The more choices your customers have, the better. Right?
According to traditional marketing thought, that may have been the case. However, that train of thought no longer applies to the modern market. Although it may make sense to you to offer your customers as many choices as possible (say, 50 different cabinet options instead of 2), that theory may be costing you customers and business.
According to research, having too many choices often overwhelms customers so much that they have trouble making their decision. In fact, they may leave your company and go to another that offers fewer choices.
Let’s take a look at the paradox of choice and how you can use it to your advantage to raise your bottom line.
The Theory Behind the Paradox of Choice
It all started back in the year 2000. Over the years, many people thought that offering more choices to customers made them happier and more likely to return to their business. However, psychologists Sheena Iyengar and Mark Lepper had a different idea. So, they set up the now infamous jam study. To start their study, they set up a table outside of a popular supermarket. On day one, they set up their table with 24 different types of gourmet jam.
When someone chose to sample one of the jams, they received a $1 coupon to use on any jam that they wanted. On the second day, they set up a similar table. However, there were fewer types of jams this time around. This day, there were just six types of gourmet jams on display. What Iyengar and Lepper found was a bit surprising.
Although the table with the larger variety of jams attracted more visitors, this didn’t translate into sales. In fact, the people who visited the larger display were one-tenth as likely to purchase a jam as the people who visited the smaller display.
What This Means for Your Business
Many companies out there operate on the assumption that more choice is better for their customers. Unfortunately, too much choice often leads to the “choice paralysis” that Iyengar and Lepper documented. Americans are already faced with several choices each day. In fact, the average American makes around 70 conscious decisions throughout the average day.
But it isn’t just your customers that you’re hurting when you offer too many choices. You’re also hurting yourself.
Let’s look at three ways this might be hurting your business:
- You Lack Focus: When you try to offer every single service out there, you never really become an expert in any of them. If you’re a smaller company, this hurts you even more since you only have a limited amount of capital. Although it can be tempting in the beginning to try to perform every service just to get more customers, you’re hurting yourself in the long run. Focusing on fewer options allows you to specialize, scale, and create a more effective marketing strategy.
- You Bog Down Your Sales Process: Imagine for a moment that you’ve just sat down at one of the several chain restaurants across the United States. What does the menu look like? More than likely, if you’re in a place like the Cheesecake Factory, you have more options on the menu than you could ever need. Now, think about how long it takes you to make a decision with that menu. When your company offers just a couple of services that you do well, the customer can make their choice much quicker.
- Your Customer May Experience Regret: Again, put yourself back in that Cheesecake Factory. Maybe you got the steak. With all of the options that you had, you might now be regretting the fact that you didn’t order something else. You don’t want your customers to experience buyer’s remorse, and they’re less likely to do so if they had fewer choices to begin with.
If you think that you might be offering your customers too many choices, it isn’t that complicated to narrow them down a little bit.
In my Experience
I sell a home service, as do many of you that are reading this. Particularly, screen enclosure mesh. In a nut shell there are basically 2 types of materials that we over, combined with 2 options of mesh density for each – so 4 choices for a customer to choose from. There are more options that exist but the difference between all of them is rather negligible and the cover all the practical needs of the material. With just 4 options of mesh, a rather simple product, offered by us, I’ve seen customer customers go back and forth for weeks holding each little sample up to the light time and time again. I’ve actually thought about reducing the options further.
Even with a suitable offering of 4 options, I still get sales representative coming into my office to pitch some new type of mesh, that falls in between the others. I say no.
My company also offers a restoration service for screen enclosures which involves repainting. The extruded aluminum members for such screen enclosures come in 2 colors, dark bronze and white. You’d be shocked at how complex it is to decide between 2 colors. Although not explicitly advertised, we allowed some customers to choose from any color imaginable for the repaint. As you’d expect it bogged down the sales process and turned simple decision between 2 practical colors, into a several week long process of comparing paint samples, which often led to know decision. When a non standard color made it into the work queue, it cause frustration. We had to buy the paint on the fly, as we no longer had it in inventory. We had excess paint that couldn’t be used – inefficient. The electrostatic paint guns we require further cleaning before and after use with a new color. The customers would change their mind once the color was partially applied. It was frustration at its finest. We quickly ended that option and are successful with just the 2 classic color options.
Narrowing Down Your Services and Products
You can start by determining which of your services or products have the highest sales and the highest margins. Coincidentally these are also usually the ones your staff enjoy doing the most and you add the most value to your customer. If you have a couple of products that sell well and also have high margins, your work is done. You can cut the rest of your services – you need to specialize. By cutting those services that don’t really sell or have lower margins, you’ll save yourself money and increase your overall profits.
For some real-world motivation, you can look at Procter and Gamble. A few years back, Procter and Gamble was thinking about how they could increase sales for Head and Shoulders. One of their solutions was to decrease the amount of products that they offered. When they went from 20 different Head and Shoulders products to 15 Head and Shoulders products, they realized a 10% increase in sales.
Another effective way to determine whether you’re offering too many choices is to simply talk with your employees. When you ask your employees to describe the difference between your products and services (particularly the financial advantages of one product over another), what do they say? If they can’t articulate to you the difference (or advantage) between your services, it’s likely that your customers can’t tell the difference either.
Unfortunately, simplifying your business and cutting down to only a few services or products isn’t going to instantly bring you thousands of customers. To do so takes a lot more hard work than just selecting the right products or services to sell.
However, it’s a great first step.
By cutting down the options that you give to your customers, you may see a slight increase in your profits or the number of leads that you’re able to convert into actual sales. When it comes to building your business, every new conversion counts.
What has your experience been?
Let us know how your company deals with the paradox of choice in the comments section below!