A Better Choosing Experience
When
consumers are overwhelmed with options, marketers should give them what they
really want: ways of shopping that lower the cognitive stress.
When Baskin-Robbins, now the world’s
largest ice cream chain, opened in 1953, its line of 31 flavors — one for every
day of the month — was a novelty. At the time, such variety was unheard of, and
Baskin-Robbins used it to stand out from other chains. Cofounder Irvine Robbins
said, “We sell fun, not just ice cream,” and part of the fun for customers was
the experience of seeing and tasting so many new flavors. The company continues
to emphasize variety; it has developed more than 1,000 flavors of ice cream to
date, 100 of which are rotated through its stores in a typical year.
Today it seems obvious to offer
consumers more choice — but the experience is no longer a novelty, or nearly as
much fun. Whereas in 1949 the average grocery store stocked 3,700 products, the
average supermarket today has 45,000 products, and the typical Walmart has
100,000 products. There are even more options online, including 27 million
books on Amazon and 15 million date possibilities on Match.com. Heinz was long
famous for its “57 Varieties,” and Burger King for letting you “Have It Your Way,”
but newer businesses have upped the ante. Starbucks, already known for its
87,000 drink combinations, recently launched the However-You-Want-It
Frappuccino, with “thousands of ways to customize your blended beverage.” Cold
Stone Creamery claims that its menu of mix-ins provides more than 11.5 million
ways to “customize your ice cream treat.” Long gone are the days when an array
of 31 flavors knocked our socks off.
Consumers have grown accustomed to
having a lot of choice, and many people still express a strong desire for
having more options. But that doesn’t make it a good idea. There are
neurological limits on humans’ ability to process information, and the task of
having to choose is often experienced as suffering, not pleasure.
That is why, rather than helping
consumers better satisfy their preferences, the explosion of choice has made it
more difficult overall for people to identify what they want and how to get it.
Thus, if the market for your product is saturated with choice, you can’t gain a
competitive edge by dumping more choices into the mix. Instead, you can
outthink and outperform your competitors by turning the process of choosing
into an experience that is more positive and less mind-numbing for your
customers. You can design a more helpful form of choice.
The goal of a new approach to choice
should not be to manipulate consumers into making choices that aren’t right for
them, but rather to collaborate in a way that benefits both the consumer and
the marketer. Although people tend to be skeptical of any attempts a business
makes to “guide” them, when it comes to choosing, you truly can help consumers
help themselves. To accomplish this, here are four actions you can take:
- Cut the number of options.
- Create confidence with expert or personalized recommendations.
- Categorize your offerings so that consumers better understand their options.
- Condition consumers by gradually introducing them to more-complex choices.
Offered together, these actions can
distinguish your company. Rather than trapping people in a morass of
alternatives, you’ll be one of those rare companies whose offerings rise to the
top by raising customer spirits.
The
Multiple-choice Problem
The peculiarities of consumer choice
have been evident for some time. For example, in the mid-1990s, one of us
(Sheena Iyengar) conducted a well-known study of shopper selection at the Menlo
Park, Calif., location of Draeger’s — a specialty grocery store renowned for
its huge selection of produce, packaged foods, and wine. Iyengar initiated the
experiment after she realized that although she greatly enjoyed visiting the
store, she often walked out empty-handed, unable to settle on just one bottle
of mustard or olive oil when she had hundreds of options. Might other shoppers
be experiencing the same problem, she wondered?
To find out, Iyengar and her
collaborator, Mark Lepper, set up a jam-tasting booth near the entrance of the
store. Every few hours, the booth switched between offering an assortment of 24
jams and offering an assortment of six. The researchers wanted to know which
assortment would attract more people and which one would lead to higher sales.
They observed the shoppers as they moved from the booth to the jam aisle, which
boasted 348 varieties.
As might be expected, 60 percent of
the incoming shoppers stopped when 24 jams were displayed, but only 40 percent
stopped when six jams were displayed. Clearly, people found the larger
assortment more attractive. However, when these same shoppers went to the jam
aisle to pick up a jar, the shoppers who had seen only six jams had a much
easier time deciding what to purchase.
By observing the shoppers and
eavesdropping on their conversations, the researchers discovered that the small
assortment helped narrow down choices, whereas the large assortment left people
confused and unsure of their own preferences. Of those who stopped by the large
assortment, only 3 percent ended up buying a jar of jam — far fewer than the 30
percent who bought jam after stopping by the small assortment. Taking into
account the fact that the larger display was more popular, Iyengar and Lepper
calculated that people were more than six times as likely to buy jam if they
saw the smaller display.
