Role of Consumer Psychology in Business Innovation

Alison Kidd, The Prospectory

(November 2020) This article is now nearly 20 years old but remains one of the most heavily accessed on the Prospectory site. Over that time, I have become painfully aware how material consumption and the energy involved in making consumer products is a leading factor in climate change and depletion of the planet’s limited resources.  Sadly, the major technological advances we are making are not enough to outweigh these effects and won’t ever be. It is now clear that consumption levels have to change

The encouraging aspect of this article is that our fundamental psychological drives which have shaped and driven product consumption are actually independent of it. Each can be met in other ways and somehow we need to find and develop satisficers for our biological, hedonic and eudonomic needs which facilitate healthy, happy and fulfilled lives for all people whilst protecting the only planet we have.

I haven’t edited my original article below which was based on research I did in the late 1990’s but please read it with a view to how we can satisfy these fundamental human drives in new, creative, zero carbon ways. That is the huge challenge of our age and psychology has a vital role to play.


What is Psychology?

Psychology is the scientific study of human behaviour, for example:

  • how people think, learn, remember, plan, form attitudes, make decisions, create ideas, solve problems, interpret events and use language.
  • how people behave – with different people (on their own, with their family or a group of strangers), in different contexts, (at home, at work, in the pub, at the supermarket, in hospital or at a rugby match).
  • how people feel –  happy, sad, angry, worried, frightened, guilty, proud, humiliated, stressed, relaxed bored or motivated.

Psychology seeks to explain how and why people think, feel and act in the ways they do, for example:

  • which parts of the brain are responsible for which behaviours,
  • how the mechanisms of language, memory and thought processes work
  • how blood chemistry and emotions are related
  • what evolutionary functions underlie different behaviours like language development, memory, the formation of social groups or the means of selecting sexual partners.
  • the nature of consciousness.
  • how and why we develop and maintain an identity
  • how and why individuals, genders and age groups differ in the ways they think, feel and act.

How can psychology help consumer businesses innovate?

In our experience, psychology can be used in five ways either to help consumer businesses improve their current products and/or develop new ones:-

1. By understanding the fundamental human drives which underpin consumer behaviour.

2. By understanding the different ways in which consumers value products and services.

3. By understanding the ordinary everyday lives and activities of consumers.

4. By understanding how different types of consumers (e.g. men versus women) think, feel and act.

5. By designing experiments to test product concepts and enable consumers themselves to innovate.

I will explore each of these in turn.

Understanding fundamental human drives

People buy products to satisfy the needs and drives they have. A human drive arises from a discrepancy between an actual and desired state. Psychology research shows that there are 7 fundamental human drives or needs which products or services can be designed to meet:-

1. Biological – the drive to eat, drink, sleep, keep warm and reduce pain.

Product examples: food, drink, clothes, electricity, beds, medicinal drugs.

2. Sexual – the drive to attract sexual partners and gratify sexual desires.

Product examples: perfume, make up, fashion clothes, jewelry, mobile `phones, hairdressing, dating agencies, cosmetic surgery, some types of car.

3. Security – the drive to keep ourselves and loved ones safe and provided for and reduce the risk of accidents or other environmental or societal threats.

Product examples: burglar alarms, children’s car seats, locks, helmets, banking, insurance policies.

4. Control – the drive to be in control of our lives, other people, events, objects, time and the environment.

Product examples: diaries, watches, mobile phones, answer `phones, personal organisers, computers, private cars (rather than using public transport).

5. Social – the drive to form relationships, experience intimacy and love, feel we belong.

Product examples: `phones, gifts, greetings cards, photographs, newspapers, clubs.

6. Individuality – the drive to establish and express a unique identity and to develop our individual and creative potential.

Product examples: clothes, music, art and furnishings, mobile `phone covers, certain car types, hobby tools and kits, evening classes.

7. Stimulation – the drive for sensory, cognitive or physical stimulation.

Product examples: chocolate, wines, restaurant meals, Jacuzzis, films, music, books, TV, toys, games, snowboards, holidays.

In practice, human behaviour is usually motivated by a complex mix of these drives. For example, when someone is worrying about what to cook for tonight’s dinner party, then they are driven by the need to know that everyone will be adequately fed (biological), that people will enjoy the combination of tastes and textures (stimulation), that they have the ingredients and know the recipe (control), that the meal is different from the one served at someone else’s dinner party (individuality) and that it will create an enjoyable dinner party (social).

