How can product managers effectively balance the desire to innovate and introduce new features with the need to address buyer resistance? What strategies can they employ?
Product managers face a tension between innovation and adoption: they must create compelling products while also ensuring that users are willing to embrace the changes they entail. In “Eager Sellers and Stony Buyers,” Gourville highlights the 9x effect, where consumers value the benefits of existing incumbent products by 3x, and developers value their innovations by 3x. This creates a chasm between the desires of consumers and the perception of developers, creating significant frictions in product adoption.
Understanding Buyer Resistance
Loss aversion and the endowment effect: losses have a much greater impact on people than equivalent gains, which leads people to irrationally overvalue what they already own compared to what they could gain. Thus, when faced with a new product, they subconsciously frame it not as an opportunity for improvement but as a threat to what they already know and value. As a result, products that entail high psychological switching costs can entirely deter user adoption or significantly increase its timeline, depending on the degree of innovation the product offers. Meanwhile, product managers can fall prey to the curse of knowledge: after months of focusing on a given product, they may see their innovation as the status quo and assume consumers do so as well.
A Real-World Example
This past summer I interned at a consumer fintech startup that helps parents establish custodial Roth IRAs for their children. Despite receiving backing from leading fintech founders and investors, a well-functioning product, and strong founder conviction, the startup is facing significant challenges in customer acquisition. During my time there, I conducted user interviews, and the audience’s sentiments can be described by the aforementioned concepts. Specifically, the product entails significant behaviour change, as it promotes a strategy the vast majority of parents aren’t familiar with. Due to the presence of alternative, well-known investment options such as 529 plans and brokerage accounts, many parents do not see the immediate value of incurring the costs of focusing on a custodial Roth IRA. At the same time, this investment option differs from current methods parents use in that it enables tax-free growth and can be used for expenses beyond education. The combination of notable product changes and significant behaviour change place this company in the long haul category.
Balancing Innovation & Adoption
-
- Minimize behaviour change: Product managers can examine how to build features that provide significant benefits relative to incumbents while minimizing the need for users to change their practices. For instance, TikTok entered the concentrated social media market by focusing on algorithmic recommendations, a departure from social graphs. Yet, its UI/UX was highly similar to existing social apps, lowering learning costs.
- Strive for 10x improvements: When behaviour change is unavoidable, the innovation’s advantages must be significant enough to incentivize adoption.
- Target the unendowed: Rather than convincing entrenched users to abandon old habits, PMs can focus on user segments who lack deep attachment to incumbents. Due to the core role existing practices play in creating adoption frictions, this strategy focuses on those unaffected by prior practices.
