Late majority in marketing

The late majority is an important concept in marketing and business. This is the phase when an idea goes completely mainstream. If it’s your idea, this is the phase when you’ve made it. If you’re competing against this idea, you’d better be ready to be counter culture. I’ll provide you the definition, and some examples from somewhat recent history.

Phases in marketing

Emerging markets follow a predictable curve, with five phases in them: Innovators, Early Adopters, the Early Majority, the Late Majority, and Laggards. Whatever product we’re talking about, if it catches on, its sales figures will follow this curve.

The late majority is the third phase in this curve. At this point, you’ve achieved market penetration. It’s the time when sales figures peak, and also when they may tail off due to market saturation. The late majority phase begins with the product at about 50 percent market penetration, and when it ends, it has about 84 percent market penetration.

The late majority is always waiting for something. It could be they’re waiting for it to go mainstream. Maybe they’re waiting on price. Or for the new feature that’s just around the corner. It’s a practical approach. Once you hit this phase, sales are at or near their all-time highs, but it also means sales are going to decline in the near future, unless you can come up with some way to add new features to spur repeat sales.

Late majority definition

The late majority is the second phase when a product goes mainstream. At this point, the leaders have all adopted it. They may even have two. This is when the followers start buying. At 34 percent of the market, it’s a significant chunk, but this is also the end of the boom times. Once this market segment buys up all it wants, the boom times are over.

This group isn’t interested in being first. They wait to see what’s going to be popular, then they buy when it’s popular. This isn’t the group that sees a band in a small venue that seats 200 people, it’s the group that waits for their greatest hits compilation.

For examples of this phase, think VHS VCRs starting around 1986, DVD players around 2004, and PCs around 1996.

A late majority example

Consider Blu-Ray players. When the successor to DVD came to market, there was a highly publicized war between the two proposed formats, HD-DVD and Blu-Ray. The late majority sat out the war and waited for the winner. That’s how they avoided choosing the loser. That’s one of the hallmarks of the late majority. They don’t like losers, and they’re fine with being one of the last people on the block to buy something if it means not picking the loser.

This could be driven by pride. We all know someone who thinks he’s cool because he’s never picked a loser. Well, it’s pretty easy to do that if you wait and see what all the cool kids do, then do what the majority of the cool kids did. I’d argue that doesn’t make you cool, it makes you a follower. Not that there’s anything inherently wrong with being a follower, unless you’re a follower and think you’re a leader.

But I think more frequently, rather than being driven by a fear of not being cool, it’s driven by price. A large percentage of the market can’t really afford to spend $600 on an HD-DVD player, only to have it be obsolete in two years. There’s certainly wisdom in waiting to see which format wins out, so you don’t have to re-buy if you choose wrong the first time.

Another hallmark of the late majority is waiting for the prices to come down. There’s certainly wisdom in waiting until you can afford something to make a purchase. And the longer you wait, the lower the prices get.

A slower example of the late majority

Let’s take the example of the Blu Ray’s predecessor, the DVD player. It had a slower uptake, which makes it easier to study. I couldn’t find US sales figures for some reason, but I was able to find them for Australia. That will work. Australia has about 5.5 million households.

DVD players appeared on the market around 1999. The early majority phase ran from sometime around 2002 to 2003. That’s when it seemed like everyone was getting a DVD player for Christmas. Arguably the late majority started in 2003, but certainly, it was under way by 2004. Sales peaked at around 2 million units and tailed off in 2009. By 2009, the late majority was certainly over.

Sales plateau during the late majority and tail off after the late majority is over. DVD player sales got a boost at mid-decade from recorders coming onto the market, but they peaked in 2006. Some late adopters may have been waiting for recorders to come out. Some never bought one.

The danger of not recognizing phases in marketing

In 2000, I think investors’ failure to apply the theory of the diffusion of innovations, and its concept of the early and late majority, contributed to the dotcom bust.

Ebay was an investor’s darling, fueled by people who had no interest in computers suddenly discovering they can buy anything they ever wanted on this new digital flea market. But as computers progressed through the late majority, Ebay’s growth flattened. Investors, having assumed that Ebay would grow forever, punished them.

But once a product hits the late majority, the best times are about over. Sales are going to level off and start to decline. The question is whether it will be a slow decline or a rapid decline. Once you top about 80% market penetration, replacement and additional-unit-for-the-home sales are all you have left. The growth period is over at that point.

And this is generally where investors start pummeling the stocks of companies in that market. Sometimes they’re right to do so. When Ebay was tailing off, AOL was tailing off too. AOL’s business model was based on obsolete technology, so it was time to get off that train. But Ebay was capable of sticking around for the long haul, it’s just that their period of rapid growth was over. So in the case of Ebay, which proved it could stick around a while, the investors were punishing success.

There were companies in the dotcom bust who had no viable business plan, so those were right to fade away. But there were successful companies like Ebay and Amazon that came out of that boom and many investors couldn’t tell the difference at the time.