The concept of “loss aversion” plays a significant role in buyer resistance to new products. In their research, Daniel Kahneman and Amos Tversky found that people evaluate alternatives based not on objective value but on their personal perception. When considering new products, consumers typically use what they already own as a reference point, seeing improvements as gains and any drawbacks as losses. Most significantly, losses impact people far more than similar-sized gains— a phenomenon known as “loss aversion.” For instance, most people would not accept a 50-50 chance to win $100 if it also means risking $100; instead, the potential gain usually needs to be two to three times the loss for the bet to seem worthwhile, a finding supported by further research.
What these findings imply is that even if a new product offers superior benefits, buyers may still hesitate to adopt it if it requires them to give up aspects of their current product that they value. For example, if a new type of vehicle offers higher fuel efficiency but sacrifices the horsepower that drivers are accustomed to, potential customers may resist purchasing it.
Product managers can leverage this knowledge in several ways: first, they can demonstrate how the new product integrates with current habits or processes, minimizing the need for behavioral change. For instance, when Apple rolls out new features, it often emphasizes how these features integrate seamlessly with existing iPhone features — ie. when promoting an improved camera, they might share that it works just like previous versions but with enhanced capabilities. Second, product managers can focus on making the new benefits incredibly compelling — more than the 3 times improvement the customers require. For example, Apple may promote its improved camera by sharing that it has 10x improvement in processing speed. Third, product managers can focus on customer segments that haven’t yet formed strong preferences or those who are not yet super averse to loss and would therefore be more open to the benefits of a new feature. In the same example, this might mean that Apple can focus on customers who don’t yet own an iPhone (therefore, they have less of a reference point by which they can measure loss) or who are using somewhat outdated devices.
