Choice OverloadIn today’s marketplace, consumers are bombarded with more choices than ever ? yet they are increasingly less satisfied. Whether they are buying a car, choosing a cell phone plan, ordering a beverage at Starbucks, or selecting a breakfast cereal at the supermarket, Americans are finding that simple decisions have turned complicated, time-consuming, and confusing.
One hundred years ago, customers clamored for more choices. Their lack of options was famously summed up in Henry Ford’s quip about the Model T: “People can have any color they want, as long as it’s black.”
Today, there are more than 1,100 vehicle models for sale in the United States, according to the book Trout on Strategy, by Jack Trout. And for each of these models, buyers can select from a rainbow of colors, plus scores of standard and optional features ranging from heated seats to global positioning satellite navigation systems.
The choices in nearly every product category have multiplied to the point where a simple purchase has become an excruciating experience.
For example, when Barry Schwartz, a professor of social theory and social action at Swarthmore College, strolled into a Gap store to buy a pair of jeans, he expected the transaction to take five minutes.
After all, the last time he bought jeans was a few years ago, and back then there was only one style. He asked a salesperson for a pair of jeans in his size.
Her reply was: “Do you want them slim fit, easy fit, relaxed fit, baggy, or extra baggy? Do you want them stonewashed, acid-washed, or distressed? Do you want them button-fly or zipper-fly? Do you want them faded or regular?”
As Schwartz recalled in a recent interview with The Times of London, he spent most of the day trying on his various options, not sure which one was best. Ultimately, he ended up with a pair of jeans that fit better than his old pair, yet he was less satisfied. After doing so much research, he expected the fit to be perfect, and he was disappointed. He was also worried that he had picked a style that was less fashionable than some of the many other styles he tried.
As Schwartz observes in his book The Paradox of Choice: Why More Is Less, “By vastly expanding the range of choices, [the store] had also created a new problem that needed to be solved... [Purchasing jeans became] a complex decision in which I was forced to invest time, energy, and no small amount of self-doubt, anxiety, and dread.”
Schwartz admits that giving consumers choices is a positive force that can be liberating. But when it is taken to the extreme, when the choices become overwhelming, then choice is a negative force that actually tyrannizes people.
Of course, there is no place in America that reflects the abundance of choice like the modern supermarket. According to research cited in the book An All-Consuming Century: Why Commercialism Won in Modern America, the number of items sold in supermarkets has doubled every 10 years since the 1970s. Today, the average grocery store stocks more than 40,000 items. And yet, as Trout points out, the average family gets more than 80 percent of its needs from a mere 150 items.
That means the typical shopper will seldom, if ever, buy 39,850 of the items in the average supermarket. Bypassing products is a way to avoid information overload generated by the tyranny of choice.
At his local grocery store, Schwartz counted 80 different pain relievers, 85 kinds of crackers, 120 pasta sauces, 150 kinds of lipstick, 275 types of cereal, 285 varieties of cookies, and 360 versions of shampoo.
The same syndrome of choice overload can be found at just about every type of retailer. At an electronics store, for example, Schwartz tallied 50 different DVD players, 85 different telephones, and 110 different televisions.
This problem is creeping into every purchasing decision. As Business Week noted recently, choice overload is “clear to anyone who has to pick from among an employer’s health-care alternatives, thought about switching from AT&T to Sprint, considered a course of college study, mused about buying a computer, flipped past the dozens of cable-TV offerings, or puzzled over 401(k) investments.”
There’s no question that choices have multiplied. But the key questions are these: Do all of these choices make people happier? Do they make consumers more satisfied with the shopping experience because they can get exactly what they want? The answer to both questions is a resounding no, according to the latest research.
A study on retirement plans revealed that the more choices of mutual funds a company offers its employees, the more likely they are to pick “none of the above,” according to The Boston Globe.
In another study that was conducted in a gourmet food store, one group of shoppers was given a choice of tasting six types of jam. Another group of shoppers could sample 24 varieties of jam. Theoretically, the shoppers that could try more flavors would be more likely to find one they would like to buy. That is not what happened, however.
Only 3 percent of the people who were exposed to the wide variety of jams actually bought a jar. Among the shoppers who were exposed to the smaller display, 30 percent ? or 10 times as many people ? purchased the product, according to the researchers’ report in the Journal of Personality and Social Psychology.
