Most people agree: choice is good. When they offer their customers choices, businesses are able to serve more people and more markets. And choice is good for the customer too. It allows them to express preference, to customize, to personalize. It would be a dull world if we all wore the same clothes, ate the same food all the time, and drove the same cars. Variety, as they say, is the spice of life.
But, too much choice can work against us. The famous “Jam Study” conducted in 2000 by psychologists Sheena Iyengar and Mark Lepper taught businesses everywhere this very lesson. In the study, shoppers at a grocery store encounter a gourmet jam display table, offering samples and coupons. On the first day of the experiment, there are 24 jam choices, and the table attracts many shoppers eager to sample the wares. On the second day of the study, there are only 6 jam choices, and the table attracts fewer shoppers. But the second day shoppers convert to buyers at a rate 10 times greater than the first. Although shoppers enjoyed the idea of extensive variety—24 jams!—when it came time to purchase, more choices actually prevented them from making a decision. Later studies have had similar results, leading us to believe that there is a sweet spot for choice.
A more recent study conducted by researchers Alexander Chernev and Ulf Böckenholt from Northwestern University has analyzed the data from the original study and identified four types of decisions where “too many choices” becomes overwhelming:
- When people want to make a quick and easy choice (effort-minimizing goal)
- When making the right choice matters/you are selling complex products (the decision task is difficult)
- When you show options that are difficult to compare (greater choice set complexity)
- When your customers are unclear about their preferences (higher preference uncertainty)
So, if you’re in the business of helping consumers make decisions that lead to purchases, how can you help them?
The obvious place to start is to limit the choices you offer. But of course, some choice is good. So, how do you find that choice sweet spot, where meaningful distinctions are preserved, but there is enough variety to appeal to individual consumers? Research can offer you some insights here. For existing products, you can analyze sales data and experiment with dropping low-performing options. For a new product, observational research or user testing might help you to narrow down which products are key variations that consumers actually want, and which variations are just adding noise to the marketplace and keeping your shoppers from converting to buyers.
If limiting choices doesn’t work for your product or service, then you need to give consumers informational tools so they aren’t overwhelmed. You can do this in a couple of ways:
1) Structure your product as a few “base options” with add-ons. Think of this as the car or burrito product model. At any dealership or Chipotle, you have base options, whether that’s a sedan, SUV, or truck, or a burrito, bowl, or salad. Then, you have options to customize: color, interior upholstery, stereo, and navigation features, or salsa, guacamole, veggies, sour cream. In either case, if you were presented with a menu that contained all possible variations and combinations, it would be overwhelming. So instead, consumers make one critical decision up front and then a series of small decisions afterward to enhance customization.
Here’s another example of base options with add-ons. If you’re helping consumers pick retirement plans, you could get them to select just their retirement year as a base choice. Then you can get them to select how much income they hope to receive from this fund, what their risk tolerance is, and how much they are able to contribute each year.
2) Show consumers what others are choosing. You can think of this as the Netflix or Amazon model. Helping consumers understand what choice they might like, based on either who they are or what they previously purchased, can give them guideposts.
So, for instance, when selecting a health insurance plan, consumers might want to know which plan or plans are most popular. Even more, they might want to know which plans are most popular with people like them—same family size, income, risk-tolerance, etc. If you don’t have that information, you can always describe the choices by who you think the ideal buyer is, i.e. this plan is ideal for a family with children, making less $120,000 a year, and with less than $5,000 liquid cash on a monthly basis.
3) Bundle products together. Like an all-inclusive vacation or a three-pack of jam flavors, sometimes it is easier for consumers to make one decision and get many products or services. Bundling can eliminate some choices by grouping several items together into logical packages, like a 10-day European tour or a variety of berry jams.
Let’s get back to that health insurance shopper: imagine that after they pick their medical insurance, they also need to pick dental, vision, behavioral health, other wellness offerings, or even other insurances, like home, car, and life. Now, imagine that instead of making those choices individually, they were all bundled in the “family with children, making less $120,000 a year, and with less than $5,000 liquid cash on a monthly basis” plan. Knowing that each product in the bundle has been curated to fit their needs would relieve a lot stress associated with the decision making process and allow them to convert much faster than making all of those choices alone.
The double edge sword of choice is a hard one for many companies. But by giving your customers meaningful differences or equipping them with the informational tools to wade through complex choice themselves, you can increase sales and help consumers make the right choice for them.