- 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 is a defensive mechanism that has allowed individuals to survive in harsh environments throughout history. In this way, preventing or avoiding harm can be considered an innate human characteristic. However, in this modern age, loss aversion seems to be more harmful than helpful–to both buyers and sellers.
By viewing economic decisions through the binary framework of “gains versus losses”, not only do buyers leave themselves susceptible to a more subjective and irrational analysis of products, but they also leave themselves vulnerable to a fear-based, cynical approach to the buying process as a whole. Gourville emphasized how, to buyers, “losses loom larger than gains”, and thus, potential benefits are constantly being overshadowed by losses, even ones that are minimal. This demonstrates just how integral of a factor loss aversion is to buyer resistance, even when a buyer stands to benefit from a sale.
It’s easy to see how executives and innovators can feel dumbfounded by the principle of loss aversion, since it goes against the intuitiveness behind the inevitable success of an objectively helpful and desirable product. However, there are several strategies product managers can use to assist in new feature adoption. For one, they can encourage innovators to strike a balance between the degree of behavior change a new feature requires a buyer to make and the actual degree of product change involved. PMs can support in ensuring that the feature is as close to the “Smash Hit” category Gourville outlined as possible; this would allow for an easy adaptation process to a new type of product that enacts a sizable positive change on users’ lives. Gourville also highlighted the importance of patience as a strategy for mitigating the negative effects of loss aversion. It is much more likely that a new and unfamiliar product will be adopted over the course of many years, rather than achieve rapid success. If PMs promote patience as a corporate strategy, they can help executives establish realistic goals and timelines, rather than setting a product launch and marketing process up for failure.
This article reminded me of our in-class discussion where Christina emphasized how most startups fail, and mostly because they don’t truly understand what users want and need. I think loss aversion plays greatly into this idea, since many startup founders do not understand the hesitations and apprehensions that buyers come into a store with. If PMs could integrate loss aversion prevention and reduction techniques into their conversations with all levels of a company (executives, engineers, marketing experts, etc.) then they could set their products and teams up for success. While loss aversion may be an innate human characteristic, developed due to a need to survive, PMs have the power to challenge overeager sellers and ever-stony buyers to pave the path for helpful products to thrive.
