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Simplifying Consumer Choices

March 6th, 2013 by Renee in Entrepreneurship

The everyday world has become overloaded with choices. While we can attribute this to a capital system that encourages competition and enterprise, it also means that for every product or service, there are many choices available for consumers. However, there comes a point when offering too many choices may hurt a business financially and actually decrease revenue. Knowing the difference between variety and overload can make a large difference in a business’ bottom line.

Cost Of Choices

To begin with, there is a financial burden to offering an over-abundance of choices. Whether you offer a product or service, there are always extra expenses when adding choices. For example, a small sandwich shop may have customers asking for a larger variety of meats or toppings. While satisfying your customers is important, if these extra supplies are going in the garbage because not enough people order them, it is not worth the small increase of business they may produce. A few people may want anchovies on their turkey sandwich, but most likely not enough to warrant keeping it in stock.

Another hidden cost of choice is that too many choices can actually hurt sales. While this seems preposterous, there have studies that show just that. In a study done at Stanford and Columbia Universities, researchers looked at the affect of the amount of choice options on consumer purchasing behavior. In three different studies, they looked at the difference involving offering only a few choices and expanded choices to determine whether the amount of choices changed consumer-purchasing behaviors. In all three studies, people were enticed by more choices but made more purchases (30% compared to only 3% in one study) when they had fewer options to choose from. The consumers were overwhelmed with too many choices and decided just not to buy, while when given fewer choices, they could easily make a decision.

Finding A Balance

The key is to finding the right balance between variety, cost efficiency and consumer behavior. Consider Baskin & Robbins and their “31 flavors”. Would they sell more ice cream if they had 50 or 100 flavors? Or would they end up throwing more away and frustrating customers (especially the mother’s of children trying to decide on a flavor when given so many choices!). Each business needs to find their right balance that will meet their customer needs as well as keep them competitive in the market.

Choice is a fickle element. Although many think more is better, they might just be shooting themselves in the foot when applying that theory to a business product or service. Consumers need enough choices to feel like they have options but not too may where they cannot make a decision. Those who can identify their best sellers and maybe add new elements on a trial basis, in small quantities, will most likely have better success.

1 Comment »

Simon (Bookkeeping Cheshire) says:

Thanks for sharing.

I see many businesses making this error, with the idea that the more choice equals more sales. People often just want a quick choice. The study conducted at Stanford demonstrates just that!

Glad its not just me who has noticed this…

Posted: March 11, 2013 @ 8:32 am

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