The Change Formula: Rule

I attended BIF-5 (The Business Information Factory’s Annual Summit) last week, a great and stimulating experience. One of the speakers was Alan M. Weber taking some topics out of his new book, Rules of Thumb. Some of what he said actually led me to buy his book at the mini bookstore they had set up there. (More some other time on the tradeoffs of paying full price for a book on the spot versus waiting a day and a half and getting it for much cheaper from Amazon.)

I was reading this article this morning: “Looking at Life as One Big Subscription” and buried in it was this sentence, about why it’s hard to get people to decide to replace a product they own for the latest model:

“The rational way to think about your purchases, says V. Seenu Srinivasan, a Stanford business school professor, is to replace a product when the benefits of a new version outweigh the costs — financial and psychological — of upgrading.” (from New York Times)

Sounds obvious, doesn’t it? Think about it.

Well it contradicts Rule #5 which is more subtle but I think upon reflection, more accurate. Rule #5 says,

“Change happens when the cost of the status quo is greater than the risk of change.”  (from Rules of Thumb, a book by Alan Weber.)

Think about that; does it in fact contradict the first formulation? He further says:

“If you do your math right and you figure out how to allocate the true costs of the status quo while driving down the risks of change, you may discover some new allies you can bring to your side…” (from Rules of Thumb, a book by Alan Weber.)

Based on this formulation, I guess your focus is not on persuading a customer that the new product will bring so many new benefits that it justifies the cost. Instead your focus is on the costs of not upgrading.

For example: if we are talking about deciding to trade in your old car, the argument would be: if you decide to keep your old car, lower gas mileage will cost you in more fuel, repairs will cost more, and the safety of the old cars will put your life at risk.

I am not totally sure that in terms of pure logic the arguments are different but psychologically, they are.

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