Written by Rebecka Lindholm
The Internet offers us as consumers an abundance of different choices. The many options and information online should enable us to find the most optimal choice. But can the number of options reach a point where they become harmful instead of helpful?
A simple test demonstrated by Iyengar (2000), suggests that presenting fewer options to consumers leads to an increase in sales. One Saturday in the local supermarket, she set up a display in which she offered 24 flavours of jam. 60 % of customers stopped for a taste, but only 3 % of those bought the jam. The next Saturday, she only offered six flavours. That day, 40 % of customers stopped for a taste, but 30 % of those bought a jar. This implies a 600 % increase in sales. Having fewer options appeared to be more effective than having many. How is that possible? In this blog post I intend to uncover why the abundance of options and information available often leads to a non-desirable outcome for both brand and consumers, and how brands can deal with this online.
Finding the optimal choice
Many people agree upon the increased freedom that the Internet has implied for us as consumers. First, it has allowed us to find an abundance of options when shopping online, and websites like ebay.com provide us with an infinite number of different products and brands that can be shipped from anywhere in the world. Second, the rise of the Internet has allowed us to access both firm- and consumer-created information that might be considered useful in making our choices (Labrecque et al. 2013). Online tools such as customer reviews and other comparative websites are indeed said to help us find options that better match our own preferences. The possibility of accessing information online and use it in comparing different options is indeed of great value to us, especially in terms of products that require more extensive evaluations, such as those within a higher price range or with certain technical functions. However, it appears that we often rely on the endless world of information online in seeking the optimal choice, regardless of product type or price. Often, we spend a proportionate amount of time browsing through multiple websites before we make our decisions. So how do we even find the optimal choice?
The rational consumer
Neoclassical economic theory suggests consumers to be rational in the sense that we seek to maximize our own utility while minimizing costs. We also compare all available options in order to make the most optimal decision given our own preferences (Dipayan, 2009). If we’re rational, more options should make us better off. We might therefore assume that the many available options that the Internet has to offer help us to find an optimal choice. But as the ‘jam test’ revealed, this is seldom the case. Obviously, the situation becomes more complex in an online setting than the context presented by the ‘jam test’. There are a lot more factors than just ‘the taste and the price of jam’ that we need to take into account online. However, the principle is still the same. Many online retailers offer an extensive range of products, which requires us to go through the entire list of offerings and compare it with those of competitors’ before making our choice. Our choices also appear to become more difficult when there is little difference between presented options (Iyengar, 2000). Considering the extensive amount of options and information that is available online, do we even have the ability to be rational in the choices we make?
Why having too many choices is bad for both consumers and brands:
1. The irrational consumer
The assumptions of consumer rationality described above have often been challenged by behavioural economists who suggest the inability for us to be rational in our choices due to bounded rationality. First, the concept of bounded rationality recognizes that we don’t have the time to collect all relevant information for each option. More importantly, bounded rationality suggests that even if we would not be limited by timely constraints, we do not possess the cognitive ability to process all available information for each option. Consequently, a wide range of possible options lowers the possibility of choosing the optimal one since our choices become biased (Pita et al. 2010). In that sense, the Internet does not facilitate the process of finding the best option there is, because it is simply impossible for us to consider all relevant information online. The multitasking world we live in causes a disruption of the decision-making process, hence preventing us to choose what is optimal.
2. The Paradox of Choice
The downside of having abundant choices is that it makes us miserable. Psychologist Barry Schwartz describes this phenomenon as the ‘Paradox of Choice’ (Schwartz 2010). According to Schwartz, individuals are either ‘maximisers’ or ‘satisficers’. A maximiser puts a lot of effort into finding the optimal choice, while a satisficer is content with something that is good enough. The abundance of options on the Internet has encouraged many of us to become maximisers of our choices. However, each new available option implies more trade-offs between existing alternatives. Our maximizing efforts to find the best options can in turn lead to anxiety and psychological stress. We are also more likely to become dissatisfied of our choices and to suffer from buyer’s remorse (Branco, Sun & Villas-Boas, 2016). No matter what we choose, it never seems good enough. The information overwhelm can also cause a fear of choosing the wrong option. This implies a situation in which all the information online might in turn lead to decision inertia in which the abundance of options and information causes us to become paralysed and not choose at all.
