Choice Overload: How Consumers Decide

It is a common belief that a consumer is better off when she has a variety of choices.

The concept of choice and the ability to exercise it is central to the idea of autonomy in several societies. Not so long ago, most people lived predestined lives. Things are not the same. I think - at least partly - this memory of our recent past has led to the glorification of the notion of having options. According to Barry Schwartz, we have embraced this individualist ethos, and it has blinded us to the ill-effects of choice overload.¹

According to Dilip Soman of the University of Toronto, the range of products available in an average North American supermarket has gone up by about 55% in the last ten years. In an informal survey of local drugstores, he found that the number of pain and fever medication ranged from 55 - 211 unique varieties.²

Though this explosion in choice is instrumental to a consumers well-being, it is important to note that - like any good thing - too much choice puts a dent in it. Several behavioural researchers have demonstrated that people find it hard to choose when presented with a diverse array of options.

Introducing complexity in choices by having too many options has several consequences, but I will go over three of note:

• Regret: As the number of options goes up, so do expectations. A consumer comes under pressure to choose the best possible outcome. A high expectation threshold can accentuate the difference between expectation and the actual experience in a phenomenon called Expectation - Disconfirmation. We have all gone through this brand of regret.

  There is also the fact that consumers are not confident in their choices - what if the alternative is better than the chosen one. It is easy to perceive the grass greener on the other side, after all. It is easier still for a consumer to extend this feeling of regret to your brand.

• Deferral: Sometimes choosing several options puts a consumer under so much strain that they either defer making the purchase or drop out of the market altogether, both bad outcomes for a competitive business.

• Defection: It is a noted fact that a business with several offerings can lose ground to a competitor with a more streamlined product portfolio.

  Look at American Express, once synonymous with exclusivity and privilege, had about 28% of the American market with a handful of cards in 1988. This number dwindled to 18% by the early 2000s with a flurry of new cards (nearly 10!).³

As a consumer-facing business, it is essential to evaluate the impact of every additional option imposed on the consumer. A streamlined portfolio can mean numerous, happier customers.

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References:

1. Schwartz, Barry. The Paradox of Choice: Why More Is Less. Harper Collins, 2004.
2. Soman, Dilip (2010), “Option Overload: Dealing with Choice Complexity,” Rotman Magazine, Fall 2010
3. Ries, Al, and Laura Ries. The 22 Immutable Laws of Branding: How to Build a Product or Service into a World-Class Brand. HarperCollins e-Books, 2009.