Similarly, a single product can simultaneously address more than one of the 7 drives. For example, mobile `phones are used to chat to friends (social), to keep tabs on the children (security), to make business arrangements (control), to impress the girls (sexual), to express your identity via the covers and ring tones (individuality) and to play games on (stimulation). If only they were edible, they’d satisfy every single human drive! It’s little wonder they’ve been so successful. Only the car comes close to achieving as many.

Understanding these fundamental human drives and how products satisfy them can help a company:-

  • Understand which combination of drives their product actually satisfies (beyond the obvious ones) and what different opportunities this opens up.
  • Improve how their current product satisfies a drive.
  • Market the current product more effectively.
  • Generate ideas for new products or features which satisfy the same or a different drive, e.g. the introduction of customised covers for mobile phones (individuality) or Mars’ introduction of the `Celebration’ box of chocolates which is designed to share with your friends more easily (social).

Understanding how consumers value products and services

Psychology research shows that there are 3 dimensions along which consumers value any product or service:-

1. Utility – i.e. what uses they find for the product, e.g. staying in touch with their friends, cleaning the kitchen floor, travelling to the office, keeping the children out of their hair, etc.

2. Experience – i.e. what it feels like to use this particular product, e.g. it makes them feel stimulated, frustrated, inspired, bored, fulfilled, amused, relaxed, etc.

3. Symbolism – i.e. what this product says about them, e.g. that they are cool, sexy, popular, sophisticated, technical, important, unusual, talented, etc.

One might assume that `utility’ is the most important dimension of a product. In fact research shows that `experience’ is the dominant dimension of value when people are quizzed about the everyday objects they choose or value. This is often because the utility of a product has become standardised; for example, all cars will transport you from A to B but cars vary enormously in terms of the driving experience they offer. Compare for example, a Porsche and a People Carrier. All beers slake your thirst but they vary enormously in taste, texture and `drinking experience’. Dedicated drinkers actually hate the taste of “the wrong beer”.

Makes of cars, beers, clothes etc also vary enormously (and deliberately) in terms of their symbolism, i.e. what they are perceived as saying about their owners or consumers. Sometimes this meaning is deliberately manipulated by the manufacturers through the medium of advertisements and role models (e.g. Marks and Spencer’s recent use of David Beckham). Sometimes this meaning is created by the consumers themselves as they evolve a particular type of car or drink or a brand of clothing into a `cult item’ strongly associated with a particular lifestyle or social group (e.g. 2CV cars, Barbour raincoats, Chardonnay wine). Smart manufacturers pick up on this social trend and seek to reinforce it.

Understanding these different dimensions of value for a product can help a company:-

1. Compete more effectively on the experience which using their product offers.

2. Explore new experiential dimensions which a commodity product could offer and charge a premium for. This is what Starbucks did with coffee, McDonalds did with hamburgers, Apple did with personal computers and Barnes and Noble did with bookstores (introducing a coffee shop as part of the store).

3. Transform the symbolism associated with their product so it says something different about its consumer.

4. Discover surprising new uses for their product which they hadn’t thought of.

Understanding consumers’ ordinary everyday lives and activities

Psychologists know how to observe, record and explain the detailed patterns of human behaviour. With reference to a business or product, it is useful to study the following behaviours:-

1. How the product is selected and bought in a retail or other context.

This can give insights into what constraints and considerations are operating when people choose your product (or not), over a competitor’s, what barriers they encounter and how you might want to position or market your product differently to address these.

2. People actually using or consuming the product.

This can give insights into: how your product might be better designed, problems it is creating or failing to solve and ways it gets used of which you were not aware. This can stimulate ideas for a new or improved product. An entire branch of applied psychology, `Human Factors’ focuses on this use of psychology as a means to improve the usability of technical products.

3. People engaging in other `closely-associated’ activities but which don’t directly involve the current product.

This helps the supplier see potentially new product opportunities which are related to but outside of their current product remit. The best insights will come from asking why people behave the way they do and, particularly, how they might behave differently if certain constraints were removed or they were enabled to achieve their goals another way, etc.

Understanding how different consumers think, feel and act

Psychology studies the way in which individuals or social groups differ in the way they think, feel and act. Psychology offers a plethora of tools which (more or less effectively) profile `different kinds of people’ in terms of their personality, attitudes, decision making and self image or behaviour patterns. Successfully designing, marketing and selling a product can all benefit from understanding these basic differences and how they can vary with context.

For example, psychology research has shown up significant differences between men and women in the ways they use technology products and the symbolism they associate with them. Women are more interested in what the technology can enable them to do than in the technology per se and men are the opposite. Women also do not tend to tie their sense of identity to owning or operating technology in the ways in which men commonly do.

Similarly children teenagers, adults and older people value different products or the same products along very different dimensions.