3. External factors
The many online tools are said to empower us by giving us more control. However, More choices imply more information that needs to be taken into account. Logically, if we become more open to the information we find online, it should also make us more vulnerable to factors that we do not even intend to consider. Those could be social media factors, such as peers, online influencers and word-of-mouth. Although these can be very helpful in the decision-making process, if we rely on these factors as a basis for our choices, they are less likely to fit our own personal needs (Merz & Chen, 2006). In other words, our choices will be guided by an external public influenced by social status and trends, and is hence likely to disregard what is the most optimal choice for us. For example, the information presented in your Facebook news feed is largely influenced by your friend’s Facebook activities, in which their interaction with a brand is likely to appear in your Facebook feed and in turn affect your purchase decision (Pariser, 2012). In that sense, although the Internet implies a higher degree of consumer freedom, it can also enslave us if we rely too much on other’s opinions.
So how can a ‘fewer-choice’- strategy be applied effectively online?
Many companies are beginning to recognize the implications that the number of options has on consumer choice. Today, a number of brands online are narrowing down the frame of options to a few choices to simplify consumer’s decision-making processes. The same principle of choice overload appears to reflect how users navigate websites.
First of all, the key is to remove redundant and unnecessary options to enhance user experience. Then what is the optimal number of options to give customers? Based on a number of e-commerce sites, it appears the most common number of options falls between 4 and 7. Amazon displays up to 7 books in their “customers who bought this also bought” section. Telia offers 5 different mobile subscriptions. The e-commerce site Zalando displays 4 options in their ‘you might also like’ section. Many other similar examples reveal that this is no coincidence. It also appears that the number of options displayed depends on the size of the screen. Nevertheless, this strategy does not imply that companies must eliminate products, but rather about simplifying of the process by narrowing down the presentation frame by organizing products into specific categories. A number of sites, such as Zappos and H&M use this technique by displaying 4-6 categories with a few numbers of sub-options within each category. That way, users can easily navigate and quickly find what they are looking for.
Other online brands, such as Mallzee and Nibbly have taken a step further by adopting the swipe interface used by Tinder. This strategy essentially implies that the consumer provides a ‘yes’ or ‘no’ answer or chooses between A or B. This technique might be better suited for millennials, who have short attention spans and spend 3.1 hours a day on their mobile devices. One of the benefits of swiping is that it allows companies to collect big data from users to create offers that are highly personalized. In that sense, we can pretty much let brands make the choice for us, but the choice is more likely to be (closer to) optimal and not involving the same complexity of the usual decision-making process. This substantially enhances the user experience and will most likely lead to higher conversion rates.
The Internet Freedom Paradox
Does a fewer options consequently restrain our freedom? That depends on how you look at it. We must admit that regardless of the amount of options and information we have access to online, our decisions are still likely to be biased (due to bounded rationality), non-autonomous (due to external influences), and often remorseful (due to our maximizing efforts). In that sense, our freedom is seemingly low. On the other hand, it becomes easier to make an optimal choice if you are presented with fewer options. Also, there is no place for remorse if you don’t know what to be remorseful about. As presented above, putting up a narrower option frame can be more efficient from a strategic standpoint. It allows companies to create the space necessary for consumers to make better choices and facilitate the brand’s core message to break through the clutter. As explained in the jam experiment, consumers are not just more likely to buy, but it also leaves them happier with their choices.
Philosopher Herbert A. Simon stated: "Decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world” (1979, p. 350). As implied by the ‘Paradox of choice’, the “satisfactory solution for a more realistic world”, is rarely satisficing enough. If having more options and information to consider always will make us doubt if the choice we have made is good enough, it will for the same reason never be good enough. In order to be happier with the purchase decisions we make online, brands must simplify the process for us by providing fewer options. Brands that can recognize and address these challenges effectively are the ones most likely to thrive in the future online marketplace. Exploring the potential for big data and personalized offerings makes the options more relevant to you and easier to make an optimal choice. On the other hand, the massive amount of information that companies are able to collect from consumers also runs the risk of being used in a deceiving way in which companies nudge us into a desirable direction. If the personalized options we are presented with online are based on our previous choices, do we as consumers run the risk of becoming ‘locked in’? It is essential that brands find the balance where they can be helpful without being intrusive, so that we as consumers are able to make the best decisions we can. In the end, having a choice is what matters most.
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