By now it has started to seep into the executives' consciousness that more offerings for customers may not be a good thing: Too much choice confuses buyers, and they will often procrastinate or walk away. In Strategy+Business magazine, Sheena Iyengar and Kanika Agrawal of the Columbia University Business School offer four strategies for easing the customer's burden:
CUT THE NUMBER OF OPTIONS
This is the most obvious, but companies avoid it, worried they might give up shelf space to competitors. But the authors argue that careful trimming can lower costs and increase sales by improving the choosing experience for customers. They point to Procter & Gamble Co., which in the mid-1990s winnowed its 26 varieties of Head & Shoulders anti-dandruff shampoo down to 15, eliminating the least popular. Result: Sales jumped 10 per cent. When Golden Cat Corp. junked its 10 worst-selling, small-bag cat litter offerings, the result was a 12-per-cent increase in sales. Better yet, with distribution costs cut in half, profit jumped 87 per cent.
CREATE CONFIDENCE THROUGH RECOMMENDATIONS
Too much choice makes customers feel uncertain. But in some areas - such as books, recorded music and video, and clothes - a lot of choice is vital. You can counter the resulting timidity, however, by offering customers expert reviews and recommendations. "Even non-expert advice can prove useful when there is consensus among a large number of reviewers or when the consumer trusts the source. This is one reason for the popularity of shopping websites with user reviews (such as Amazon.com), and also for the growing popularity of retailers ... that post recommendations for some of the products they carry," the authors write.
PUT OPTIONS IN CATEGORIES
Help the buyer by creating categories from which to choose. Instead of choosing from 80 to 100 products, for example, the customer sees only eight categories, and then reviews the options in the preferred category. The authors note that wine retailer Best Cellars divides its 100 wines into eight simple categories, such as fizzy, juicy, and sweet. They stress that you should limit the choice to no more than 20 categories, with 10 or fewer options in each.
CONDITION THEM FOR COMPLEXITY
For certain kinds of decisions, you can nudge consumers forward by encouraging them to learn from, and build upon, their own previous choices. Prof. Iyengar, for example, with other researchers found that when buyers of a German manufacturer's cars were faced with a total of 144 customization options, they fared better - were more satisfied with the final car - if their choices initially were from categories with the fewest number of options rather than starting with the multi-option categories. "This research shows that people can handle a large number of options, if they start off in the shallows and then slowly move toward the deep, all the while building skill and nerve."