Addressing Loss Aversion
As outlined by the reading, “loss aversion” is the idea that consumers will personally feel losses more in comparison to potential benefits (Gourville 2006). This contributes to buy resistance by providing a psychological and emotional lens that goes beyond simply leveraging that a new product may objectively be providing more than other competitors.
I think that an important and effective approach that managers should implement in order to leverage this knowledge is to constantly overestimate how conservative consumers will be in their decision-making. Gourville provides strategies to overcome loss aversion, such as ensuring that products are 10x better than existing products to guarantee transfers are worthwhile and minimizing consumer behavior change. This would allow for overcoming adoption obstacles such as learning curves, limited familiarity, and hyper-valuing the status quo while making benefits very obvious to the user. Furthermore, with overestimation of consumers’ conservative behaviors will create an even higher upper-bound of convincing selling points.
Relatedly, managers should conduct careful, ongoing user research. According to Gourville, loss aversion can lead to the “endowment effect,” in which users feel particularly attached to products they already own (Gourville 2006). In order to further understand reasoning behind the endowment effect given the context of our product, we would want to conduct research on why users’ current products are working for them. It is important to do this routinely. Even if we reach justified conclusions, the impact of the loss aversion is dynamic, as the “magnitude of the bias rises, over time,” for instance (Gourville 2006). This sense of loyalty intensifies over time, but can also slowly diminish as user needs change.
Additionally, managers could direct user research towards their markets within the SOM to SAM range. This would allow for a balance between a large enough audience where the product could gain traction, but also niche enough to cater towards a specific need that could make adoption of a new product necessary.
Further Questions to Consider
I think it is safe to say that my suggestion of compensating for overestimation would only increase the likelihood of a successful product. However, I also realize that there exist external constraints, such as funding and personnel, to make such solutions possible. I am wondering the tradeoffs between aiming for a ‘smash hit’ product and building appropriate resources.
I’m also curious about how these concepts apply to products that have already gained user loyalty and the company wants to implement improvements/new features. If successful, this can earn more revenue for the company, but there is a risk of placing inconvenient behavior change and learning curves that could frustrate or even drive away users. Given that users are already using your product, do these thresholds then change?
