If you ask someone about the cost of a product, either hardware or software, you typically get an answer in dollars. HBO, for example, is $15 a month, and Facebook is free. The reality, however, is a bit more complicated.
All products—virtual or physical—have financial costs and cognitive costs, both upfront and on an ongoing basis. The financial costs are easy enough to think about. You might pay upfront for something or via an ongoing subscription. Financial costs are easy to compare and almost all products are priced equally for all of their users.
The cognitive costs are far more nettlesome and conditional. Most products require some upfront cost in time and attention. Many then require some form of continual mental engagement to be useful.
These costs are much harder to reason about and discuss for several reasons. They are usually hard to quantify and highly conditional to an individual. Someone who is very technically adroit might find the cost of learning a new relatively technical product or interface orders of magnitude easier than someone else.
But in many cases, the cognitive cost of digital products turns out to be much greater than the financial cost. Product developers and investors should consider the cognitive cost of their product. This framework also explains the power of early adopters as well as the relative strengths of companies over startups.
Upfront vs. Ongoing
There are two different types of non-financial, attention costs: products with high upfront costs and those with high engagement costs.
Products with high upfront costs—Photoshop, for example—need to get users over the hurdle of wanting to pay the initial cognitive fees on the promise of the product being less expensive (and therefore marginally more valuable to them) overtime. Big companies tend to be more successful at building these products because it can be extremely difficult for new startups to generate enough consumer trust for people to be willing to gamble their time on learning their new product.
Even when big companies succeed in getting consumers to invest that upfront time, modifying products can be costly. Once a consumer has paid the cognitive cost of learning something new, the person expects consistency so their investment in learning will not rapidly depreciate as new versions of the product come out. That makes this class of high-learning-cost products extremely difficult to rapidly evolve without alienating customers.
The second type of attention cost is continual engagement. Social applications are good examples. If you want to get value out of social applications or messaging apps, you need to be engaged daily. If you don’t, you’ll miss messages and encourage people not to engage with you on them, diminishing their value.
Most networked products, ranging from Instagram to Snapchat, have reasonably low upfront costs to make it dead-easy for people to join. But as networks, they all implicitly require that you need to dedicate at least a few minutes a day to them to get value from them.
This small daily drip of required time investment adds up quickly. While I adore Facebook, I shudder to think about the amount of time I spend every month with it in order to get the value from it which I do. The equation probably is ROI positive for me, but the costs are quite significant. At a minimum, the amount of time I have spent on Facebook is greater than the time it would have taken me to master many other things, like playing the guitar or learning Mandarin.
Beyond social applications, I believe wearables also suffer from high engagement costs. A product that is always on my wrist is levying a small amount of mental cost from me all the time. To use something that I am going to be at least passively aware of, the feature really needs to be worth it.
Ongoing Engagement Costs
Ultimately, the interesting thing about products which have ongoing engagement costs is that they are probably the most difficult for consumers to reason about upfront. It is hard for people to calculate the cognitive expense of an experience which only requires a few seconds or minutes a day, but requires it every day. That means these products are susceptible to attracting and engaging customers who don’t on the margin get enough value out of them to justify the expense.
The math around the cognitive cost of new products also is a good way to understand the difference between early adopters and mainstream consumers. Early adopters tend to be technologically sophisticated people who have enough of a technology background as a user that the cost of trying something new is relatively low for them.
The fact that they can learn quickly means that new products are simply dramatically less cognitively expensive for them than for the average person. That difference explains why so many products fail to cross over from early traction to meaningful mainstream success. It also means that when a product changes they pay a lower cost in learning the new functionality, which makes them far more accepting of change than the average user.
Personally, I like products that are more financially expensive and less cognitively expensive. Financial expenses are a pure and rational transfer of value from consumer to a creator. Cognitive costs in time and attention, on the flip side, are usually dead weight loss; consumers have to pay them, but the creator doesn’t benefit from the payments.
What I get really excited about, however, are companies that make the cognitive cost of using their service absurdly low or even zero, such that the technology fades away and doesn’t take my attention or focus.
While I dislike hardware on my body that constantly sucks attention and time in micro-increments, I am very excited about products like the Amazon Echo. The smart home speaker feels like it fades into the background of my life and asks nothing of me. That is one of the most powerful things a product can do.