When customers do not understand the benefits of radical innovations
Has your company successfully developed a revolutionary product that offers customers unique added value? Congratulations! Now they “only” have to recognise this added value.
Companies have to be innovative to maintain their competitive position in the market and to be successful in the long run. The innovation process is time-consuming, expensive and risky. But by no means every successful product development is successfully launched on the market. From a scientific point of view, so-called “radical” innovations are of particular interest, i.e. those that represent such a radical departure from what has gone before that they can even establish a new product category when they appear (e.g. the first automobile, the first telephone, the first iPhone). These radical innovations are contrasted by “incremental” innovations that represent an improvement in an established product category (e.g. iPhone 13, a better camera, display, etc. compared to iPhone 12). The development of radical innovations is the high-risk-high-reward strategy: successfully introduced radical innovations can create entire markets or upend existing ones, but the risk of failure is even more common than with incremental innovations. In fact, the list of radical innovations that have been launched and then failed miserably in the mass market is long – so long that even museums are dedicated to these flops.
“Developers are not real people”
So why are so many radical innovations not accepted by customers? One possibility – which is often not implausible – is that companies achieve a revolutionary development feat but do not create any substantial added value for customers. In other words, the new product pleases the engineers but not the customers, and as Veryzer (1998, p. 149) so aptly puts it: “Engineers are NOT real people”. In this paper, however, I would like to address another possibility: The added value is objectively created, but unfortunately customers have difficulties in recognising it. In this case, companies need to better understand the customer purchase decision process for radical innovations and why the decision to buy or not to buy is a complex decision problem. With this knowledge, the market launch can be flanked with marketing measures that offer customers appropriate support so that they make an optimal purchase decision. In our study, my co-authors (Steve Hoeffler/Vanderbilt University, Michal Herzenstein/University of Delaware and Min Zhao/Boston College) and I synthesised a total of 53 academic articles on radical innovation from the customer’s perspective. In the following, I summarise the most important findings.
New products must fit into a known category
The first important aspect is the definitional deviation of radical innovation from established product categories. If customers can assign an innovative product (e.g. iPhone 13) to a certain category (e.g. smartphone), which is possible with incremental innovations, a wealth of stored category knowledge is automatically activated and transferred to the innovation (e.g. enables communication, use of apps, taking photos and videos, suitability as a status symbol, expected price range). Radical innovations require customers to learn what “this” is, what “this” can do, and whether “this” represents a personal benefit (and whether the price is worth that benefit). To illustrate, consider the 2018 innovation shown in Figure 1. Assuming you are not already familiar with this product, you may ask yourself: What is it? A toaster? A speaker? A droid from the Star Wars universe? (Resolution follows!)
If customers do not succeed in making a simple classification, learning processes are necessary by means of which customers must first laboriously acquire the new category knowledge. Suitable marketing instruments (e.g. communication measures using analogies) can be used to support these learning processes. Other key elements are product design and positioning, and from these points of view it may not make much sense at all to make an innovation appear to be groundbreaking, unprecedented. Rather, marketing tools should be aimed at reducing too much incongruence with established categories. In this way, curiosity can be achieved, but not frustration in the face of the new.
Does the radical innovation bring personal benefit?
Once customers have understood what the radical innovation is and what functions it has, they must next become clear about whether these functions create a benefit for them personally that goes beyond established products. At this point, the resolution from Figure 1: It is a portable projector with touch technology that projects an interactive touch screen onto smooth surfaces.
Now the following task: Think of 10 occasions from the past when you – loosely based on Shakespeare – would have offered a kingdom for a portable projector with touch technology that projects an interactive touch screen onto smooth surfaces.
If you’re having a hard time with this, you’re not alone, as previous research confirms. Worse, customers infer little personal benefit from this self-perceived difficulty. Companies can and must therefore provide support through appropriate communication measures in which diverse situations the radical innovation can be used.
Does thenew product change everyday life too much?
When it comes to the question of personal benefit, another aspect of radical innovations is of central importance, namely that of a necessary change in behaviour in order to be able to realise any personal benefit at all. Let’s look at the example of the Thermoacoustic Refrigerator, in which engineers make use of the fact that it is apparently possible to create a cooling effect with certain sound waves. However, despite potentially groundbreaking technology, the Thermoacoustic Refrigerator does not force a change in behaviour (as before: open fridge door, put drink in, wait, open fridge door, enjoy cold drink). Under these circumstances, customers find it relatively easy to weigh up between innovation and an established product. But when the innovation forces customers to change their behaviour, things get interesting. Customers are neither excited by the prospect of changing their behaviour nor very good at imagining performing a new behaviour. For example, imagine owning the “invisible um brella “ – an umbrella that produces a rain deflecting air shield above your head – to what extent would you need to change your behaviour to use it effectively? (charge the battery, etc.) If such a behavioural change is necessary, we can often assume psychological processes, at the end of which there is a preference for the status quo solution, regardless of whether the underlying technology is groundbreaking or not. Companies therefore need to understand how exactly and to what extent a change in behaviour is necessary, and where exactly the customers’ fears lie in this context. These can then be addressed, for example, with communicative measures.
Which uncertainties inhibit our purchasing decisions?
The entire purchase decision process for a radical innovation, especially learning and assessing the personal benefits, is characterised by considerable uncertainties on the part of the customer. It is worth taking a closer look at the term “uncertainty” in contrast to the somewhat better known term of risk (both are often used synonymously). While the term risk describes a decision-making situation in which the consequences and their probability of occurrence are or can be known (e.g. in roulette, where the ball falls on “red” with a certain probability), uncertainty characterises a decision-making situation in which the decision-maker is unclear about the consequences and/or their probability of occurrence. For example, customers might think that the social environment might react to the purchase of a radical innovation, but be unsure whether it will happen at all and, if so, how. Although recent research suggests that some people may even value uncertainty (as evidenced, for example, by the purchase of surprise boxes), there is a strong case to be made that uncertainty is something that needs to be reduced from a business perspective. Companies can analyse different types of uncertainty, e.g. functional uncertainty (will the Invisible Umbrella really work?), social uncertainty (how will my social environment react when I walk through the rain with it?), learning uncertainty (will I be able to learn the necessary steps to use the innovation effectively), affective uncertainty (how will it feel to use the new product). A good understanding of these customer uncertainties is important for companies to address them with appropriate marketing tools.
Special understanding in radical innovations
Of course, there are other situation-specific and personality-specific factors to consider, as can be read in our scientific paper. In summary, however, it is certainly worthwhile to have a good understanding of the purchase decision process for radical innovations, because only then can clever marketing measures intervene in a supportive manner at the appropriate points. As a positive final example, SunGard (a provider of cloud solutions): When cloud computing was still a new concept, SunGard was confronted with the problem that customers did not recognise the personal benefits. A communication campaign very successfully used the idea of learning by analogy by equating the use of the cloud with the survival of a zombie attack (zombies and hackers are “both are right around the corner”, “both are after your brain”) and letting customers see the benefits. Measures like these can then increase the likelihood of radical innovations ending up with customers rather than in museums.
About the study
The study was written by Sven Feurer from BFH Wirtschaft, Steve Hoeffler from Vanderbilt University, Min Zhao from Boston College and Michal Herzenstein from the University of Delaware. It was published in the International Journal of Innovation Management: Feurer et al. 2021_IJIM.
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