Psychology of New Product Introduction

As we continue to think of ways to innovate Flock I reminisce over an email I sent out after my first couple of weeks at the company concerning the Psychology of New Product Introduction.  One of the things we biffed in 0.7 was changing how bookmarks work resulting in an end user experience that was different than what other browser provided (specifically the folder concept was removed).

The economic theories this is based on is one of my favorite rumination subjects.  Kahneman, Tversky and Thaler blew the doors off conventional economics by not assuming irrational behavior and applying Psychological biases

Hi folks,

There is a reasonably relevant article in this month’s (July ‘06) Harvard Business
Review (I think there is a copy in the lounge area) on the psychology
of New Product Adoption. It basically touches on work done by two
psychologists, Kahneman and Tversky, around why individuals deviate
from rational economic behavior (in reality the price of product is
NEVER exactly where supply and demand intersect).

The article’s thesis is that it is not enough for a new product to
simply be better.  People will not necessarily make a rational decision
about a better product because of an irrational behavior concerning
gains and losses where losses greatly outweigh gains.  The common
example is that most people will not take the bet of 50% of winning a
$100 and 50% of losing $100.  This is  known as “Loss Aversion” (and in
today’s pop culture will probably eventually be called “Deal, or No
Deal”).

People have a tendency to look upon adoption of a new product in terms
of gains and losses.  Feature improvements are gains and new
shortcomings are losses.

This leads to a couple of biases:

-

Endowment effect.  The value of products already possessed
greatly outweigh the ones that aren’t.  Another psychologist, Thaler,
sums this up by saying “consumers value what they own, but may have to
give up, much more than they value what they don’t own but could
obtain”.  A similar experience is that once you own something, you
don’t want to give it up.  Some real world examples

       – ebay plays to this effect.  If you’re currently the winning
bid for an item that is still open your mind has already wired itself
thinking that it is the owner.  If someone bids higher it is hard to
resist not raising your own bid

       – “Try before you buy”.  This one is awesome.  I put some kid
through college because a rug salesman convinced me that I could lay
down some Persian rugs in my house for a week before I decide to buy
them.  I bought them.

- Status Quo Bias. People just have a tendency to stick with what they
have even when a better alternative exists.

In typical HBR fashion they boil down a framework into a 2×2 matrix.

low behavior change, low product change => Easy Sell (tweaking angle
of toothbrush).

high behavior change, low product change => Failure (Dvorak keyboard
for example).

high behavior change, high product change => Long Haul.  (Cell
Phone, probably satellite radio eventually)

low behavior change, high product change => Hit (google)

Anyways, these are things to keep in mind as we continue to innovate
the flock browser and find ways to market it. 

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