Analysis of Eager Sellers, Stony Buyers

Analysis of Easy Sellers, Stony Buyers: Understanding the Psychology of New Product Adoption

According to John Gourville, associate professor of marketing at  Harvard Business School in Boston, companies who introduce new products tend to forget about the psychological effect that comes with changing their behavior for a new product. New products often require these consumers to change their behaviors and consumers hate having to change anything. They irrationally overvalue their current product and undervalue the benefits anything new could entail.

New products, such as electric cars or online books, are both better for the environment and easy to use, require consumers to change, to learn new skills to use the product and overall, requires them to purchase something new even though the old is not broken. Apple is a great example of a company that outdates their own products, causing consumers to have to buy the new product because the old is ‘broken.’ The new iPhone 4 has FaceTime and a greater graphics quality. The iPhone 3GS, while could shoot video and has decent graphic quality, was nothing compared to how nice the iPhone 4 is. To a loyal Apple fan, their old iPhone 3GS is now broken and they must purchase the new one. Why do consumers not see the value in an electric car? Because the car is not consider cool. It is not marketed as a must have item, where as Apple creates their new products as something required to be in the cool crowd.

Gourville says that consumers go through four characterists. First, “people evaluate the attractiveness of an alternative based not on its objective, or actual value, but on its perceived value.” For Apple fans, the iPhone 4’s perceived value is greater than its actual value. The FaceTime quality can only work in a Wifi zone and those high quality graphics do not make the phone work better. Second, “ consumers evaluate new products or investments relative to a reference point, usually the products they already own or consumer.” Apple users compare the perceived value of an iPhone 4 to the phone they currently have, viewing the new product as having a greater value than the phone they use currently. Third, “people view any improvements relative to this reference point as gains and treat all other shortcomings as loss.” 

The iPhone 4 gains to a loyal Apple brand user greatly overshadow any shortcomings, like the faulty antenna or expensive price. Finally, “losses have a far greater impact on people than similarly size gains…called loss aversion.” Apple managed to make the loss aversion miniscule compared to the advantages of their new product. They market the new iPhone 4 has something of power or something of status, causing the shortcomings to be insignificant to a loyal brand user.

The loss aversion, which causes consumers to value what they already have, is something that marketers really need to pay more attention too. Apple did. Apple made their new product become more valuable than consumers old phones. If more companies were like Apple, more new products could be launched successfully.  Gourville also says that the consumers overvalue the existing benefits by a factor of three and developers overvalue the benefit of their products by factor of three. This is called the 9x effect and it is a fundamental problem. Innovators need to have a better grasp on what consumers actually want and how willing they will be to part from what they already have. Consumers are irrational and there really is no way to predict what they want. So companies need to create a strong given value in their new product to attract their new target audience, much like Apple does.

I know that I pretty much say that Apple has the best marketing strategies, but honestly, look at their success… Apple DOES have one of the best marketing strategies. They make all their new products outdate their old products, leaving competition in the dust. They analyzed their consumers, understanding how best to market their new products in a way that created a want that the consumer had no idea they wanted, an added value in something they did not know they needed. That’s absolutely brilliant. 

Wrote this for MKTG 4320, based on Eager Sellers, Stony Buyers: Understanding the Psychology of New-Product Adoption by John T. Gourville. Direct quotes from his brilliant article.