What role does the concept of “loss aversion” play in buyer resistance? How can product managers leverage this knowledge to facilitate the adoption of new features?
“Loss aversion” as defined by Kahneman and Tversky is a phenomenon where most people outweigh the potential loss compared to a potential gain, even when the two can be comparable. The example used in the reading referred to a hesitancy in taking a bet where there was a 50% chance of winning $100 or losing $100. The very negative effect of “losing” deters people from taking the wager in the first place. Within the context of innovation and introducing new products, consumers will also deter from purchasing a new product given the desire to avoiding a loss. As alluded to in the reading, comparable losses will still drive this effect, essentially meaning consumers must see significant gains. As such, loss aversion contributes to buyer resistance.
As a product manager, I would leverage this by firstly ensuring that the new features being built are ones that people actually need. Taking this further, the benefits of using these new features must also vastly be more positive than the existing status quo. It’s simple to say, but difficult in practice. The reading highlights that consumers often overvalue the existing status quo by a factor of 3 and that companies overvalue an innovation’s benefits also by a factor of 3. Within this case, it’s best to temper expectations for the company in facilitating consumer adoption of new features. From the strategies discussed in the reading, perhaps the most useful strategies would be to remain patient and strive for 10x improvement. In this way, it’s reminiscent of Apple’s iOS updates. New features are only introduced when they are ready to be shipped and often work with little to no bugs. The features also usually offer one to two significant improvements over the previous year’s update. On a rolling basis like such, the company does play patient with users as they test and use their new features.
