Wednesday, June 18, 2008

Early to adopt doesnt make a man wealthy

Recently I was asking my friend who mails me from her iphone about how much she finds the phone usable especially when it comes to typing mails etc. Her mails were considerably longer than a mere one/two liner which also made me ask her if she is using thumbs to type as opposed to me using index finger. It seems she was also using index finger to type all that. Towards the end of our gmail conversation she said

Friend: I'll bet you're kicking yourself over the $199 price drop for the new iPhone 3G. I know I am :(

Me: Well I’m not. I don’t own an iphone. I use one at work; we have one to test our designs etc. I knew all this would happen so I had decided to wait. I also asked my friends to wait for the new version to be out. So they are thanking me.

Friend: Awesome. I think I will use you as my gadget consultant from now on. I am stuck with my iPhone until my 2 year contract with AT&T expires so I can't change phones even if I wanted to.

Me: As a thumb rule it’s not good to jump on anything absolutely new in the market especially cars, phones etc. It’s always good to wait till the product mature a bit after two or three iterations. And of course the price also comes down.

Friend: Yeah, your observation is correct ... But have you ever read "Diffusion of Innovations" by Rogers?

In that he talks about "Innovators" who have to have the newest coolest, but not perfected gizmos and who will buy a product despite the high sticker price and technological issues. Innovators are rabid fan-boys and girls who love to spread the word about the coolest gizmos in their blogs, to their co-workers, etc. And after the innovators try a product, they spread the "idea virus" to the early adopters who are the influential thought leaders whose opinions are respected by the masses. Think of folks like Mossberg. The early adopters are a lot more cautious about new products but will try new ideas if they see the appeal. They are also excellent communicators and their actions are emulated by folks who follow them.

And once the Early Adopters give their approval, your "Early Majority" jumps in and accepts the new product. These people are more cautious than the early adopters but are willing to try a second iteration of a new product and/or idea. These folks are the ones that are ultimately responsible for getting the Late Majority (aka the masses) to try the product (usually the second or third iteration of the product). The product goes mainstream with the Late Majority but its pretty much a death sentence for that product and the company needs to think of something new.

So, if you follow Moore's law, the second or third iteration of the product will be half the price of the previous iteration and have double the computing power but if you're a savvy marketer, you will do what Apple does and stage your products in a way where you charge the Innovators and Early Adopters a whole lot more than you would the masses (greater volume of users * lower price = fat moolah for Apple). That's price skimming and Apple is the master at every genius marketing ploy in the book.

So, while I hear you about not jumping into something new, I think psychology and personality traits play an important part in the buying decision as does the price. You could find yourself on different ends of the spectrum of the adoption curve depending on the price tag of the stuff you're buying. For instance, in terms of smaller, technological gadgets, I find myself on the Innovator or Early Adopter end of the spectrum but when it comes to hybrid cars, I'm in the Early Majority. So while I won't be trading in my 2007 Prius for the newer plug in electric-hybrid Prius that releases next year, I might wait a couple more years for other folks to test it out before plunking down money for a second car.

This was probably a long-winded explanation but I wanted to qualify your "rule of thumb" with just a couple of observations.

Me: thanks for all that. Its certainly something which I can talk about in my next interview with a potential employer :P

Also it’s not something which I didn’t know as an idea but you just enlightened me with a detailed observation. As a product designer you the early adopter is my dream user who would selflessly opt to use my product to get input for my next set of iterations. I’m an early adopter of technologies myself but only when it comes to a fairly cheaper web. May be I’m not that rich to splurge on gadgets. So there I become a little more cautious, I wait to be a part of the early majority. As u said rightly I think its the passion for trying out new ideas or technology and very importantly the price tag which decides that in which end of the spectrum one should be in.

I gave you the thumb rule gyan coz I thought you just fell in love with the gadget and jumped on to get one as you said you are kicking yourself now coz of the new version and cheaper price. As an early adopter you should have foreseen this happening.

Oh btw I also notice that the last mail you chose to not reply from your iphone :-)
So on which end of the spectrum are you?


raj said...

Need drives my buying decision. When I need to buy something, I look for the most latest available in the market. Also I verify whether it serves my purpose. Price comes later. I can relax my budget to some extent. Given that I am an early adopter for many products.

Same nature sometimes saved me too.
(My contract is with T-mobile, so I was not able to buy first generation iphone. Now my contract ends... I can happily buy $199 one :-)

Anonymous said...

Late or Never is the set where I belong, unless I see a potential to make money out of it. Rarely that happens and I must mention, I am seeing the potential in iPhone and will be an early adopter when it launches in my country.