Why customers do not buy my (wonderful and innovative) product?
Undoubtedly this is one of the questions most frequently are the executives of innovative companies. Unfortunately, in many cases the answer is “because your product does not provide any significant benefit” or “because they’re fatal mistakes in strategy or execution of your marketing.”
In other cases the answer is less obvious and has to do with the fact that any new product means a change and the dislike of its potential customers to bear the costs associated with this change. The process of adoption of innovation has been studied since the’60s and formalized in what is known as diffusion models by academics such as Everett Rogers, who in his book “Diffusion of Innovations” describes how an innovation spreads through the various user profiles (as defined in part by their propensity to take risks) and the variables that influence the distribution (relative advantage, compatibility, complexity, etc.)..
Essentially these theories assume that users take the products to provide greater value than those currently existing and that all agents make unbiased assessments of the alternatives. For this reason, in recent years have been questioned by not incorporating the psychological biases that have been shown to affect decision making.
Many of the conceptual frameworks currently used to classify a new distinction between the benefits and behavior change required. In his article “Eager Sellers and Stony Buyers” John Gourville second variable identifies this as the key to innovative companies that can benefit from the value of innovation: according to him, companies create more value the greater the change in the product, but better capture the value minimizing the behavior change necessary to adopt that innovation. This change implies costs that may be more or less objective, predictable, quantifiable and manageable (infrastructure, migration, reengineering, training …) but other costs are less obvious and difficult to recognize or admit. We talked about the psychological biases that impose barriers to the adoption of new products. Some of these biases (whose discovery was rewarded with a Nobel Prize) is the endowment effect and status quo bias and its main consequence is that people irrationally overvalued the benefits of what we already have versus new alternatives. Some empirical studies have shown that this overstatement is between two and four times. Another important feature is that although these biases are universal, most people are not aware of them and not recognize them.
From the standpoint of introducing a new product, these biases imply that potential customers overestimate by a factor of three compared to its current product offering a new similar benefits, thus slowing the adoption of it. Interestingly, from the viewpoint of company executives innovative status quo is represented by the new product while the alternative is the product currently in use by the market as due to the same psychological biases tend to overestimate by a factor of approximately three at first. Creates a difference in valuation of new product from 1 to 9 between the company and consumers, and that is the origin of the question that gave title to this note. And to some extent also at the base of the famous “10x factor” that quoted Andrew Grove of Intel in “Only the Paranoid Survive” when he says that to transform an industry innovation should provide a benefit ten times greater than those that provide alternatives.
What to do then to avoid losing the battle against these forces opposed to innovation? Gourville raises a number of strategies have two models:
* Accept and manage this resistance, for example, preparing for a slow adoption (and properly manage the resources in time) or providing benefits ten times those of today.
* To minimize this resistance, for example, making compatible products from the standpoint of behavioral targeting consumers who are not entrenched in current products.
Ultimately, much of the success of a new product is on the minds of people. Until innovative companies do not understand, anticipate and respond to the psychological biases that both consumers and its executive decisions to incorporate new products continue to fail.
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