Crouching Confusion, Hidden Hassles

Market Barriers in the Mental Model

Consumers make choices using a mental model that typically includes both explicit and implicit perceptions of benefits, costs, and uncertainties. Researchers often use choice-based methods to partially deconstruct these mental models; to make mathematically explicit the implicit assignment of benefit and cost that each of us makes in our mind regarding specific aspects of a purchase decision. The model is inferred because most of us can't articulate that mental model with any precision.

This approach to inferring preference and choice got its mainstream start in the consumer packaged goods (CPG) industry. In CPG, representing the salient benefit and cost factors that make up a choice, such as for bath soap, is generally straightforward. Choice-based models have expanded over the years to address a much wider and more complex range of consumer choice situations, including automotive, financial services, technology, and communications. These choice models can provide critical inputs in demand-based volumetric forecasts as well.

Our reliance on choice-based approaches, as accepted as they are, can sometimes lull us into forgetting that, beyond the explicit benefits and costs typically represented in choice modeling research, other conditioning factors can influence consumer choice. These conditioning factors often reflect one of two types of market barriers:

1. Hidden costs -- Typically these are more amorphous than dollars-and-cents purchase costs, but nevertheless can and do influence real life decisions. For our purposes, they also can be thought of in terms of expected hassle costs. Classic examples of hidden costs include the effort to learn, maintain, and/or upgrade a complex product or service (e.g., using all facets of a new smart phone, configuring a home PC network, or simply owning and maintaining a home).
2. Performance uncertainties -- While hidden costs tend to pertain to the fear of the expected but unquantified, performance uncertainties are more fear of the unexpected and unknown. This can include both what you know you don't know about a given situation, as well as what you don't know that you don't know. Performance uncertainties often emerge when consumers can't fully and confidently envision what a value proposition will be like. For instance, in considering their ISP for telephone service, in contemplating bundled offerings from a provider that is trusted in one sphere but not yet in others, or in trusting that a new product will perform as promised.

Typical Characteristics of Market Barriers

There are two key reasons that hidden costs and performance uncertainties, whether objectively valid or not, are of real concern to marketers and researchers. First, they may exist in the minds of consumers but not be captured or measured in our models, adding to the inevitable error term that exists whenever we try to model (understand, predict) individual human behavior. Second, where these factors exist (visible or hidden), they can serve as barriers to serious consideration of a new product or service; they can slow or truncate the market's evolution before it gets off the ground.

One high-level way to assess hidden cost or uncertainty is to gauge how consumers perceive the "worth-it" factor, regarding the acquisition, learning, and ongoing use of a given technology. Simply asking for agree or disagree ratings for a statement like "learning and using this product would be more trouble than it's worth," or something similar can assess this. It also can be helpful to gauge this factor both before and after detailed exposure to the explicit costs and benefits of a specific product or service: we can then model changes in worth-it concerns as a function of responses to specific costs and benefits, yielding insights into how we can practically address the concerns. We also have probed the hidden cost barrier through our analysis of choice data, by analyzing input from respondents who tended to select none of the options presented in choice exercises.

In our experience, a key element of market barriers is that they operate--broadly speaking--in a hierarchical or ordered manner. That is, as consumer information gathering and consideration of a new product or service progresses, some market barriers may recede, while new ones then come to the fore. A typical pattern over time--which we'll return to shortly with a concrete example--might look like this:

The key and very practical point is that the market barrier profile for an individual and for the market as a whole can be quite fluid and evolve over time. To some extent, we can anticipate what barriers may emerge as early ones are surmounted. From a market research and product planning point of view, a key step is to distinguish between those market barriers that are real versus those that are (mis)perceived and, of course, those that are addressable versus those that are not. Finally, while this theme may echo the classic product diffusion curve, familiar to researchers and marketers (with its distinct adopter cohorts), this perspective focuses more on the developmental process within a given adopter cohort.