The same researchers conducted a second experiment, using college students as subjects. The students were asked to evaluate chocolates, and then given a choice of cash or a box of the chocolates as compensation. One group of students tried six kinds of chocolates; another group tried 30.
The students who tested only six chocolates gave the candy higher ratings for quality, and were four times more likely to ask for chocolate rather than money than the students who tested 30.
The researchers suggested at least two possible explanations for their findings. One possibility is that when people face too many choices, they reject all of them because the decision is too hard. Another possibility is that when people have to sift through many options to make a choice, they don’t fully enjoy the one they select because they know they may have passed up something even better.
Both of these answers agree with Schwartz’s theory about why people feel less satisfied when they have more choices. As the number of choices multiplies, so do the odds that the individual has made the wrong choice. Or at least, it may seem like the wrong choice because there’s no time to evaluate all the options, and there’s a high probability that a better choice exists.
As Schwartz explained in his interview with The Times: “The problem is that when you make a decision and it’s disappointing, it may actually have been a good decision, just not as good as you had hoped. For example, you could choose a pension fund that gives you a 5 percent return rather than the 7 percent you had hoped for. In fact, 5 percent is still good.”
Worse still, as other authors point out, our cornucopia of choices may be to blame for several social trends. In The American Paradox: Spiritual Hunger in an Age of Plenty, psychologist David Myers links today’s material abundance to the doubling of the divorce rate since 1960, the tripling of the teen suicide rate in that same period, and a three-fold increase in clinical depression.
The Trends editors are not convinced that there is a direct connection between the explosion of choice and all of society’s problems, but the fact that some pundits see it that way shows how the backlash against choice is growing. Among the advice that Schwartz offers are the following five guidelines for people who want to reduce the stress involved in making choices.
Limit your options. If you find that it costs you too much time, energy, and anxiety to make certain types of decisions, set rules for yourself. For example, just as you might set a limit of two drinks at a cocktail party, you could limit yourself to no more than two stores when you need to buy something.
Learn to accept “good enough,” instead of striving for the “best” choice. This will simplify your choices and allow you to feel happier with your decision. Schwartz calls people who always search for the perfect item “maximizers,” and notes they agonize for a long time before they make decisions, and then are rarely happy with them. In contrast, people who are “satisficers” make faster decisions and suffer fewer regrets. By settling for a “good enough” toaster, for example, you can save the trouble of searching for the perfect appliance, and you’ll be less likely to regret your decision.
Focus on the decisions that really matter. Some issues are more important than others, and are worth the time it takes to sort through all of the competing choices. For example, choosing the right private school for your children is an important decision that should involve doing research, visiting several schools, and making comparisons. By contrast, choosing the right backpack for carrying their schoolbooks should be limited to a quick trip to a single store and selecting from the stock on hand.
Don’t be tempted by “new and improved” options. When the 361st kind of shampoo hits the store shelves, pass it up. Except in cases when you are unhappy with your current product, continue to buy what you always buy.
Make your decisions non-reversible. Once you make a decision, it is inevitable that you will find something later that might have been a better choice ?just as married people can usually find someone who is more attractive than their spouses. To avoid regrets, decide that your choice cannot be reversed, and focus on what you like about it.
It seems inevitable that consumers will turn to tactics like these to cope with the overwhelming choices they face every day in the marketplace.
With that in mind, we offer four forecasts:
First, the most successful companies will refocus themselves and reign in “product proliferation.” As the Pareto Principle would predict, in most companies, the vast majority of profits come from a small number of products. All of the additional product line extensions typically confuse customers and even make a negative contribution to the company’s bottom line. Some companies are already starting to simplify their product lines and give consumers fewer choices. As Michael L. George and Stephen A. Wilson explain in their book Conquering Complexity in Your Business, the Sony Corporation expects to save $3 billion over the next three years by simplifying and standardizing its product lines. Similarly, when Procter & Gamble shifted marketing expenditures away from a broad base of brands to focus on core brands, its total market share increased from 24.5 percent to 28 percent ? and its stock price outperformed the Dow Jones Industrial Average by nearly 50 percent. Increasingly, executives who lead their industries will focus on the 20 to 50 percent of their products that contribute 100 or more percent of their net value creation, while getting rid of the rest.
