How to Study Consumer Behavior Like a Venture Capitalist - Firebrand Group

How to Study Consumer Behavior Like a Venture Capitalist

How to Study Consumer Behavior Like a Venture Capitalist

photo credit i1os.com

Success in the tech sector requires straddling the line between offering the products that consumers want and the products they don’t know they want–yet. In walking that fine line, understanding consumer behavior is a critical area of focus for many companies, as they strive to better understand their users and provide the most positive customer experience.

One of today’s sharpest studies of consumer behavior is John Frankel, founding partner of ff Venture Capital, which focuses on disruptive technology companies. Many of the ventures in which Frankel invests face challenges pertaining to consumer behavior, breaking established habits, and habituating consumers to new experiences. From crowdfunding to baby vitals monitors to Unmanned Aerial Vehicles (UAVs), Frankel’s companies are guiding customers toward their vision of the future.

But it’s not always an easy transition, as Frankel is well aware. “It’s just our nature that we want things to be easy,” he explains. “With computers, we used to feed codes into machines; today we’ve got touch-based interfaces. More and more, we want the experience to feel natural, and mirror how humans interact.”

Making disruption feel natural.

That last part isn’t always easy. Google Glass, for example, seemed like a great idea when it was introduced, but it didn’t really pan out as a breakout consumer product. Frankel believes “it was too intrusive into normal interactions from people.” A company with a disruptive product still needs to fit it into an interface that feels natural. Virtual reality and augmented reality are both technologies that ffVC has a stake in, but these advances have to be executed in a way it doesn’t make people feel nauseous or ridiculous. “It’s very difficult if you block someone’s eyesight or you engage across someone’s eyesight,” Frankel explains, “because that’s a place where we as humans interact with other people.”

Yet our culture has seen barriers like this overcome before: look at earbuds, for example. At one point in time, it was strange that someone could be right next to you and not hear you. And yet, people got used to it. According to Frankel, the success of these new technologies isn’t about timing; it’s usually about the degree of change. “When we invest, we’re looking at companies that are trying change behavior, but not too significantly,” he says. “You have to weigh how much value you’re adding versus how much friction you’re adding. Do people do things in a particular way because they have to, or because they want to? ”

When ffVC invested in leading smart-lock firm UniKey, the bet was that the current behavior pattern–namely, reaching into a pocket/bag, taking out a piece of metal, putting it into a lock’s metal chamber, twisting it, pulling it out, and putting it back away–only felt very natural because we’ve done it for so long. UniKey believed that their process of touching a pocket/bag to the lock would be a change of behavior that would feel considerably more natural after a short period of time–a superior experience people would be willing to do and stay with.

The problem is, people are very set in their ways, and a more technologically sophisticated experience may not actually feel like an improvement to users accustomed to the old experience. The interesting thing about “superior” is that it is subjective. The amount of time it takes you to take a key out of your pocket, put in the lock, and put it back is roughly ten seconds. The first version of the Kevo lock–the world’s first true smart lock, born from a UniKey partnership–took 2.8 seconds to unlock. And yet, it was a worse experience. Why? Without the act of unlocking the door, users weren’t sufficiently occupied; thus, users weren’t counting time in the same way. It wasn’t until the Kevo lock took under a second to unlock that it felt sufficiently instantaneous for it to be “superior” for enough users.

Focus on the “right” problems.

When you’re talking about understanding consumer behavior, you’re trying to figure out what it is to be inherently human, and optimize getting rid of the barriers to people doing what they want to do. But sometimes you might end up trying to solve a problem that’s not there. Some problems are really good problems to solve, but others are more trivial. “Our job,” Frankel says, “is to filter through those and find the ones that we think are interesting, have a long life, and people will be increasingly interested and passionate about.” One such example is the self-driving car industry. Many people spend two hours a day or more in their car. That’s two hours of human attention, a scarce resource. Frankel’s job is to think from that perspective, and see what innovations fit in with the self-driving car.

Some of Frankel’s consumer behavior-changing bets are rather audacious. The premise of the team at ffVC-backed Owlet, which monitors newborns’ vital signs via a technologically advanced sock, is that they can change the behavior of every parent in this country to the point that you might not be able to leave hospital without an Owlet sock. Now that is a bold, audacious goal, but as both an investor and a futurist, those are the types of opportunities Frankel is looking for, and you have to believe this will cause some change in behavior, or else it’s not going to create a business.

Some of these behavior changes are things people need to be talked into. So there has to be lots of advertising and support. Behavior is sticky, and the crucial question to answer is whether your product creates more value than it does friction. If you’re creating more of the former and less of the latter, then you just might have a winner on your hands. But in today’s market, innovation has taken off, and consumers are more likely than ever to give new technologies a fair shot. And that is good news–for UniKey, for Owlet, and for innovators like Frankel.

Jeremy Goldman has been working with companies looking to take their operations online and inject “social” into their processes for over a decade. After a career at L'Oreal and Unilever, Jeremy founded Firebrand Group. His views have been featured in publications such as Inc., Mashable, Wall Street Journal, Smart Money, ReadWriteWeb, and The Next Web. His first book, Going Social: Excite Customers, Generate Buzz, and Energize Your Brand with the Power of Social Media hit the #1 spot on for social media and business.