President Obama is clearly perplexed on why the dogs aren’t eating the ObamaCare food.
He’s trying to give people a better “product” … and they just don’t get it.
What the heck is going on?
Well, shoving the roll-out snafus aside, much of the answer lies in good old behavioral economics.
Last week we talked “loss aversion” and the “endowment effect”.
Today, let’s look at the “developers curse” …
In my Advanced Marketing Strategy class, students read “Eager Sellers and Stony Buyers” by one of my favorite academics – Harvard’s John Gourville.
The article drills down on why most new products fail.
Gourville argues that innovators often fall victim to the “developer’s curse” – far over-weighting the market benefits of their new products.
- They may see a need that customers may not recognize.They see gaps and weaknesses in currently available options.
- They have intimate knowledge of their innovations that customers don’t have, e.g. they “know” the features, functions and benefits.
- They understand how the product works … down to minute operating details.
- They minimize the importance of any bugs or glitches …. and just work around them.
- They have full confidence that their product works … or can work, if the customer just tries it.
Gourville concludes that developers often overweight their innovations relevant benefits by a factor of between three or more.
In combination, the endowment effect – which requires that a new product be at least 3 times better than an existing product … times the developer’s curse – which says that innovators overrate their innovations by a factor of 3 …. creates the “9X Problem” – the huge gap between what a developer thinks he has to offer and what a customer requires in order to be motivated to change from a product that they’re satisfied with.
Now, put those well established behavioral biases in the ObamaCare context.
The President & Friends probably do overweight the benefits of ObamaCare (the Developer’s Curse) … and vastly underweight consumers reluctance to change (the Endowment Effect).
Didn’t Obama see that coming?
It’s garden variety behavioral economics.