Designing experiments to test product concepts and enable consumers themselves to innovate

Up to 80% of new products fail at the point of consumer acceptance. This is equally true for brand new (i.e. discontinuous) products as well as incremental variations on existing products. It is also true for services as well as goods.

Psychologists are skilled at designing early tests of a new product or product concept. This will significantly reduce the risk of a new product introduction. One of the biggest lessons learned from this kind of research is the importance of testing the concept in context, if at all possible, because people’s behaviour is more strongly determined by context than by their personality or attitudes.

Psychology research has also shown that it is often the consumers themselves, rather than the manufacturers, who find the important uses for a new product. For example, early telephone users pioneered the use of the telephone for social communication in the face of direct opposition from the telephone operators who tried to limit its use to business purposes only. Early microwave oven owners `discovered’ the use of this device as a quick reheater of food running counter to the vision of the manufacturers who were positioning it as a general cooking device competing with the conventional oven.  Teenagers pioneered the use of text messaging on mobile `phones, inventing a whole new language in the process. This confounded manufacturers who predicted that texting would be a minor feature because it was so awkward to accomplish compared to talking.

What if you don’t have a psychologist on hand?

Few consumer companies either employ or have ready access to a psychologist. However, even in the absence of that kind of help, companies can still benefit significantly in improving and innovating on their product range by trying to engage their key staff in some of the following `psychological’ activities:-

1. Taking frequent opportunities to talk (or more importantly listen to) customers.

This might be through a formal mechanism like focus groups or it might be through more informal, everyday encounters with individual customers.

Encourage them to tell you stories about how they use the product, what works well for them and what doesn’t, what they would like to see improved or changed.

Listen to the stories with an ear for picking up how they think about the product, what’s important or valuable to them about it and whether there are surprising or unusual ways in which they employ it.

Make sure your engineers and designers hear the stories and meet the customers rather than simply your marketing staff or sales people.

Ask customers how they like using the product, how it makes them feel and how they think owning or using it reflects on them.

Ask them what they think your brand stands for. Ask what kind of person comes to mind when they think of your brand or what adjectives they associate it with.

Ask them which of their family members decided on buying your product and how that decision was reached in their household and whether that pattern was typical.

You will learn far more from a handful of such conversations than from the implementation of hundreds of questionnaires and surveys. Because the latter use pre-categorised responses, they cannot, by definition, challenge your thinking, break the mould or give you insights into why your customers think, act or feel the way they do.

2. Creating opportunities to watch customers using your product in their normal everyday context, i.e. at home, on the street, in the office, etc.

For example, Ford regularly have their design engineers and marketing staff ride for a day with a Ford customer in their car – witnessing them driving it, loading shopping, managing small children, negotiating rush hour traffic, operating the controls in the dark, parking in tight spots, towing a trailer, etc. Many innovative ideas for new car designs and features have come from these observations. Similarly, Unilever arrange for their senior managers to visit consumers’ homes from time to time and watch their branded cleaning products being used. They also film people (volunteers!) in the shower using their soap and shampoo products.

If you run a retail outlet which has close circuit TV for security reasons, then you may be able to learn a lot about the service you provide and the behaviour of your customers by watching the security videos. For example, you can see which family member is leading and motivating the search for an item and how the attention of different family members is engaged or lost.

3. Creating an `early adopter’ or customer advisory panel.

When you encounter customers who are particularly insightful about your product designs or innovative in adopting or adapting new products, invite them to join a panel. You can then use this group of people to consult on new designs or ask to try out new product concepts. Make sure that the panel includes a good cross-section of your customer population. Nike now use a regular panel of children and teenagers to help them track fashions and to generate innovative products features and ideas. 3M have a `customer innovations centre’ where they invite groups of customers in to explore with them innovative applications for their 3M adhesive, reflective and adhesive technologies.

4. Collecting and analysing customer feedback

Record all customer problems, criticisms and suggestions and analyse these regularly to look for common patterns. Publicise the data in a form which is interesting and accessible to all your staff. Encourage them to think of innovative ways to solve these problems.

5. Devising ways to run multiple small, low-cost, low-risk experiments on new product concepts, features and extensions

Observe which ones work and which ones don’t and talk to the customers about why this is. This process becomes easier as it becomes part of your normal culture and practice. Multiple, rapid experimentation is by far the most effective way to innovate – after all, it’s the way nature does it!

3 Responses to Role of Consumer Psychology in Business Innovation

  1. Katelyn K says:

    When was this article published?

  2. Achira Dutta says:

    Really like the way the article has been written. The significance of consumer psychology is realized by few and implemented by fewer.

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