Client-Firm Engagement for Adoption of Multi-Generational Technological Innovations
Firms strive to attract early adopters of new products and services via significant investment in both R&D, distribution and marketing to the detriment of profitability. A focus on customer profitability over the life cycle of a product and across multiple product generations is desirable from a firm’s point of view for maximizing the returns on investment; even the common truism that 20% of customers drive 80% of profits does not inform us which adopter segment(s) these profitable customers belong to. This raises the questions: (1) From which adopter segment do the most profitable customers come from and what factors influence their profitability and overall engagement with the firm? (2) What drives client engagement across adoption of multiple generations of products? Despite substantial research on customer engagement, managers seek guidance on the phenomenon of the adoption of multi-generational technological innovations (MGTI) and the effect on client engagement.
We explore the adoption behavior of MGTIs on three dimensions - adoption depth, adoption breadth and inter-generational adoption time. Using client and multinational firm-level interactions across technology generations from various countries over multiple years, we draw on the theory of customer engagement to investigate how MGTI adoption behavior by clients influence their satisfaction and sentiment, which then influence direct engagement (customer lifetime value) and indirect engagement (business reference value and valuable feedback). We employ a profitability-based perspective to explore per period short-term and long-term profitability of clients across adopter segments. Our approach allows firms to generate new insights for their targeting strategy and to maximize their profits.