why people won't buy your product even though it's awesome
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Why People Wont Buy Your Product
Even Though Its Awesome Contributed by David Tang on May 6, 2013 in Strategy, Marketing, & Sales
Its a common business problem faced by any size company, big and small.
The situation is youve developed a brilliant product. Compared to the incumbent or
existing way of doing things, your product is more feature-packed, is easier to use, and is
more economical to the customer.
The problem is your sales suck. Why arent customers banging down the door?
Are customers irrational?
The answer is yes. Numerous studies have showed that consumer behavior is
irrational. If you assume otherwise, then you are also behaving irrationally.
To understand why people arent buying your product, it is imperative to understand some
key concepts in behavioral economics. Here are three important principles to be cognizant
Principle 1. Losses Loom Larger than Gains
Every new product provides perceived gains and losses for the customer. These gains and
losses need not be financial. For example, lets say you are starting an online grocery store
for your municipality. With the promise of groceries delivered to the door, the perceived
gains could be convenience, time savings, and effort savings. On the other hand, you are
altering the way the customer performs a certain processbuying groceries. This change will
translate to perceived losses (i.e. financial and non-financial costs), which can include the
inability to handpick produce and meat, delivery fees, and having to be home during the
When we look at this objectively, online groceries is a clear superior choice. Convenience,
time savings, and effort savings are great value propositions, after all.
However, when the customer evaluates options subjectively, it becomes unclear whether
online groceries is the still better choice. In fact, it is likely the customer views online
grocery shopping as the poorer choice. This is because losses loom larger than gains.
A consumer has an inherent Consumer Bias . This bias weighs a loss three times that of a
benefit. To put it another way, the objective value of a gain needs to exceed the objective
value of a loss by three times for the customer to perceive the new product as better than the
Principle 2. Reference Points Matter
The second principle to understand is different people have different reference
points. These reference points matter. The reference point simply refers to the persons
current state of being.
Continuing our online grocer example, the reference point of a typical customer is someone
who currently goes to the physical supermarket to pick up groceries. This process may
already be part of the customers weekly routine. Gains and losses are relative to this state
For two people with different reference points, a gain for one person may be perceived as a
loss for the other. To illustrate this concept, lets look at the price of gas. Assume the
average price for a gallon of gas in the US is $3, whereas its $10 in the UK. If a US
customer came upon a gas station charging $6.50/gallon, she would be furious. If a UK
customer came upon the same situation, she would be ecstatic. (Also, note that even though
the objective difference is the same for both customers, the US customers sentiment would
be more affected than that of the UK customer, because losses loom greater than gains.)
The Value Function Illustrates Objective vs. Subjective Values
By understanding your customers reference point, you can determine her perceived gains
and losses. In most cases, your reference point is different from that of your
customers. This is because you have already used and experienced your product, whereas
your customer has not. Your product has become part of your state of being. This disparity
in judgment is captured in the concept known as the Innovators Curse .
Principle 3. Endowment Effect
According to the Endowment Effect, people value items in their possession (i.e. part of their
endowment) more than items not in their possession. This is because people are loss
This behavior sheds some light on why losses loom larger than gains. If a customer is
already accustomed to an existing product or existing way of doing things, it becomes hard
for her to give that up and changeeven if the alternative presents greater benefits.
Are any of these principles hindering your sales?
Recognizing and understanding these three principles of behavioral economics is crucial. It
allows us to develop product strategies that specifically counter consumer adoption barriers
at play and leverage behavioral tendencies.
Now, lets look at three such strategiesone for each principle.
The 10X Rule
If losses loom larger than gains, then we need to create a product where the gains greatly
dwarf the losses. Create one where the benefits are 10X that of the losses, so that all
economic and psychological switching costs are overcome. This is also known as Andy
Groves 10X Rule. Andy Grove, Intels third employee and former CEO, had stated, for
widespread adoption, a new product has to offer a 10X improvement over the incumbent
Of course, this strategy is easier said than done.
Reference Point Pivot
Since reference points dictate how customers perceive gains and losses, it makes sense to
seek out customers with favorable reference points. Think about it this way. In one market,
your product may have fulfill the 10X Rule. In another, your same product may be
perceived as 10X worse!
During its earlier years, Walmart opened stores only in rural areas to compete against local
mom and pops. Compared with these incumbent retailers, Walmart was a clear 10X
improvement. If Walmart had started off launching stores in metropolitan areas instead,
where large department store chains were already established, Walmarts growth would
have been hindered.
Ideal markets are ones filled with first time buyers. For the first time buyer, her reference
point is neutral. She doesnt have any preconceived biases over existing benefits lost and
new costs incurred, because she doesnt currently use the incumbent solution. Thus, for
many products, it is easiest to launch in emerging markets. This is because emerging
markets (e.g. BRICS nations) are filled with first time buyers. Read more about entering
emerging markets here .
The Endowment Effect has an interesting implication. It implies the customer will spend
moremo money, mo time, and mo effortto keep something she has than to obtain
something for the first time.
With this insight into consumer psychology, many companies offer free samples to get
customers hooked on their products. Once the customer begins using the product, she will
appreciate the benefits it offers and is likely to spend money to retain these benefits. This is,
in essence, an example of Reference Point Pivot.
Similarly, a popular business model adopted by many Internet SaaS companies is the
freemium model. In the freemium model, the customer is first presented with a free
version of the product. Then, the customer is offered (or forced) to a premium version.
For a more in depth discussion on product adoption, consumer psychology, and product
strategies, take a look at this business document: The Psychology of Product Adoption .
Still no dice?
Of course, if your product is awesomeyou think so and your customers agreethen lack of
sales could be due to poor marketing. Ramp up your marketing, sales, and biz dev efforts.
Interested in business strategy? Check out Flevys collection of business frameworks , most created by former
consultants of top tier consulting firms.
EDIT: I have just published a new article, The Complete Guide to Product Adoption . This
article analyzes product adoption on the market level, product level, consumer level, and
tactical level; and is based on a number of established business strategy frameworks.
Please also share your thoughts, experiences, and advice in the comments. Thanks!
About David Tang
David Tang is an entrepreneur and management consultant. His current focus is Flevy , the marketplace
for premium business documents (e.g. business frameworks , presentation templates , financial models ).
Prior to Flevy, David worked as a management consultant for 8 years. His consulting experience spans
corporate strategy, marketing, operations, change management, and IT; both domestic and international
(EMEA + APAC). Industries served include Media & Entertainment, Telecommunications, Consumer
Products/Retail, High-Tech, Life Sciences, and Busines