In “Eager Sellers and Stony Buyers,” Gourville explains why, in many instances, new products fail despite their impressive and useful gains they offer customers. The reason behind this is a mismatch between the sellers and buyers, where buyers are approximately 3x less willing to let go of a current behavior or product, and sellers overestimate the value of their product by approximately 3x, resulting in a total of 9x mismatch between the seller and buyer.
“Loss aversion” refers to the idea that consumers are far more averse to losses than gains. In studies described in the article, time and time again, participants demonstrate that losses are irrationally more meaningful to them than gains. This plays a large role in buyer resistance. Even when a new product presents improvements and gains, if it requires giving up something already in current possession, one is likely to be resistant to making the change. For example, if a new music streaming app has far more capabilities and offers social features and AI suggestions, I am unlikely to buy a subscription if it means I have to lose my current library of liked songs on Spotify and past playlists I’ve made with friends. Even though I can always create new playlists and the new site has far more advanced features, the loss of playlists I do not even listen to anymore from years ago still seems to outweigh the gains.
Perhaps one way product managers can avoid failing into this trap while addressing eager sellers’ demands is by minimizing the loss. By drawing a comparison between a current solution and the solution that their product offers, they can highlight the scale of the benefit against the weight of the loss. To minimize the loss that the buyer has exaggerated in their mind, a product manager might offer support tools or reward the buyer for making the transition to their product.
Further, Gourville explains that products that require a drastic behavior change are extremely daunting to buyers and trigger the many psychological effects that result in the ‘stoniness’ of buyers. It is wiser to avoid straying from the main elements that make up a current solution when designing new products. New features should be introduced organically and gradually. New features should be framed as gains and gently nudged towards consumers without requiring a large shift in behavior.
Overcoming loss aversion ultimately comes down to convincing a buyer through proving that there is more to gain than lose. Due to the 9x effect, extra effort is required to design products that seem to offer gains that outweigh losses by 9x, and/or require a loss smaller by a degree of 9x. Product managers need to take into account the reasons for buyer resistance and address concerns as a way of relating to their customers and proving the value of their products.
