The Ten Commandments of Consumer Behavior (That We Forget About in Web3)

In a world where technology and markets update at a breathtaking pace, it’s important to remember that people themselves are remarkably low-tech. We are driven by the same needs and motivations we’ve had for hundreds of years. And even if technology helps us meet those needs with more information, precision, volume and speed – the needs themselves are remarkably consistent.

Many web3 companies, enamored with the potential of a new financial system and technological paradigm, forgot this fundamental truth. And some paid the price. Most founders may rightfully believe that their vision, and the products they make, can change the world in profound ways - but they cannot change human nature. The smartest founders never forget the timeless operating system they need to master first: the human mind.

These are the principles of consumer behavior that we at Double Down believe all founders—crypto and otherwise—should keep top of mind to maximize their chances of success.

1. Consumers are overwhelmed, busy, and often lazy.

People care about data privacy, but not enough to have strong passwords. People care about governance, but not enough to vote at high rates. Recency bias and the “availability heuristic,” — a psychological process by which people often make decisions based on which information is most top of mind — mean that decision-making is often driven by psychological convenience. So saving people time, effort or bandwidth has fundamental value.

Rule: Consumers don’t necessarily want to know how a product works — they want to know what it does for them. Stop marketing the technology, market its value to them. If you are asking people to make an effort, you better build something they simply have to have.

2. Consumers are impatient.

Remember the Marshmallow Test? Choosing delayed gratification is hard: consumers are wired to want benefits now, as opposed to the always uncertain later. This tradeoff between short and long term benefits dragged down many NFT projects. As consumers bought NFTs during the height of the boom, they also began asking for more perks, events, and utility, often without understanding the time it takes to build quality products and sustainable operations.

Rule: To be successful, founders need to tactfully manage consumers’ expectations regarding timing from the very onset of a project, and not succumb to aggressive demands of their community that could jeopardize long term success.

3. Consumers are emotional creatures.

Emotions and dopamine drive a far greater share of consumer decision-making than rational thought. Even what we consider “rational decision-making” is often based on emotional needs: trying to find the best car seat for your baby is a research-driven process that is rooted in an intense fear about safety. And emotionally invested customers means more engaged customers with more financial upside.

Rule: Playing to the emotional tentpoles of human experience is a good strategy for companies and brands looking to find a niche in the market. Research has shown that hundreds of emotional motivators drive consumer behavior — and that more connected customers are significantly more valuable.

4. Consumers are inconsistent in what they say versus what they do.

This is a timeless axiom about consumer behavior that remains true today. People routinely profess to want one thing, but ultimately buy or choose something else. Seen from another angle: consumers want to be perceived a certain way, or they perceive themselves a certain way that doesn’t necessarily line up with how they act. It’s the reason why actual election results differ from pre-election polls; why few people admit a preference for celebrity gossip over more substantial news, despite data showing otherwise, and why the percentage of consumers who actually make purchasing decisions based on social values is well under the numbers of people who say that’s important to them.

Rule: Direct user feedback is important for companies, but it should be taken with a grain of salt. Research or data that are grounded in observed actions —such as actual product referrals to friends — are always stronger than self-reported data in consumer questionnaires.

5. Consumers are self-interested — and financially motivated.

The oldest rule in the books is still one worth keeping top of mind. You give users an opportunity to make money, like the lottery, and many will rush to get in. People are deeply wired to gravitate towards free things, under the right circumstances – think of fans at NBA games wrestling over a free t-shirt, or the line down the block when Ben & Jerry’s offers free ice cream cones – so perks can play well when driving a new product.

Rule: One of the simplest ways to make people feel like they are getting value is to give them something for free. But be savvy about this: no one likes a gimmick, and the value can be diminished when people feel like they deserve the thing being given. Research shows that when done correctly, perks increase word of mouth marketing – the work your consumers do for you.

6. Consumers can be fickle.

Some product affinities are stickier than others — ask someone who’s found their preferred skincare regimen — but on the whole, banking on loyal customers can be a tricky game. That guy you know from college who’s worn the same brand of shirt his entire life? Those types of customers are likely irrelevant to your startup’s success. Spending, particularly the type of spending that growth is dependent on, is generally driven by consumers who are open to recommendations and looking to try new things. Those consumers can help you build your company, but their loyalty takes effort to earn.

Rule: Acquisition is hard, retention is harder (but ultimately more valuable). Never take your customers’ support for granted. Trust will always be an important component of building long-lasting relationships.

7. Consumers are pack animals, but adopt new products at different speeds.

Diffusion of Innovation theory, which dates to 1962, is one of the classic theories of behavioral science that every founder, marketer and brand owner should be familiar with. It explores the process by which new ideas, behaviors or products are adopted — not at once, but in waves, by consumers with varying tolerance for uncertainty, newness and risk. These are divided into five groups: Innovators; Early Adopters; Early Majority; Late Majority; and Laggards. This adoption narrative played out famously in the case of home computers and mobile devices, but can be seen across just about every category.

Rule: It is wise to coordinate strategy around each of these groups. How can innovators and early adopters help you reach the mainstream? And what kinds of strategies will you need to reach these different segments?

8. Consumers don’t move back, only forward.

Whether it’s the legalization of cannabis, sports gambling, or the creation of a new social program, once you give people new freedoms or benefits, it’s very hard to take them away. Think about the outrage as companies tried to get workers to give up remote work privileges; or when anyone tries to scale back a government entitlement or tax break.

Rule: Be careful what you give your users from the onset, as it will be hard to remove later. Lower prices or adding features over time is easier than increasing prices or removing features later on.

9. Consumers are who they are.

New consumer behaviors are rare. A piece of revolutionary technology like a smartphone will create new habits. But technology does not create new motivations as much as enhances existing ones — the need for human connection, entertainment, information, and achievement.

Rule: If your company is not fulfilling a core human need, you won’t succeed. New behaviors are possible, but they occur naturally. Apple didn’t have to teach anyone to be glued to their phone — it just happened.

10. There are exceptions to every rule.

There can be a hierarchy to these rules that varies depending on a specific customer segment. Financial motivation can easily be trumped by other considerations under the right conditions, for example. Some people are lazier than they are cheaper, which is why many consumers are willing to pay for convenience — the business model behind app-based food and grocery delivery, or crypto exchanges with high transaction fees. In other scenarios, our social and emotional needs can override our impulses towards frugality: no one wants to be viewed as cheap, which is part of the reason why the social pressure to tip works so well.

Rule: Are there exceptions to these rules? Of course. But use caution.