Group 7 Abin Jose [1121220] Sasanka Varanasi [1121219] Abhilash Mohanty [1121221] Ipsita Sen [1121247] Payal Kripalani

[1121248]

What is it all about ?

New products that fail and consumers behavior towards new products. Consumers look at new products from a cost-benefit point of view where gains and losses need to be measured. Psychological net benefit vs. objective net benefit.

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.

Key Learning's [contd.]

Capturing value through innovations : The 2 x 2 Matrix: We finally have a simple but powerful 2 x 2 matrix which shows the behavioural change required for the product change involved. According to this there can be four different situations: Tinkering: low product change which has low behavioural change. Eg: doubly stuffing a cream biscuit Strike out: Low product change involved but a significant behavioural change required. Eg: replacing a QWERTY keyboard with an abcd or dvorak one. Long haul: high product change with a high customer behavioural change required. Eg: fuel cell cars

Key Learning's [contd.]

Home run: Best of both worlds-minimum behavioural changes required with a high product change. Stands the greatest chance of long and short run success. Eg: Toyota Hybrid

The Nature of Innovations: Giving and Getting

Strategies to manage innovation

Bracing for the long haul: the simplest strategy for dealing with consumer resistance by accepting it and bracing for the slow adoption by consumers. The 10x Improvement: making sure that the tradeoffs greatly favours innovation. Making it behaviourally compatible: offering a product that is highly compatible with the existing behaviour. Seeking out the endowed: seeking out customers who are not currently endowed with the existing alternative. Finding the right believers: Seeking out customers that either greatly value the benefits to be gained or do not value the benefits to be given up. Finally after everything fails, a firm can eliminate the incumbent technology