Eager Sellers & Stony Buyers

Presented by Aathira G Krishna

By John T. Gourville

Understanding the Psychology of New- Product Adoption

HBR June 2006

If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbour, though he build his house in woods, the world will make a beaten path to his door!!!

Innovation cost

Economic cost

Psychological cost

Curse of innovation!!!

People irrationally overvalue the benefits they currently possess relative to those they

don’t

Relative advantage How individuals value prospects/ choices

◦ Perceived value◦ Reference point◦ Gains and losses◦ Loss Aversion

The Psychology of Gains and Losses

Losses loom larger than

gains!!!

Endownment effect Status quo bias

Innovations and Behavior Change Consumers and Behavior Change Companies and Behavior Change

Building a Behavioral Framework

9 X Effect

Consumers are usually Companies are often

Skeptical about a new product’s performance

Unable to see the need for it

Satisfied with the existing product

Quick to see what they already own as the status quo

Convinced the innovation works

Likely to see a need for the product

Dissatisfied with the existing substitute

Set on viewing the innovation as the benchmark

Companies overweight the new product’s benefits by a

factor of three

Consumers overweight the

incumbent product’s

benefits by a factor of three

Recipe for disaster

Capturing value through innovation

Easy sellsSmash

hits

Sure failures

Long hauls

How to tackle resistanceAccepting resistance Minimizing the resistance

Be patient

Strive for 10 X improvement

Eliminate the old

Make behaviorally compatible products

Seek out the unendowed

Find believers