• by dave.b , Max Kalehoff , March 14, 2008

If you follow my column, blog or Twitter updates, you know that I recently canceled my bundled Internet-television-phone service with Cablevision. I replaced it with a similar new bundled service from Verizon called FIOS. It promises fiber-optic speed, higher quality, greater reliability, superior customer service and a lower price. While Verizon is delivering on its promise so far, my switch to the new service also came with very real, painful costs associated with necessary behavioral change.

Admittedly, FIOS' benefits coupled with my dissatisfaction with my prior provider made switching an easy decision. However, the new service came with a steep learning curve and behavioral modifications that are proving to be inconvenient, disruptive, time-intensive and downright frustrating. For one, hours after hookup, my attempt to rename the wireless network and reset the security code resulted in locking myself out of it altogether. My unfamiliarity with the new modem and wireless router required a lengthy call with customer service. While the technical service agent was helpful and knowledgeable, and he got me back-up, I still dreaded the inevitable time investment I had to make in learning the new system.

Secondly, a digital cable-box is required with FIOS, so I can no longer hook up my TiVo directly to the cable feed. In fact, I don't even know if I can hook my TiVo up to the new cable box at all. The service technician who installed FIOS didn't know anything about my TiVo's compatibility, but swore I would like the FIOS combination cable-DVR box far more. One week later, I haven't figured out how to work the DVR functionality, nor have I figured out what half the buttons on the remote do. But my 16-month-old did figure out how to access the adult channels.

Was FIOS really worth it? I'm convinced it's is the best product for me in the long run, but the required behavioral changes and resulting ambivalence underscores one of the fundamental challenges of any new product innovation. In fact, this phenomenon - overvaluing loss of existing benefit while devaluing new benefit - was covered in a fascinating 2006 Harvard Business Review article titled "Eager Sellers and Stony Buyers," by John T. Gourville (preview here). It is the root inspiration of my own startup, whereby we're trying to reduce the friction and behavioral change required to advertise across many different ad networks.

Pointing out that 40% to 90% of all new products fail, Gourville says that consumers are creatures of habit and they irrationally overvalue the benefits offered by products they're already using. They despise having to change their behavior to use an innovation. Consequently, they often reject products that are objectively superior to the incumbents they're already using. Conversely, companies mistakenly mark their own innovation as a frame of reference, and therefore irrationally overvalue the benefits it provides. This deadly combination results in a "mismatch between what innovators think consumers desire - and what consumers really want."

In response, Gourville suggests anticipating and managing consumer resistance to changes as innovation requires during adoption. Specifically, he recommends:

1. Gauge the Degree of Behavioral Change Required. For example, is your innovation an "Easy Sell," which provides limited benefit and limited behavioral change? Or is it a "Sure Failure," offering few benefits and significant behavioral change? Is it a "Long Haul," providing great benefit but also great behavioral change? Or is it a "Smash Hit," offering tremendous benefit and little behavioral change?
2. Minimize Consumer Resistance. Not surprisingly, Gourville recommends making products that require little behavioral modification. Uniqueness and features - often marketers' top selling points - can be detrimental. Second, market to new consumers who aren't loyal to competing incumbents. Thirdly, market to consumers who "prize" the benefits they'd gain, or don't value those they'd have to give up.
3. Manage Consumer Resistance. Gourville recommends bracing for slow adoption. Especially with "Long Haul" innovations, be careful to deplete marketing resources too quickly. Furthermore, consumers overvalue existing benefits of incumbent products by a factor of three, on average, while companies overweight the benefits to consumers by a factor of three - resulting in a nine-fold gap. To overcome the "9X Effect," companies must introduce products with 10 times the benefit.

According to Gourville's framework, Verizon FIOS would fall into the category of Long Haul. While fiber-optic broadband is a great innovation, the service can stand a massive upgrade in usability to reduce necessary behavioral change. One of the things it does have going for itself is a customer base that perhaps has less loyalty to the incumbent, as well as little benefit to lose amidst adoption of the innovation.

Importantly, this innovators dilemma applies to every marketer - in a big way. Embracing it is critical in a hypercompetitive marketplace, and especially in our industry of online advertising.

How does incumbency impact innovation in your business ?