These observations may seem to
contradict what you already know about consumers. People like the idea of
choice. It’s exciting to hear a list of exotic flavors and to see a wide wall
of colorful jars, any of which can be yours. Having a larger number of choices
makes people feel that they can exercise more control over what they buy. And consumers
like the promise of choice: the greater the number of options, the greater the
likelihood of finding something that’s perfect for them. In short, they believe
that having more choice gives them more power and satisfaction.
But they overestimate their own
capacity for managing these choices. Psychological studies have consistently
shown that it’s very difficult to compare and contrast the attributes of more
than about seven different things. When faced with the cognitive demands of
choosing, people often become overwhelmed and frustrated. As a result, they may
forgo the choice altogether, reach for the most familiar option, or make a
decision that ultimately leaves them far less satisfied than they had expected
to be.
We see this frustrated response to
“choice overload” even when the decision has serious consequences. For example,
in 2001, at the request of Steve Utkus, the director of the Center for
Retirement Research at the Vanguard Group, Iyengar and her collaborators, Wei
Jiang and Gur Huberman, tried to determine why so few of the 900,000 employees
covered by Vanguard were participating in their defined-contribution retirement
savings plans — also known as 401(k) plans. Analysis of the data revealed that
participation fell significantly as the average number of funds in a plan rose.
By controlling for individual-level variables such as age and income, as well
as plan-level variables such as the size of the company and the extent of
employer matching contributions, Iyengar and her collaborators showed that the
decline in average participation rates was due to an increase in choice. When
plans offered only two funds, 75 percent of the relevant employees
participated; when plans offered 59 funds, the percentage of participants fell
to 61 percent.
These findings are particularly
significant when you consider the benefits of defined-contribution plans:
compound interest, tax-exempt contributions, and employer matching in many
cases. Even randomly picking funds is still a better financial move than not participating
at all. At the time of the study, a 25-year-old median salary earner who chose
to postpone participating in his or her 401(k) plan for just one year would
have ended up with US$18,540 less in his or her retirement savings account at
age 60 than an identical peer who chose to participate immediately and save 5
percent of his or her income (assuming a 9 percent total annual return on a mix
of stocks and bonds). And yet many of the employees, overcome by too much
choice, kept putting off the decision or just skipped it.
In another study, Iyengar and Emir
Kamenica discovered that the employees who participated made worse
investment decisions, on average, when they chose from plans with more options.
For every 10 additional funds offered in a plan, employees allocated 3.28
percent less of their contributions to equity funds (as opposed to bond or
money market funds), and they were also more likely to avoid allocating any of
their contributions to equities at all. Unfortunately for them, equities are virtually
guaranteed to outperform bonds and money markets in long-term investments. Even
employees in their 20s, who should have been allocating 80 to 90 percent of
their contributions to equities (based on the accepted wisdom of financial
advisors), became more likely to entirely avoid equities as the number of
options rose, undermining their long-term financial well-being.
The deleterious effects of too much
choice have been observed in situations as varied as buying chocolate, applying
for jobs, and making healthcare decisions. This presents a considerable
opportunity for marketers, but it requires looking in a different way at one of
the essential contradictions of consumer choice: People keep expressing a
desire for more choices, and businesses keep expanding product and service
options in order to fulfill this desire — but it often does more harm than
good.
Confidence,
Trust, and Fun
Don’t marketers have to give
consumers what they want? Yes and no. We should give them what they really
want, not what they say they want. When consumers say they want more choice,
more often than not, they actually want a better choosing experience.
They want to feel confident of their preferences and competent during the
choosing process; they want to trust and enjoy their choices, not question
them. As Irvine Robbins of Baskin-Robbins might have said, “They want fun.” And
it’s your challenge to give it to them. The following four approaches will help
you meet that challenge.
1. Cut their alternatives. You’ve heard it said that “less is more,” but rarely in the
context of consumer choice. Most companies avoid reducing the number of
products they offer because they’re afraid of losing shelf space to their
competitors. But careful trimming can lower costs, increase sales, and improve
the choosing experience for consumers. In the mid-1990s, when Procter &
Gamble Company winnowed its 26 varieties of Head & Shoulders anti-dandruff
shampoo down to 15, eliminating the least popular, sales jumped by 10 percent. In
a similar case, the Golden Cat Corporation got rid of its 10 worst-selling
offerings in the small-bag cat litter category. This led to a 12 percent
increase in sales and slashed distribution costs by half; the end result was an
87 percent profit hike. Another example comes from a 2001 study that tracked an
online grocer that had made substantial cuts in the number of products it
offered, across 94 percent of all the product categories. Not only did sales
rise an average of 11 percent across 42 categories, but 75 percent of its
customer households increased their overall expenditures.
