Introduction to Consumer Choice
The Paradox of Consumer Choice is a term used by psychologists. It was initially coined by American psychologist Barry Schwartz in his 2004 book ‘The Paradox of Choice – Why More Is Less’. The premise being that typically, consumers like the opportunity to have a variety of products to choose from. Whilst, at the same time, they can become overwhelmed by which product to choose if they are given too many options. ‘The Paradox of Consumer Choice’ reflects this fine balancing act.
The Wider Context
This contradiction goes beyond FMCG. For example, mobile phones, holidays, fashion, and cars all offer different degrees of choice for the consumer. Yet, they can also all lead to indecision.
“Any customer can have a car painted any colour that he wants, so long as it is black.” – Henry Ford discussing the Model T circa 1908.
Limiting the choice to one colour meant that the car was affordable for the average American due to lower production costs. It also made it very easy for the consumer to make a buying decision no doubt contributing to its success. This is because it prevented potential deliberation and delay over which colour to choose. When Ford tried to produce more product options in the 1930’s, financial problems followed.
Famously, President Obama always wore the same outfit, a dark suit with a white shirt. The president’s reason was that he did not want to make choices about attire as he had too many other decisions to make. Psychologists call this ‘decision fatigue‘. It is why grocery shopping is often tiring when there is too much choice.
Consumer Choice in FMCG
To illustrate the Paradox of Consumer Choice, let’s consider the jam category as an example:
- Store A has 25 choices of jam. For each flavour, Store A has the following options: seedless, own label reduced sugar and no added sugar. Not to mention, for each option, different sizes, brand choices and pack type.
- To contrast, Store B has only 4 choices consisting of one jar, each, of the most popular flavours. This could be, for instance, raspberry, strawberry, blackcurrant and blueberry.
Studies like this have shown that Store A delivers more variety and more traffic to the shelf. However, Store B can deliver more sales because of the Paradox of Consumer Choice. For consumers whose aim is to buy raspberry jam, Store A can create indecision, and, ultimately, a nonpurchase decision. The offer in Store B, however, delivers a simple choice; raspberry jam or no raspberry jam. This poses an interesting question for Category Managers:
‘How can you compare 25 different types of jam?’
The answer is ‘You can’t!’. That is why often the overwhelmed shoppers may choose to buy nothing, or in the language of consumer psychology, make a nonpurchase decision.
So, What Does This Tell Us About Consumer Choice?
A wide choice of products means there are likely fewer differences between them. This can mean there is less chance of one product being substantially better than others. For consumers who make a purchase, this can lead to dissatisfaction because:
Expectation Can Outpace a Good Choice
Some consumers may feel they could have made a better choice. They will then link a negative choice with feeling negative about the product itself. When presented with a large product offering, the consumer will expect to make a perfect choice. Any deviation from that outcome results in a questioning of the choice made. In other words, more options make it easier to regret the decision even if the decision was a good one.
For example, if only one flavour of crisps is available on the shelf the consumer has no expectations. They will still be satisfied with the one flavour. Now say there are 100 flavours to choose from. The choice is still a good one, but it is no longer perfect. The consumer will enjoy the packet of crisps. However, the feeling of dissatisfaction is present because the purchase is now below expectations.
A good choice of product depends upon others that we compare them to. With many options, it is easy to focus on all the positive features that we are missing out on. This is a term known as ‘Opportunity Cost’. This is the benefit that you give up when making a decision or selecting a specific course of action. It is the common experience of someone else’s meal, in a restaurant, being more appealing than your own, when the food arrives.
For non-purchasers, the process actually outweighs making a purchase decision at all when presented with too many options. This is known as overchoice, or choice overload, and can actually lead to a decision paralysis.
The key here, however, is to ensure that an optimal number of options are provided to allow satisfaction but prevent the consumer from feeling overwhelmed, anxious and demotivated (see graph below). So, it is the differences between options which deliver purchase satisfaction and can lead to ideal consumer choice.
Learnings for Category Managers
Establishing an ideal range is, therefore, key for Category Managers. You can achieve differentiation via subcategories, such as:
- Standard Jam v Healthier Jam.
- Different consumption and usage occasions. For example, Baking Jam v Breakfast Jam.
- Hero offerings, such as ‘Voted the best Jam’ in a Food publication or ‘UK’s No.1 selling Jam’
These subcategories can make choices simpler for the consumer. Typically, suppliers of market research data only refer to attributes of products which are visible. They are on pack, such as brand, flavour and weight. Category Managers should discuss specific consumer segments, with their data supplier. This allows them to better understand the consumer decision process.
An obvious example is the greetings cards category which can lead to a choice of hundreds in store. By grouping by occasion, the choice is less overwhelming. The purchaser will feel in control and satisfied. This is also similar to the magazine aisle.
The merchandising trick of Brand Blocking is also a useful tool for Category Managers to consider. For categories with high brand loyalty, it allows the consumer to select their favourite product within their favoured brand. As well as an easier experience for the consumer, the retailer can also deliver a value message by promoting particular brands at the same time.
From the outset, consumer choice seems desirable. It enables the consumer to have control over their own purchases for their own benefit. However, high levels of choice can be a bad thing. They can lead to dissatisfaction as the consumer contemplates how their needs could have been even better met by another product. Category Managers need to understand the psychology of choice and provide the ideal range to achieve a balance of choice with consumer satisfaction.