Growth Insights for CEOs

The “Choice” Choice - Placing the “Right Bet” on Product Mix

Posted by The Chief Outsider

One of the most important choices CEOs and their marketing teams must make is how much choice to offer customers in the product or service lineup.  Many have wrestled with two opposing schools of thought – “less is more” and “more is better.”  

Two Schools of Thought

The “more is better” school is far and away the predominant group. Their approach is to give the customer exactly what he or she wants.  They view the days of “one size fits all” as ancient history, and any move to limit choice as the Neanderthal ramblings of those “brute force marketers” of yesteryear, as typified by Henry Ford and the “any color you want as long as it’s black” mindset.  They reason the more customized the purchase options, the better the chance of attracting customers. Cutie catcher small

The “less is more” school’s point is perhaps best articulated by the mantra: “Choice is the enemy of conversion.” As politically incorrect as that may sound today, there are prospects that are prepared to buy, but when faced with “choice overload,” they have difficulty making a decision. The fact that they are stymied and have to “think about it” should strike terror in the hearts of those holding the budget that generated that call, click or drive in the first place.  

The Answer (?)

So, what’s the right choice on how much choice? 

A recent article by Sheena S. Lyengar and Kanika Agrawal, of the Columbia University Business School, published in the Winter 2010 Edition of Strategy+Business may hold the answer. In the article, entitled “A Better Choosing Experience,” the co-authors suggest the decision is less about the quantity of choices and more about the experience.  Iyengar and Agrawal point out that if the market in which you compete is already saturated with choices, you cannot gain a competitive edge by offering even more.  But, you may be able to gain competitive advantage focusing on the process of choosing, i.e. making it simpler, less stressful and more satisfying for your customer.   How?  They offer four paths forward:

  1. Yes Virginia, you can cut the number of options. This has to be a careful balance, as customers do like choice. The authors note that psychological studies have shown it is very difficult to compare and contrast the attributes of more than about seven different things at once.  Beyond that, customers may become frustrated or overwhelmed, perhaps opting not to buy altogether, or retreating to the most familiar option.    
  2. Give customers confidence with expert or personalized recommendations. According to Iyengar and Agrawal, reducing the number of options may not work for highly differentiated goods like books or music. Here, the goal may be to help the customer confidently cut through the complexity. The authors recommend two approaches. First, you could give customers access to experts (e.g. expert reviews and recommendations).   
  3. Categorize customers’ options. It is critical to pre-sort the product or service offerings into logical categories that help customers quickly assess and easily eliminate what they do not want. The authors suggest no more than 20 categories with 10 or less options in each. This establishes a framework for making sense of a large assortment, giving the customer a feeling of empowerment from the choices, yet without feeling overwhelmed. 
  4. Condition customers for complexity. What do you do when your product/service requires the customer to make numerous choices to customize their own solution?  The authors cite research with a major German car manufacturer’s customization website that required 144 choices in eight different categories. The study showed that starting customers off with the categories that commanded the least number of choices and working them up to those with the most number of choices yielded much better results than the other way around.    

To download the complete white paper on this subject, click here.

- by Mike Amburgey, Partner & CMO

Topics: Customer Intimacy, Product Strategy, CEO Strategies, Business Growth Strategy, CEO Choices, Strategic Insights, Data Matters in Marketing

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