The Motley Fool

Use This Effective Method to Assess Demand for a Product

Our world is filled with new inventions and spectacular ideas, but only a fraction of these actually result in real products and services that benefit our lives. Companies that manage to hit the jackpot are those that invent life-changing products that can greatly enhance the quality of our lives, such as the very first smartphone introduced by Apple (NASDAQ: AAPL) more than a decade ago.

However, as investors, how do we gauge whether new inventions or innovations are well-accepted by the general public? Enter the “Rogers Adoption Curve,” a model that describes how new innovations and ideas are accepted and adopted by groups and cultures. The theory was developed by three men at Iowa State University in 1957 and is represented by the diagram below.

Let’s look into each category and what this means for a product or service.

Innovators

Innovators are always the first to jump on and embrace any new product or technology. Typically, these are the people who need to try every new gadget and be the first to experience new inventions in their full glory. However, this is often a small minority of the population, and if a product is embraced only by them, it’s not likely to be a major hit.

Early adopters

Early adopters are also risk-takers in adopting new technology and embracing new ideas, but they are more leadership-oriented and can influence a larger group of people. This is the group poised to push the idea or product out into broader culture. When early adopters jump on a product, there’s potential for it to be injected into the larger public consciousness.

Early majority

The early majority are not as comfortable taking risks and tend to accept more conventional ideas thrown to them. Once a product reaches this stage, it is already widely accepted and adopted by the majority of the general public. Think of smartphones and CD players when they were first invented — initially they were only used by the “nerds” and “technophiles,” but they eventually seeped into mainstream use. Once a product hits this stage, it may enjoy many years of growth and rising sales volume.

Late majority

The late majority are those who adopt new ideas and products reluctantly. Some are forced to because an older product is being discontinued, but the idea here is that this bunch is resistant to change and somewhat set in their old ways.

Laggards

Laggards are the direct opposite of innovators — these are the people who steadfastly refuse to adopt any new ideas or innovations, even if it may benefit them. They resist change and avoid changing their way of life because they are too comfortable with the status quo.

Tap the early adopters

As investors can probably tell by now, they should look for products being embraced by the early adopters and early majority. These groups have the power to make a product hugely successful and mainstream. Companies that have managed to tap into these two groups will see their products gain acceptance quickly and effortlessly, and investors will reap the returns accordingly.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Apple Inc. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.