Reducing Product Selection Increases Sales
Many company’s under perform for a reason that appears counter-intuitive: too much product selection. Whether shopping in an online or physical environment, many well-intentioned consumers become befuddled from a plethora of products and configurations and end up purchasing less than was originally intended. These missed buying opportunities can sink product plans, spoil capital investment decisions and hinder customer satisfaction scores. Moreover, excessive product selection can spawn system complexity resulting in sub-optimal service and support, reduced scale economies and increased error rates. Recent thought leadership by consulting firm, Booz & Co., explored this marketing challenge.
Consumers seem to want more choice but shop at their own peril. In 1949 the typical US grocery store stocked 3,700 products. Today, the average supermarket has 45,000 products with the typical Walmart stocking around 100,000 products. For service businesses, the number of different product combinations can be mind-boggling. Starbucks, not content to offer only 87,000 drink combinations, recently launched the However-You-Want-It Frappuccino, with "thousands of ways to customize your blended beverage." Not to be out-done, Cold Stone Creamery provides customers with 11.5 million ways to customize their ice cream through a menu of mix-ins.
Some psychological studies analyzed the negative impact of too much choice. One study looked at participation in defined pension plans. When the plans offered only 2 funds, 75% of the relevant employees participated. When the plans offered 59 funds, the percentage of participants fell to 61%. Similar finding around "choice overload" have been observed in other situations as varied as buying chocolate, applying for jobs, and making healthcare decisions.
Why does a person’s behavior change when faced with an excessive number of options? Cognitively, individuals find it very difficult to compare and contrast the features of more than about 7 different variables. There are neurological limits on a human’s ability to process information. During choice overload, the task of having to choose will often generate frustration and suffering, not pleasure. Not surprisingly, buyers may skip the purchase altogether, reach for the most familiar item, or make a purchase decision that ultimately leaves them far less satisfied than what they had expected to be.
In market research, consumers often say they want more selection. Company’s willingly oblige by offering more products that target ever narrower needs and niches. What marketers should do is give consumers what they really need: new ways of shopping and an optimized product mix that reduces the cognitive demands of choosing.
There are a number of ways to do improve the choosing experience:
- Cull the number of options. A combination of quantitative modeling, product rationalization and qualitative techniques such as ethnography can be used to design the right product mix.
- Foster confidence with expert or personalized recommendations. In categories where variety matters like music, apparel and food, some companies such as Nordstrom and Amazon use recommendation engines and product experts to help guide customers through the purchase cycle.
- Categorize the offering so that consumers better understand their options. One useful approach is to group products according to certain characteristics or usage patterns. This enables consumers to quickly eliminate unwanted options and get to a decision faster.
- Condition consumers by gradually introducing them to more-complex choices. Consumers will embrace more complex configurations after they have been warmed up on simpler offerings. Beginning with fewer options also helps consumers better understand their own preferences, which in turn, enhances their choosing experience.
Clever companies know that happy consumers purchase more and are more loyal when the product selection process is simple. When it comes to designing the product portfolio and process, less is usually more.
Mitchell Osak – Strategist to the C-Suite
Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of winning strategy and organizational transformation consulting and educational solutions to global Fortune 1000 organizations. Mitchell can be reached at firstname.lastname@example.org