If you’re working hard to explain to
your customers — and perhaps even to your employees — the differences among the
variations you offer, then it’s time to think about making a few cuts. If the
poor performers aren’t evident from sales figures, focus groups and online
networks can help you separate the wheat from the chaff. Potential consumers
should be able to zero in on a product’s defining characteristics and explain
why it is (or is not) appealing to them. If people respond vaguely or
inattentively, that’s a signal that the choices you offer are not distinct
enough and should be consolidated.
2. Create confidence through
recommendations. Reducing options works well when the
variations among products are relatively small. But for highly differentiated
goods — books, prerecorded music and video, clothes, and many housewares — you
can’t get away with offering a small selection. (Even if you could, you
probably wouldn’t want to, because niche purchases can cumulatively contribute
heavily to sales.) Instead, you have to offer a wide variety while helping
consumers navigate the complexity so they still have a positive choosing
experience. How do you give consumers enough confidence to overcome the
complexity of a large choice set? By turning to the people who already have
that confidence: experts.
Through study and practice, experts
in any field learn to simplify, categorize, and prioritize information, and to
recognize patterns. This allows them to create order out of seeming chaos. For
example, a chess player thinking eight moves ahead is presented with as many
possible games as there are stars in the galaxy. He or she can’t possibly
consider every option. The critical difference between novice and master is the
ability to quickly eliminate the vast majority of moves and concentrate only on
the most promising ones. The novice suffers under the pressure of choice, but
the master knows how to relieve that pressure.
In high-choice conditions, the ideal
consumer is the most expert consumer. That doesn’t mean someone with in-depth
expertise in any one type of product. Most people don’t need to become
specialists in jam or mutual funds to make decisions expertly. In fact, even if
they did become experts, their knowledge would be limited to a specific domain
and would not allow them to make better overall choices. However, novice
consumers can become expert general consumers by learning to rank and structure
their choice sets the way that experts do.
Marketers can thus help novices make
more educated guesses and create confidence in their choices by giving them
easy access to expert reviews and recommendations. In other words, you can
attract consumers by allowing them to skip over much of the
information-processing component of choosing, thereby minimizing their
cognitive stress and enabling them to make good choices. Even non-expert advice
can prove useful when there is consensus among a large number of reviewers or
when the consumer trusts the source. This is one reason for the popularity of
shopping websites with user reviews (such as Amazon), and also for the growing
popularity of retailers that post recommendations for some of the products they
carry (such as Whole Foods or New York’s Fairway grocery chain).
Another way to give consumers access
to recommendations, especially when tastes vary or ratings aren’t easily
available, is to set up automated systems that generate suggestions based on
consumers’ expressed preferences. These systems, also known as “electronic
agents,” are software programs that guide people by analyzing their prior
purchases or their answers to survey questions. If consumers are willing to
invest a little time teaching a well-designed system about their preferences, then
the system can serve as a personalized expert for them. People don’t usually
trust programs as much as they trust other people, but trust in well-performing
electronic agents tends to develop over time.
For example, the Internet radio
service Pandora has acquired 50 million users who tune in for an average of 12
hours a month, even though (or perhaps because) they cannot directly choose
what they’ll hear. Pandora’s “mission” is to “play only music you’ll love,” and
it accomplishes this by combining human expertise with an automated system.
First, trained analysts determine the musical attributes of every song in the
database. (Pandora calls this the Music Genome Project.) Then, when users tell
the system what music they like, it searches for other music with similar
attributes. As they listen to their personalized music streams, users can let
the system know how well it matched their preferences. Eventually, the system
comes to “know” the users so well that they no longer have to provide feedback.
They can just sit back and enjoy.
3. Categorize their options. You can also help novices by teaching them to emulate
expert judgment. For an expert, there is no completely unique product or
service; rather, each offering is a distinctive combination of attributes that
the expert has seen before. Thus, where the novice sees 100 different items,
the expert sees maybe seven or eight relevant qualities interacting in novel
ways, with one or two important features that immediately stand out. The trick
is to get the novice to see things as the expert sees them.
