Changing consumer behavior is the key to unlocking billion-dollar businesses

Changing consumer behavior is the key to unlocking billion-dollar businesses

Excerpts from the article by Jonathan Golden on TechCrunch

In the summer of 2012, I had just learned of a new service where a driver would pick you up in their own car, not a taxi or licensed town car. You’d be able to recognize the car by the pink mustache strapped to the front. I quickly downloaded the new app called Lyft and, intrigued, started to share it with others around the Airbnb offices.

Almost everyone gave me the same response: “I would never use it.” I asked why. “Well, I wouldn’t feel comfortable getting into someone else’s car.” I said, “Wait a minute, you are comfortable allowing others into your home and staying in others’ homes while you travel, but you don’t want to get into someone else’s car?” The reply was always a version of “Yeah, I guess that’s it — a car is different than a home.”

I was dumbfounded. Here was a collection of adventurous individuals — who spent their days at Airbnb expanding the boundaries of what it means to trust another person — but they were stuck on the subtle behavior change of riding shotgun with a stranger. I then had another quick reaction: this product was going to be huge.

Behavior shifts in consumer internet

Truly transformative consumer products require a behavior shift. Think back to the early days of the internet. Plenty of people said they would never put their credit card credentials online. But they did, and that behavior shift allowed e-commerce to flourish, creating the likes of Amazon.

Fast-forward to the era when Myspace, Facebook and other social networks were starting out. Again, individuals would commonly say they would never put their real names or photos of themselves online. It required only one to two years before the shift took hold and the majority of the population created social media profiles. The next wave included sharing-economy companies like Airbnb, Lyft and Uber, prompting individuals to proclaim they would never stay in someone else’s home or get into their car. In short order, times changed and those behaviors are now so commonplace, these companies are transforming how people travel and move about the world.

The behavior shifts were a change in socially accepted norms and previously learned behavior. They alone don’t create stratospheric outcomes, but they do signal that there could be something special at play.

Build an enhanced experience

Still, just because a product creates a behavior shift does not mean that it will be successful. Often, though a handful of loyal users may love them, there is ultimately no true advantage to these products or services.

One prime example comes to mind in the product Blippy. In late 2009, the team built a product to live stream a user’s credit card transactions. It would show the purchase details to the public, pretty much anyone on the internet, unlocking a new data stream. It was super interesting and definitely behavior shifting. This was another case where many people were thinking, “Wow, I would never do that,” even as others were happily publishing their credit card data. Ultimately there was little consumer value created, which led Blippy to fold. The founders have since gone on to continually build interesting startups.

In successful behavior-shifting products, the shift leads to a better product, unlocking new types of online interactions and sometimes offline activities in the real world. For instance, at Airbnb the behavior shift of staying in someone else’s home created a completely new experience that was 1) cheaper, 2) more authentic and 3) unique. Hotels could not compete, because their cost structure was different, their rooms were homogenized and the hotel experience was commonplace. The behavior shift enabled a new product experience. You can easily flip this statement, too: a better experience enabled the behavior shift. Overall, the benefits of the new product were far greater than the discomfort of adopting new behavior.

Revolutionary products succeed when they deliver demonstrable value to their users. The fact that a product creates a behavior shift is clearly not enough. It must create enormous value to overcome the initial skepticism. When users get over this hurdle, though, they will be extremely bought in, commonly becoming evangelists for the product.

Unlock greenfield opportunity

One key benefit of a behavior-shifting product is that it commonly creates a new market where there is no viable competition. Even in cases where several innovative players crop up at the same time, they’re vying for market share in a far more favorable environment, not trying to unseat entrenched corporations. The opportunity then becomes enormous, as the innovators can capture the vast majority of the market.

Other times, the market itself isn’t new, but the way the product or service operates in it is. Many behavior-shifting products were created in already enormous markets, but they shifted the definition of those markets. For instance, e-commerce is an extension of the regular goods market, which is in the trillions. Social media advertising is an extension of online advertising, which is in the hundreds of billions. Companies that innovated within those markets created new greenfield, but also continued to grow the existing market pie and take market share away from the incumbents. The innovators retrain the consumer to expect more, forcing the incumbents to respond to a new paradigm.

Read the full article on TechCrunch