Unfortunately, you can be in for a world of hurt if you assume the average person will even try out your software just because it is groundbreaking, has a slicker interface, or sports a few more features than the next guy. Your friends might think you’re a genius, and tech insiders may give you rave reviews, but you’ll end up in the deadpool if your product doesn’t provide customers with much more value than their current software. There are a number of reasons for why this happens, but one worth learning about is the endowment effect.
As Wikipedia puts it:
The endowment effect (or divestiture aversion) is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own relative to objects they do not. In one experiment, people demanded a higher price for a coffee mug that had been given to them but put a lower price on one they did not yet own. The endowment effect was described as inconsistent with standard economic theory which asserts that a person’s willingness to pay (WTP) for a good should be equal to their willingness to accept (WTA) compensation to be deprived of the good. This hypothesis underlies consumer theory and indifference curves.
The endowment effect is closely tied to loss aversion, which is the theory that we’d rather avoid losses than potential gains, and the status quo bias or the believe that people just like things how they are. We overvalue what we have, and we undervalue what we can gain. This behavior is irrational, and it feels like the mainstream culture is extra resistant when it comes trying and buying software. It’s why there is a first mover advantage, IE6 is still around, and nobody cares that your application has some AJAX and a few more features. It’s one of the reasons why so many products lack the steam required to climb the adoption curve.
What Can You Do
You can get a sense of just how irrational buyer behavior really is now that you understand why people are afraid to leave their overvalued software. This doesn’t mean that you have no shot at hitting the mainstream market, but it does mean that “me-too” products and one-upping the competition are going to leave you broke. Instead of entering an arms race, you’re going to have to get creative and make something that people will really value. There is a large body of knowledge on how to go about doing this, and if you’re interested in learning more, I’d recommend reading Blue Ocean Strategy, and John T. Gourville’s article in the Harvard Business Reveiw on Eager Sellers and Stony Buyers: Understanding the Psychology of New-Product Adoption.