Why is it So Difficult to Make People Switch Products?
By Vineet Singla, General Manager of New Business and Director of Product, dubizzle
Contrary to popular belief, people seldom buy on impulse. When they experience problems in their life or work, they are motivated to find solutions to make things easier. It is important to understand the context in which people experience problems, and what drives them to switch products to solve them.
Innovative companies or first movers tend to think that they are alone in the market. It is a mistake to assume that competition does not exist. Studies have shown that most innovative products that were expected to be big hits have failed at an alarming rate of between 40 and 90 percent. Historically, 47 percent of all first mover products have failed. Although easy to dismiss in hindsight, it is not always obvious before that happens.
Why do companies spend millions developing innovative products that are destined to fail? Why do customers reject innovative products over incumbents?
Firstly, when companies build new products they segment people into attributes such as demographics, income levels and preferences. By using attributes to design products, they focus too much on the differences between people. However, in doing so they limit the overall market because different people use products in very similar ways.
Instead of analyzing individuals by attributes, we should analyze their behaviors, motivations, and desired outcomes. This allows us to design products for the job, regardless of who they serve.
For example, people from all demographics hire dubizzle to trade items in an open accessible online marketplace. Sellers hire dubizzle to access demand that was previously untapped, and buyers hire dubizzle to find better deals. In 2016, 1.2M people sold 6M items on dubizzle.
Secondly, customers evaluate new products relative to products they already use. When switching products, the new products’ shortcomings have far greater impact on their decisions than similar-sized advantages, a phenomenon known as “loss aversion”. They also tend to overvalue the advantages of products they already own more than the benefits of new ones, a phenomenon known as the “endowment effect”.
This double-edged sword acts as a nemesis, a force multiplier, that pushes innovative products towards sudden failure.
Studies have confirmed that customers demand a performance that is three times better on average to even consider giving up products they already own. As the proverb goes, simply making a better “mousetrap” isn’t enough.
Successful adoption of new products involves overcoming these psychological biases. Unless the gains far outweigh the losses, product adoption will be low.
For example, when dubizzle launched its partnership with CarReport to provide a service that allows users to get a comprehensive history of the secondhand car they are interested in buying, it had to compete with the trust that sellers used to place in their mechanics or car dealers for the true condition and value of their cars. We are witnessing a change in that trust as now, users are turning to this service for full vehicle accident history, mileage records, and recommended selling price.
So, how do you get people to switch products?
People use products out of sheer habit, and the cost of changing habits is high. Ultimately, innovation is about changing customer behavior, overcoming anxieties, and forming new habits.
As innovators and product developers, it is our job to remove the hesitation associated with new products and forming new habits.
One way innovators overcome resistance is by building behaviorally compatible products. By talking to users, identifying the jobs they need done, and providing a safe, compatible alternative, we decrease attachment to the status quo and generate desire to switch.
For example, real estate agents and car dealers hire the dubizzle listings dashboard to analyze the performance of their ads. By examining their jobs to be done, we found out that by making the listings dashboard mobile ready, we could enable them to monitor the key performance indicators of their ads whenever they are visiting clients. Thus, 100 percent of our agents and dealers are using the listings dashboard to manage their ads on dubizzle.
Therefore, innovation for the sake of innovation is not a profitable enterprise. Companies must work to create the most user-friendly and efficient offering to encourage users to switch to the better product, especially in a world that changes rapidly.