The easiest way to do this is to
categorize. For example, Best Cellars, Wine Enthusiast’s Retailer of the
Year in 2009, makes the choosing process a breeze for its customers by
consulting with oenophiles in advance. It draws on their advice to limit its
variety to 100 high-quality, reasonably priced wines. Since 100 wines could
still be an overwhelming number for novices, Best Cellars divides the wines
into eight simple categories, such as “fizzy,” “juicy,” and “sweet.” The novice
has to deal with only eight units of information now, which can be managed
fairly easily. Once the novice has chosen a category, he or she can choose a
wine within that category by reading the detailed labels that accompany all the
bottles.
To be sure, wine experts may not use
the same categories that Best Cellars uses, but they apply the same principle
when they make their choices. By pre-sorting the wines into categories, the
retailer helps novices look at the world through expert lenses. Best Cellars
cofounder Joshua Wesson says, “We all want simplicity when it comes to these
types of decisions…. We try to make wine shopping as much fun as wine
drinking.” Note that this is the flip side of what Baskin-Robbins did in its
heyday. Both retailers thrived by creating a better choosing experience. Back
then, this meant giving customers more choice; now, it means giving them less.
To simplify the choice process,
limit your categories to no more than 20, with 10 or fewer options in each.
When you hold to these limits, consumers are likely to feel empowered by the
number of choices, and are unlikely to miss any offerings that weren’t
included. Iyengar and her collaborators, Cassie Mogilner and Tamar Rudnick,
discovered this when studying the magazine aisles in several Wegmans
supermarkets. The number of magazines available at various branches ranged from
331 to 664, but this number had no effect on buyer satisfaction. What mattered
was the number of categories, such as “Health & Fitness” and “Home &
Garden,” that each display provided. Arranging the magazines under a wider
range of subheadings created the perception that the store offered more choice,
even when the number of magazine titles was comparatively small. Customers in
these stores also reported greater enjoyment of their overall shopping
experience.
For novices, who may not be able to
create categories on their own, the categories established by a marketer or
retailer provide a framework for making sense of a large assortment, thus
keeping consumers from being discouraged by the daunting task of choosing.
Because these categories often make the same distinctions between products that
experts make, they also provide a general overview of the field, which
catalyzes consumers’ understanding of it and the development of their
preferences within it.
4. Condition them for complexity. For certain kinds of decisions, you can set consumers up
for success by encouraging them to learn from, and build upon, their own
previous choices. This is especially valuable if your product is customizable.
For example, Iyengar and her
collaborators, Jonathan Levav, Mark Heitmann, and Andreas Herrmann, conducted a
study with a major German car manufacturer. This automaker allows its customers
to design their new cars from a long list of options, choosing everything from
the engine to the rearview mirror. In the study, researchers presented the
first eight design choices in different sequences to different groups of car
buyers. One group had to first choose interior and exterior color, with 56 and
26 options, respectively. From there, they chose features in descending order
by number of options, ending with interior decor style and gearshift style
(which were each limited to four options). A second group of buyers encountered
the same choices in reverse order, starting with the design elements that
offered the fewest options and ending with the ones that offered the most.
Although both groups eventually saw 144 total options across eight categories,
the buyers who moved from high choice to low choice had a much harder time.
They began by carefully considering every option, but they soon grew tired and
settled for the default. In the end, they wound up less satisfied with their
cars than the buyers who had progressed from low choice to high choice.
This research shows that consumers
can handle a large number of options, if they start off in the shallows and
then slowly move toward the deep, all the while building skill and nerve.
Beginning with fewer options not only warms consumers up, it helps them better
figure out their own preferences, which in turn enhances their choosing
experience. Over time, practicing this choosing technique will condition
consumers to cope with increasing complexity.
An
Open Invitation
Each of these forms of customer
engagement can be technologically enabled, for example, through online networks
or social media. But the heart of this method lies in better design of the
shopping experience, fueled by better awareness of human capabilities. When you
take this approach, the goal of your marketing is no longer to give people what
they say they want. Instead, your goal is to invite consumers to enter into a
collaborative, mutually beneficial relationship with you.
From the outset, your design shows
them that you understand how they think and respect their desire for both
control and simplicity. The message is clear: In the short run, you are helping
them navigate a bewildering and even debilitating world of options. In the long
run, you are inviting them to choose you.
by Sheena Iyengar and
Kanika Agrawal http://www.strategy-business.com/article/00046?pg=
No comments:
Post a Comment