How to Fail at Innovation #8: Believing Users Can Tell You What They Will Buy
Advising against relying solely on consumer focus group feedback in the innovation process can seem counterintuitive at first glance. After all, customer insights are crucial for designing products or services that meet market and user needs. However, there are compelling reasons why researchers and innovators might need to exercise caution with focus group feedback.
A. Limited Perspective: Focus groups only represent a pre-determined demographic and consumer profile. There is no opportunity for other potential consumers to self-select into the study. Nor is there a methodology, or a motivation, for participants to opt-out if they don’t see themselves as potential customers.
B. Groupthink: Individuals often alter their opinions to fit into the group dynamic or to align with what they believe the moderator wants to hear. In a group setting, individuals may sway towards the majority opinion, overshadowing unique viewpoints. Participants may feel uncomfortable expressing dissenting, critical or negative viewpoints.
C. Limitations of Imagination: Consumers can find it challenging to imagine or appreciate the value of entirely new concepts or disruptive technologies. They tend to provide feedback based on their current understanding and experiences, and are imperfect at predicting their behavior after an innovation becomes integrated into their lives.
D. No Skin In the Game: When consumer research doesn’t involve participants spending their own money, the results are unlikely to reflect real-world purchase behavior. Designing studies to include economic friction is critical to overcome the weaknesses of focus-group studies:
1. Lack of Real Investment Leads to Hypothetical Preferences: When consumers are asked about their preferences or choices without the need to make a real financial commitment, their responses often reflect ideal or aspirational behaviors rather than practical, real-world decisions. This discrepancy can lead to a misunderstanding of genuine consumer priorities and budgetary constraints.
2. Overestimation of Willingness to Pay: Without the pressure of actual spending, participants might indicate a higher willingness to pay for products or services, leading innovators to overestimate the market value or price points that real customers would be willing to accept.
3. Underestimation of Purchase Decision Factors: Real purchase decisions are influenced by a wide range of factors, including budget constraints, competitive alternatives, and immediate financial priorities. Research that doesn’t require real spending may oversimplify the decision-making process, overlooking these critical factors.
4. Risk Aversion and Loss Aversion Are Not Accounted For: The psychological impact of spending money, including risk aversion (preference for avoiding losses over acquiring gains) and loss aversion (weighing losses more heavily than equivalent gains), plays a significant role in consumer behavior. Studies not involving real monetary transactions fail to capture these nuances.
Consumer studies that incorporate economic friction, or the perception of economic friction, offer better feedback than focus groups due to the realism and commitment involved in actual purchase situations. When consumers spend, or think they are spending, their own money, their choices reflect a more accurate picture of market behavior, taking into account personal budget constraints, perceived value, and the competitive context. This realism leads to insights that are far closer to real-world outcomes.
