When Choice Becomes Confusion

Everyone agrees that consumers want choice, whether they're shopping for a product such as candy bars or a service like carwashing. That's why the typical supermarket carries 50,000 different items today, about three times the number it did in 1980. Or why the number of styles of running shoes on the market has jumped from five to 285 in a generation.

Choice is good, but as the saying goes, "You can have too much of a good thing," whether it's cookies on a supermarket shelf or options on a carwash menu board. This is true even in our Internet era, when consumers can browse through millions of book and DVD titles on Amazon and download thousands of songs on their iPODs. As a growing number of marketers are discovering, offering customers too many choices without providing them with a simple way to navigate through all of their options is not only confusing, it's also likely to have a dampening effect on sales.

Too Much Choice Puts Customers in a "Jam"

Researchers at Stanford and Columbia universities conducted a study that illustrates this "choice paradox" principle. They presented one group of consumers with a display of six exotic jams, while they showed another group an array of 24 varieties. Both groups were given discount coupons they could use if they wanted to purchase the jams. Although the wider selection initially attracted more attention, only 3 percent of the consumers who saw 24 varieties actually made a purchase, while ten times more (30 percent) of the shoppers who were given "only" six choices went ahead and bought jam.

As this research indicates, giving customers too many options to choose from puts them in a "jam." When consumers are presented with an overabundance of alternatives, choice quickly gives way to confusion, which ultimately turns to stress, leaving them in no mood to buy anything.

In another revealing study, students who were given 30 topics to choose from for an extra-credit essay were less likely to write one than their classmates who were given only six alternatives. What's even more interesting, students from the 30-topic group who did decide to tackle a project tended to turn in lower quality papers – a sign of the stress caused by too much choice.

Professor Susan Broniarcyzk of the University of Texas led a group of researchers that studied the choice paradox at two convenience stores. During the study, the number of items in the stores' selections of popular products like candy, soft drinks and snacks was cut in half. Although the stores carried much more narrow selections after these changes were made, sales went up slightly, and customers reported that they felt less confused when shopping.

Give Customers What They Want, Instead of Too Many Options

In some cases, say marketing experts, companies allow the number of options they offer to mushroom because they aren't certain themselves about what their customers want and expect. The logic here is that "if we offer enough choices, we're bound to have something for everyone." Unfortunately, this often overwhelms customers, prompting them to tune out all of the options the business is offering.

Alexander Chernev of Northwestern University’s Kellogg School of Management advises business owners to invest more time upfront learning about their customers' wants and needs before building their selections of products or services. Doing this results in a more thoughtful and tightly focused mix of options, said Chernev that is easier and less confusing for customers to evaluate.

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The successful Costco chain has followed a strategy of managing choices for its customers. Instead of stocking five or ten brands in a category, Costco limits its selection to a single brand or two. This strategy has allowed Costco to achieve high levels of sales, profits and customer satisfaction (its dollar volume is greater than Sam's Club, even though it has 16% fewer stores).

"Costco really does reduce the level of complexity," said Tod Marks, senior editor of Consumer Reports. "The hand-holding and thumb-sucking? You don’t have to do it, because they've already made the choice for you."

Control vs. Choice

Apple Computer is another company that has successfully managed choices for its customers. When introducing its popular iPOD, Apple limited the line to only three basic models and a handful of colors. This decision on Apple's part made it easier for customers to focus on what the company's new product could do, rather than becoming distracted by an over abundance of model and color options.

Of course, a distinction must be made between the iPOD as a physical product sold at an electronics store, and the service that this product performs for end users. Unlike the product, the service is designed to expand the number of choices available to consumers by giving them the power to download thousands of different songs.

The key word here is "power." Through its technology, the iPOD empowers end users by enabling them to navigate their way through volumes of different song titles in a way that would be impossible in a store setting. Because these end users are in control of the transaction, they're not intimidated or confused by the overwhelming variety of choices facing them. Technology has allowed them to sort through their options at their own pace, without having to deal with a sales person or worry about the line of customers behind them. Without this level of control, most consumers would rather simplify their choices so their shopping experience is less confusing and more convenient.

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The same principle explains the growth of Amazon. According to a 2003 study conducted by the Sloan School of Management at MIT, Amazon stocked 23 to 57 times more book titles than brick and mortar "superstores" like Borders and Barnes & Noble. Yet rather than being confused by the large number of choices at Amazon, customers are drawn to it because they feel in control when shopping online in a way that they don't when they enter a cavernous store.

Dwarfing the six and 24 varieties of jams used in the Stanford/Columbia study cited earlier, Amazon sells 1,133 different types of jelly spreads. This creates no choice overload issue, however, because consumers can control their transactions at Amazon. Visiting the giant shopping site from their personal computers, consumers can work through the variety of options before them at their own pace, typically in the comfort of their own homes. They may even visit the site several times before they make a purchase without feeling the social pressure that they would at a store.

Perhaps even more importantly, Amazon is using technology to help customers navigate their way through the maze of choices. By taking advantage of the navigational tools provided by Amazon, customers can narrow their jelly search by price, brand, cuisine (such as Latin American or Asian) and category (chutney, marmalades).

Relying on technology to help guide customers through the purchase process isn't confined to Internet merchants like Amazon. Other retailers are identifying customers at their self-pay terminals, so the terminal display can present them with options that are tailored to their specific needs and interests.

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Getting Personal

Knowing more about your customers makes it easier to help them manage their choices and have a more rewarding shopping experience. This realization wasn't lost on consumer electronics leader Best Buy in 2003, after it discovered that 33 percent of its customers were leaving dissatisfied, often because the stores' broad focus left them feeling lost.

At this point, Best Buy implemented a new strategy that it describes as "customer centricity." Identifying five core groups of its best customers, from the homemaker looking for household electronics to the gadget freak obsessed with the latest technology, the chain designed its store departments around the needs of each. Depending on the demographics of their locations, each of Best Buy's 930 stores has a different mix of the five groups represented in its design and product selection.

By narrowing the product selection at its stores to reflect the specific demands of individual markets, Best Buy was able to streamline the shopping experience for its customers. The chain took a major step further in this direction when it deployed Personal Shopping Assistants (PSAs) to stores with a high percentage of "Jills," its code name for suburban homemakers.

The noncommissioned PSAs learn all they can about a customer's budget, needs and preferences so they can steer her through the store's electronic product selection, without overwhelming her with too many choices. "Product solutions are evolving faster, which makes it tougher for the consumer," explained Bob Willett, Best Buy's chief information officer and executive vice president of operations. "We want to act as the consumer's ambassador, the equivalent of a modern-day butler."

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Following a customer focused strategy and managing choice for shoppers has reaped handsome dividends for Best Buy. After two years, the company had implemented its new model at roughly half of its stores. Sales gains at those sites were double those at other Best Buy locations.

In an era when technology has empowered consumers and given all of us a multitude of options, success will require more than marketing products or service to customers, it will also be about helping them manage choices.