Second, as choices continue to proliferate, people will look for ways to simplify their decisions. This creates opportunities for established businesses and entrepreneurs who can devise business models to sort through people’s choices for them. For example, Consumer Reports independently evaluates and rates all of the manufacturers’ offerings in various product categories. It is one of the 10 largest paid-circulation magazines in America, and its Web site is one of the most profitable business ventures on the Internet. Other examples include Edmunds.com, which rates and values cars; Pricegrabber.com and Nextag.com, which help people find bargains on-line; and services like Audio-Tech that choose the most important business books from the thousands published each year.
Third, managing choice will continue to drive resurgence in a few business models that were discredited during the dot-com debacle. One example is the sudden popularity of on-line grocers. Not long ago, these companies collectively burned through billions of dollars ? $830 million in Webvan’s case alone ? and most went bankrupt. Today, on-line grocers appeal to consumers who want not only convenience, but the peace of mind that comes from having someone else buy their groceries amid the bewildering array of choices in the supermarket aisles. TheAssociated Press recently revealed that firms like Freshdirect.com, which offer a limited, premium-quality selection of products, have seen their customer base expand by 400 percent in the past 12 months. At Safeway.com, business has doubled over the past two years, and the company expects it to double again this year. Overall, sales of on-line groceries should reach $2.4 billion in 2004. By 2008, revenues will approach $6.5 billion, according to Jupiter Research. That’s an annual growth rate of 42 percent.
Fourth, the emphasis on individual choice that underlies much of the public policy debate about health care and retirement plans will have to be adjusted to reflect this trend. As ineffective and inefficient as today’s bureaucratic Social Security and Medicare schemes are, these “no choice” programs offer the recipients the benefits of freedom from making a “bad choice.” By offering multiple alternatives, proposed and on-going reforms create anxiety upfront with most of the net benefits accruing later. As the British government has found in its effort to reform its social services, there is often an unanticipated backlash from those who would rather not risk “being wrong.” We hope and expect that American reformers will learn from the British experience and the ongoing confusion related to prescription drug benefits. If they do so, they will devise solutions that will offer alternatives to those who seek them, while maintaining the “one-size-fits-all” programs for those who prefer to minimize choice.
References List :
1. Trout on Strategy: Capturing Mindshare, Conquering Markets by Jack Trout is published by The McGraw-Hill Companies, Inc. ⓒ Copyright 2004 by Jack Trout. All rights reserved. - The audiotape or CD summary of Trout on Strategy is available from Audio-Tech Business Book Summaries. Ask for catalog #3042.2. The Times, April 1, 2004, "Isn’t Choice Only Good Enough for the Middle Classes?" by Peter Riddell. ⓒ Copyright 2004 by Times Newspapers Limited. All rights reserved. 3. The Paradox of Choice: Why More Is Less by Barry Schwartz is published by Ecco, an imprint of HarperCollins Publishing. ⓒ Copyright 2004 by Barry Schwartz. All rights reserved.4. An All-Consuming Century: Why Commercialism Won in Modern America by Gary Cross is published by Columbia University Press. ⓒ Copyright 2002 by Gary Cross. All rights reserved.5. Business Week, April 26, 2004, "Clobbered by the Cornucopia," by Hardy Green. ⓒ Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.6. The Boston Globe, May 16, 2004, "Paralyzing Seniors with Choice," by Ellen Goodman. ⓒ Copyright 2004 by The New York Times Company. All rights reserved.7. Journal of Personality and Social Psychology, November 2002, "Maximizing Versus Satisficing: Happiness Is a Matter of Choice," by Barry Schwartz, Andrew Ward, John Monterosso, Sonja Lyubomirsky, Katherine White, and Darrin R. Lehman. ⓒ Copyright 2002 by the American Psychological Association. All rights reserved.8. The American Paradox: Spiritual Hunger in an Age of Plenty by David Myers is published by Yale University Press. ⓒ Copyright 2001 by David Myers. All rights reserved.9. Conquering Complexity in Your Business by Michael L. George and Stephen A. Wilson is published by The McGraw-Hill Companies, Inc. ⓒ Copyright 2004 by Michael L. George. All rights reserved.10. The audiotape or CD summary of Conquering Complexity in Your Business is available from Audio-Tech Business Book Summaries. Ask for catalog #5042.11. Associated Press, May 17, 2004, "Internet Grocery Quietly Grows to $2.4 Billion Industry," by Jason Straziuso. ⓒ Copyright 2004 by The Associated Press. All rights reserved.
