Streamline Consumer Choice for Higher Profits
Summary: As business owners, it’s easy to fall into the trap of thinking that throwing more choices out there to cover more bases is the path to more sales. This can work against us, as for every marketing and sales situation there’s a tipping point where more consumer choice actually has a demotivating effect on our customers. This blog article explores this “Paradox of Choice” and gives specific tips for finding your own business’ sweet spot of customer choice.
What skill do 2016’s most successful online marketers share?
Hint: It’s the same skill shared by the most successful marketers of fifty years ago when tv ads ruled, and fifty years before it was all print or person-to-person.
The most important marketing skill of yesterday, today and tomorrow has nothing to do with any specific medium, channel, or tactic. Nothing to do with SEO, PPC, CRM, or any of the other acronyms we toss around these days. It has to do with understanding people and their psychology. The successful marketers of any era chose customer psychology as one of our main starting points for the strategies, messages and touch points that we develop, with a special focus on consumer choice.
Understanding Consumer Choice
One major area of interest for marketers and others who study consumer psychology is called Consumer Choice. It looks at the effects choices have on buying patterns to understand how to provide and position choices to customers in order to maximize sales and profit. When looking at consumer choice, a concept that comes up time and time again is the Paradox of Choice. It was popularized by Barry Schwartz in his book, The Paradox of Choice, Why More is Less.
In a nutshell, the Paradox of Choice goes like this: When providing choices to customers, more is not always better. Just as providing too few choices to customers will have a de-motivating effect, providing too many choices will also lead to a demotivating effect.
The Jam Study, More is Less
A famous example of the Paradox of Choice is the 1995 Jam Study, led by Sheena Iyengar, a professor of business at Columbia University. Iyengar and her colleagues sampled different flavors of jams in a chain of high-end grocery stores. One group of shoppers sampled from 24 different jam flavors, a second group of shoppers sampled from 6 different flavors. What they saw was that shoppers who were presented with fewer flavors converted into sales at 30%, while the shoppers who were presented with more flavors only converted at 3%!
The Paradox of Choice is paradoxical because by solely mathematical logic, the group presented with more flavors should have converted into more sales. More flavors equals more individual taste preferences are being met, right?
Clearly, it’s not so simple, and the biggest additional “x factor” which needs to be accounted for is the psychology of the customer. For every customer and sales situation, there is a tipping point where providing more choices will stop improving results and start diminishing them. In the Jam Study, the psychological overwhelm of having to choose between so many different flavors outweighed any possible benefit of the greater variety.
Finding Your Sweet Spot of Consumer Choice. What’s Too Much, Not Enough, and Just Right?
To help determine how much choice you should provide to your customers and prospects at a given touch point (i.e. your website, your marketing campaign, your store), consider these 3 P’s:
- Persona – Who is your buyer Persona for this touch point or campaign?
- What do they need and value most from your business right now? Variety, simplicity, etc.?
- Typically how familiar is your Persona with your solutions? In general, educated buyers favor more choice, while buyers who are new to your product or service will appreciate the simplicity of fewer choices.
- Is your Persona a Maximizer or a Satisficer?
- Positioning – What Position are you claiming for your brand in your market? If you’re positioning your business around themes like ultimate variety, endless options and one-stop shopping, then more offering more choices to your customers is appropriate. If you’re positioning your business around themes like ease, simplicity and time savings, then you’ll likely want to keep customer choices to a minimum.
- Product – The type of product or service you sell also factors greatly into how much choice to provide to your customers. In general, think about reducing or simplifying customer choice if your solution:
- Is complex. Consumer technology, like cell phones, are one great modern example. Think about creating individual models or packages to streamline choice for your customers.
- Is high-consequence. Avoid putting a heavy choice burden on your customers if you sell products or services where making the wrong choice can have dire consequences. They’ll value the peace of mind of knowing you’ve pre-filtered for them.
- Is high-price. High-price is one form of high-consequence. The more expensive your solution, the more you’ll need to work to present a streamlined choice set to each customer.
- Is long-term. The longer your customer plans to live with a purchase, the more they’ll appreciate your help simplifying their choice.
The 3 P’s of Consumer Choice – A Practical Example
For an example, let’s say I own an eCommerce website that sells baby products, and I want to sell more infant car seats. Looking at my 3 Ps, I see:
- Persona – first-time parents, extremely busy, emotional, possibly overwhelmed, little to no existing knowledge of the product.
- Positioning – “We give peace of mind and simplicity to new and expecting parents”
- Product – complex, high-consequence, high-priced, long-term.
Now let’s say I sell 30 different models of infant car seats. Would I lay out all 30 on the page and ask the customer to figure it out from there? Probably not. Instead, I would think about featuring my three favorites in a “good, better, best” style array at the top. The other 27 models are still available to view and sort underneath. But now they don’t get in the way of those expecting parents who appreciate the speed, simplicity and peace-of-mind of having their choices boiled down to three expert-recommended options.
Note that simplifying and streamlining choice doesn’t necessarily need to mean reducing the number of products or services you provide (though it certainly can). It can simply mean being more deliberate about making sure you provide the right choices, to the right customers, at the right time. In this regard, your Website and your Inbound Marketing Funnel actually represent a unique ability to mitigate the Paradox of Choice. By delivering options tailored to individual personas, customer journey points, and funnel stages we can achieve a level of Just-in-Time Marketing (and choice) that wasn’t possible during the mass marketing era of fifty years ago, and wasn’t scalable in the person-to-person era of fifty years before that.
Consumer Choice – Summary
In this article, we’ve explored the Paradox of Choice, and looked at some ways to determine where and how to reduce or simplify consumer choice in your business to help boost profits.