Market Barriers in Consumer Technology

As marketers, researchers, or just consumers, we're all probably familiar with tech sector examples of market development issues due in part to hidden costs and performance uncertainties. The Ipsos-Insight Technology & Communications practice has recently looked at several examples in detail, including:

• VoIP (voice over the Internet protocol)
• Convergence of web access and other functionality on wireless devices
• Digital Den -- shorthand for convergence of various in-home consumer electronics devices and capabilities

A typical example of how these market barriers operate is evident from recent Digital Den study data, involving perceptions of various aspects of the Digital Den concept and overall interest in pursuing it further. A penalty/reward analysis quantifies the degree to which various perceptions about the emerging Digital Den may act as market barriers (figure 1). The blue bars on the left are penalties; the longer the blue bar, the more concern about that statement is associated with low interest in the Digital Den. Conversely, the green bars on the right are rewards; the longer the green bar, the more lack of concern about that statement is associated with high interest.

The pattern of penalty bars fits the model outlined earlier. At this juncture, with the Digital Den (which is not a product per se, but a new mode of consuming home entertainment) still in its infancy, many consumers fall into the no-need category. This is similar to 20 years ago when most consumers reported no need for hundreds of cable channels, cell phones, ready-made meals, or drive-through espresso. When tracking the cell phone market just a few years ago, we also saw no need for rapidly mainstreaming features such as camera phones and gamer phones.

The second tier of market barriers revolves around active perceptions of hidden or hassle costs, such as dealing with the complications of connecting devices, the need to spring for broadband Internet access, and overall expectation of high costs (which were not specified in the research). Finally, note that a third tier of latent performance uncertainty factors emerges, all of which are anchored to more ambiguous, uncertain concerns and skepticism.

Of course, we cannot predict exactly what market barriers will emerge as the Digital Den model evolves. However, it's prudent for marketers active in stimulating perceived need (demand) for Digital Den products and services to anticipate (and measure) hidden cost barriers as awareness is stimulated. Likewise, it's prudent to expect the now latent performance uncertainty barrier to emerge as consumers examine the Digital Den model more closely.

Finally, viewing market dynamics from this market barriers perspective and anticipating how these barriers may evolve over time can shed light on:

• which players in a new tech space like the Digital Den may have the greatest barriers or leverage at different points in the market's evolution; and
• which players may be the more attractive partner candidates in a space as inherently complex and convergent as the Digital Den.

For instance, the perceptual map in figure 2 hints at the potential evolution of the Digital Den with this market barrier framework in mind. (Note that the attributes were not developed specifically with this framework in mind, so there is room for judgment and subjectivity in the discussion below.)

• "Your wireless provider" (left of the vertical axis) is most closely associated with fulfilling a real consumer need. While it may seem a bit of a stretch to expect wireless providers to be in the vanguard of Digital Den development, today's tech news highlights standards-setting and investment activities supporting the convergence of high-quality audio and video content on wireless devices. This suggests that wireless providers have an intriguing opportunity to spearhead the first demand/need stimulation phase of the Digital Den--more than might be suspected by some.
• In another area of the map (lower right), Intel and Apple are both associated with attributes linked to need/demand stimulation--development of innovative and unique high tech products and services. Both have invested considerable marketing dollars communicating their innovation and development of cutting-edge technology. An interesting question is the degree to which this positioning may ultimately complement or compete with wireless providers in need/demand stimulation.
• The upper left area of the map shows a cluster of several attributes that can be related to avoidance of hidden or hassle costs, relating to affordability, ease of use, and a company's understanding what "a household like mine" wants to buy and use. Here an eclectic mix of Yahoo!, "your wireless company," and "your cable company" are most closely associated with these attributes, again reflecting low hidden/hassle cost barriers. So, one interpretation is that after demand for the Digital Den model reaches critical mass, players like these can be key to reinforcing consumer confidence in clarifying and avoiding hidden costs and hassles.
• Finally, the upper right quadrant associates Sony and Samsung with providing high quality products, which seems a reasonable proxy for reliability, and avoidance of performance uncertainties. Similarly, in the upper left quadrant, POTS (plain old telephone service) providers are credited with capably addressing any issues or questions that may arise.

In Summary

Anticipating the nature and potential evolution of market barriers -- and tracking this progression over time -- can offer a valuable complement to choice-modeling research designed to optimize offerings and support volumetric forecasts. Marketers will benefit by watching how the various categories of barriers advance and recede over time, and adjusting marketing and communications to assuage perceived barriers. And, monitoring these trends among the different cohorts (e.g., early adopters), and targeting marketing programs to them will serve to optimize marketing investments. This is particularly critical in the technology sphere given the ongoing explosion of new features, feature combinations, provider combinations, and emergent needs and benefits.