When Marketers describe Customers as moving up the Learning Curve or moving along the Experience Curve, they typically are concerned about the fear surrounding a new Product or Category recently introduced into the Market.
This Market Simulation models how Customers overcome their mistrust of Products. As the Category itself becomes more mature, Customers become more familiar with its Brands and Features and grow steadily less fearful of it. After a Customer purchases a Product and tries it for themselves, the fear of similar Products — either same-Brand Products or same-Feature Products — also diminishes. Eventually mistrust evaporates and all that is left is the Customer’s innate Willingness To Pay (WTP) for the Products.
This Market Simulation is designed to model Customers being introduced to a new Category of headache medicine (based on Acetaminophen). At first, Customers deeply mistrust all of the Products and Brands in the Category – especially the “Ultra Strength” Products. But over time their familiarity with the Category grows and their mistrust dissipates. If they buy a Brand then their trust of all the Products in that Brand increases. If they buy Regular Strength then their willingness to try the Ultra Strength also increases.
All the headache medicine Products within this Market are made with Acetaminophen – only the Brand and dosage (Ultra vs. Regular) differ.
There are 1,000 Customers in this Market and 6 types of headache medicine:
- Tylenol Regular,
- Tylenol Ultra,
- Paracetamol Regular,
- Paracetamol Ultra,
- Panadol Regular, and
- Panadol Ultra.
Each Product is made up of a mix of positive and negative Features. The Features include:
- Regular Strength
- Ultra Strength
- Acetaminophen Mistrust
- Regular Strength Mistrust
- Ultra Strength Mistrust
- Tylenol Mistrust
- Paracetamol Mistrust
- Panadol Mistrust
All Regular Strength medicine is Priced at $3.00 while Ultra Strength is Priced at $9.00.
The Customers make 20 purchase decisions. As their trust in the Products increase, Customers may switch to Products better suited to their requirements.
If the Customer purchased a Headache Medicine Product then reduce their mistrust of related Products – that is, same-Brand Products and same-Family Products. At the same time, steadily decrease the mistrust of all Products across the entire Category.
After the Feature WTP Matrix has been updated, and all of the values in the negative ‘Mistrust’ columns have been reduced, loop the Feature WTP Matrix back to the Product Generator node and generate the Product WTP Matrix. Continue looping for 20 iterations then group the final results.
Most Customers will move up the Learning Curve and overcome their fear of the Headache Medicine Category. Soon these Customers will be buying their most preferred Product.
But some Customers make several leaps along their Learning Curve journey. These Customers will overcome their initial fear by buying a Regular Strength Product. After a while, these Customers will then start buying the Ultra Strength Product.
For example, Customer C0202’s purchase journey (highlighted below) proceeds like this:
- Initially makes no purchase but selects the ‘No Sale’ Product, then
- Starts purchasing the ‘Tylenol Regular’ Product, and
- Finally switches to the ‘Tylenol Ultra’ Product.