Developing new products through consumer behaviour

Philip Graves, Frontier’s associate consumer psychologist and author of Consumer.ology, believes conventional market research is unreliable because it overlooks how customers actually behave in making spending decisions. We caught up with Phil to ask how his research techniques can help companies develop new products.

How do you apply your behavioural insights to innovation?

PG: My approach is to bring innovation as close to reality as I can, both physically and psychologically, in the most pragmatic way possible. I use psychoanalytical techniques and in-depth interviews to understand the unconscious drivers of people’s current behaviour when they’re buying a particular type of product. I then present customers with a slightly modified alternative version of the category to explore how they’ll behave when they encounter it.

In most traditional market research the context is the research interview, whereas I’m creating the context of the consumer experience. So it’s a fundamentally different principle. At the simplest level, one is saying people understand themselves so we can just ask them; the other is saying people don’t understand themselves, therefore we can’t rely on them post-rationalising and projecting accurately.

Why don’t more firms run live trials?

One reason consumer research is so popular is that it is easy to do. It doesn’t involve messing around with operations or systems or retail stores and so on. Live trials bring up those complications. That’s why most organisations really struggle to run them. Consumer research appears to offer a solution because a lot of things can be put in front of the consumer and tested to find out what they think. But there is no real evidence that consumers are particularly good at that. That’s not really a surprise because in a sense you’re asking them to predict the future - and that’s notoriously difficult.

If your psychological approach works, why hasn’t everyone adopted it?

Because people mistakenly believe the current approach works.  The fact that we have a capacity and tendency towards belief is hugely important in our evolutionary psychological development. But it also leaves us open to believing in things that don’t have a huge amount of evidence to support them - like astrology, homeopathy, religion… Market research is one such example. It appeals to people because they like the idea that there’s this easy, relatively inexpensive, organisationally simple way of getting answers to questions when they face uncertainty. They want to believe it’s true, so when it appears to have supported what they’ve done it reinforces their belief. When research results aren’t borne out over time, they dismiss that outcome as irrelevant - something known as confirmation bias. So if someone commissioning research believes it works, they’ll keep doing it that way. If they’re more intellectually curious they’re usually open to considering my approach.

Are there limitations to your approach to studying consumer behaviour?

There can be a desire in some organisations for quantified metrics, which my approach doesn’t provide. But the best I can say about quantitative data is that it’s a placebo. If it gives the organisation the confidence to take a project forward or to win board approval, it can potentially be of benefit. The problem is that, from the evidence I’ve looked at, you’re as likely to get a good idea rejected as you are to get a bad idea endorsed. I’d rather move forward knowing that I don’t know with complete certainty, but having done the best that I can, than to get some false sense of reassurance by using a form of research that has no justification.

Do you have to adapt your approach when it comes to innovation?

PG: Quite often clients will conceptualise innovation in a way that is completely abstract from a consumer’s perspective. So, they might write a concept statement about a new drink, but there’s no way I can put it to a prospective customer and get a realistic reaction. Because the way their brain will process it has nothing to do with the way they will behave as a consumer. They will walk up to a shelf and make a decision in a fraction of a second, perhaps a bit longer, and then move on. And that decision may or may not be influenced by what people have told them, by advertising, by some sort of social proof and so on. So the challenge for me is to turn these concepts into products so I can put them in a realistic context.

Do services pose different challenges from consumer goods?

The same principles apply to, say, financial services or utilities. You can ask people why they stick with the same bank account and they’ll justify their behaviour. You can ask them what would make them do something different and they’ll invent something plausible. Unfortunately, neither is likely to be reliable. Instead, we use our techniques to explore how people are currently behaving and what unconscious traits are driving this. You have the best chance of innovating successfully if you really understand the present. We find it’s a springboard for clients to come up with lots of creative ideas.

You still have the challenge of how to test those ideas. And you have to be realistic. If you’re talking about a general insurance product that is normally bought through an aggregator, there is not huge value in doing a massive innovation exercise if your amazing new product doesn’t appear above the fold on the price comparison websites, because people will probably never see it.

Can your approach help come up with new products?

Yes. Understanding how consumers think and how their purchase decisions are happening in their minds can be very useful in identifying themes when you’re exploring new ideas or finessing them. An appreciation of how consumers’ minds work in a category is definitely something that should be considered in the innovation process.