Jon M. Huntsman School of Business

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Tuesday, June 12, 2012

The Law of Laziness

Consumers are lazy. Once they have made a conscience decision to purchase a particular product or service, it’s almost impossible to get them to change to a competitor’s offering, so long as prices and the competitive landscape remain relatively stable. If you regularly buy Dove soap, it’s almost impossible to convince you to switch to Dial soap. If you prefer Heinz Ketchup, it’s highly unlikely you will switch to Hunt’s

For brands, products and services in market leadership positions, that’s great news. Consumer lethargy makes it almost impossible to screw up. For everyone else, it sets a clear challenge – in order to successfully introduce a new product or service and capture significant sales, you must disrupt marketplace equilibrium by offering the customer something significantly different, better and special versus the current product or service offerings. 

This is a high hurdle. Think about maps for example. For a hundred years, when we went off on our summer vacation, we bought a few paper maps (remember how fun they were to try to fold up?), a road atlas, and off we trekked to adventure. Do we use paper maps anymore? No. We now have GPS maps on our smartphones or Garmin maps installed in our automobiles that automatically navigate us to our destinations. The GPS disrupted marketplace equilibrium in the paper maps and road atlas categories, offering customers a significantly better product than what already existed. Maps and road atlas’s were effectively put out-of-business.
Eric Schulz

VCR’s are another example. In 2000, 99 percent of households used a VCR as their primary appliance for watching movies and recorded programs. In 2006, DVD players for the first time were in more homes (84 percent) than VCR’s (79 percent). High Definition Televisions were in only 10 percent of homes. 

Fast forward to 2012 – just six short years later, and 69 percent of homes have at least one HDTV, 90 percent own a DVD player, 38 percent have a Blu-ray DVD player; 41 percent have a Digital Video Recorder (DVR); and VCR usage has plummeted to under 10percent. Did the DVD player kill VCR’s? No. In fact, it took DVD players 14 years to push by VCR players in home penetration. It wasn’t until HDTV’s started getting into homes that VCR’s died. Why? Because played on a High-Definition TV, a digital picture from a DVD was significantly better than that from an analog VCR tape. When the two formats were played on old analog TV’s, there wasn’t much difference in picture quality. But high-definition TV’s made the digital pictures come to life, making DVD players suddenly a significantly better product for movie playback than a VCR.

So if you are a budding entrepreneur, is what you are cooking up for your new business so good that it will be disruptive to your product or service category? If it isn’t, you better have deep pockets and be prepared to spend a ton of money on advertising to try to win over some customers. Oh yeah, and remember, if what you are selling isn’t different, getting customers to switch is almost impossible. They won’t switch until you give them a real reason to.

--Eric Schulz

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