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Summary
The
authors start by giving examples of 3 instances where the firms were not successful after the launch of a new innovative product. Different concepts in the psychology of consumer behavior to explain the reasons behind the failure of the products. The psychology of Gains and losses. He has explained them by answering 2 key questions they are:
1. 2.
Why consumers are reluctant to buy seemingly attractive goods and services? Why developers fail to anticipate this reluctance to adopt ?
Concepts
Prospect Theory : The psychological impact of gains and losses drives consumer behavior more than the actual gain or loss does. Rule no 1 : individuals are sensitive to gains and losses Rule no 2 : reference point matters Rule no 3 : decreasing marginal sensitivity Rule no 4 : aversion to losses
Concepts [contd.]
The Endowment effect: People value more the products in their hand than they value items not in their possession. Factors like Timing, Certainty and ability to quantify will also determine how well consumer evaluate the gains and losses form a product or service.
Concepts [contd.]
Psychology of innovator: Developers curse. It talks mainly about gap between what the products or the concept developers think the utility of the product is what the consumers perception about the utility of the product. The author mainly identifies the problems like 1. Self-selection 2. A clash in perspective of the consumers and developers. 3. The curse of knowledge: Once we learn some information we find it difficult to appreciate what a person who does not know that information might be thinking.
Key Learning's
Developers should develop products keeping in eye believers of the product. Listening to the customers and understanding their imagination. Developing products according to the outcomes of customers reference point which is his or her current situation. The gap between the developers perspective and the typical consumers perspective should be bridged. Better informed developers should be able to anticipate the judgements of less informed individuals. The developers should understand that the problem does not lie with the failure of customers to understand but the developers or sellers failure to anticipate and appreciate this predictable lack of understanding.