their ‘aha’ moment.
Focus On Your Best Customers
How can you attract customers from the early majority by getting more referrals? How can you ensure that the innovators and early adopters who’ve bought your product stay? To do these things, you need to work with the right customers. If you can find customers with low churn, those with high lifetime values, you won’t only retain their interest but also create a promoter base from which you can get referrals.
Finding these types of customers is easy with HockeyStack’s dashboards. You can find the sources that attract customers with high LTVs and focus on your marketing campaigns on those sources.
Or, you can find the blog posts and topics that result in the most churn to know which customer groups you shouldn’t be spending time on.
Find Where Your Users Drop Off
If users drop your product after signing up for your free trial, they may have a problem understanding your features. If they drop off after the first week of buying, they probably haven’t experienced their “aha” moment yet. And if they leave after a few months, you may have failed to engage with them and use the proper customer marketing techniques. In short, if you know where you lost a customer, you can also deduce the reason behind their decision.
HockeyStack’s customizable dashboards can help you find your most valuable customers and show you your drop off rates at different points 🙂
Understanding customers’ motivations, needs, and behavior can help you increase product adoption substantially. By knowing your product adoption curve groups, you can create marketing and sales campaigns directed to the right audience. This knowledge and awareness can help you cross the chasm many businesses fail to cross.
There are a few possible reasons: a weakly executed launch, a non-understandable product, bad reviews, and lack of demand may lead to failure.
The product adoption stages are awareness, interest, evaluation, and conversion.