strategy+business

ISSUE 61 WINTER 2010 A Better Choosing Experience

When are overwhelmed with options, marketers should give them what they really want: ways of shopping that lower the cognitive stress.

BYSHEENAIYENGARANDKANIKAAGRAWAL

REPRINT 00046 features marketing, media & sales 1 ABETTER CHOOSING features

EXPERIENCE sales & media marketing, by Sheena Iyengar and Kanika Agrawal

When consumers are overwhelmed with options, marketers should give them what they really want: ways of shopping that lower the cognitive stress.

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When Baskin-Robbins, now the world’s largest ice Walmart has 100,000 products. There are even more cream chain, opened in 1953, its line of 31 flavors — options online, including 27 million books on Amazon one for every day of the month — was a novelty. At the and 15 million date possibilities on Match.com. Heinz time, such variety was unheard of, and Baskin-Robbins was long famous for its “57 Varieties,” and Burger used it to stand out from other chains. Cofounder Irvine King for letting you “Have It Your Way,” but newer Robbins said, “We sell fun, not just ,” and part businesses have upped the ante. , already of the fun for customers was the experience of seeing known for its 87,000 combinations, recently and tasting so many new flavors. The company contin- launched the However-You-Want-It Frappuccino, with ues to emphasize variety; it has developed more than “thousands of ways to customize your blended bever- 1,000 flavors of ice cream to date, 100 of which are age.” Cold Stone Creamery claims that its menu of mix- rotated through its stores in a typical year. ins provides more than 11.5 million ways to “customize Today it seems obvious to offer consumers more your ice cream treat.” Long gone are the days when an choice — but the experience is no longer a novelty, array of 31 flavors knocked our socks off. or nearly as much fun. Whereas in 1949 the average Consumers have grown accustomed to having a lot grocery store stocked 3,700 products, the average super- of choice, and many people still express a strong desire

Illustrations by Andreas Samuelsson today has 45,000 products, and the typical for having more options. But that doesn’t make it a good

su 61 issue strategy+business she realized that although she greatly Iyengar initiated the experiment after enjoyed visiting the store, she often walked out empty-handed, unable to produce, packaged foods, and wine. settle on just one bottle of mustard or To find out, Iyengar and her collaborator, cery store renowned for its huge selection of olive oil when she had hundreds of options. Might other shoppers be experiencing the Calif., location of Draeger’s — a specialty gro- same problem, she wondered? study of shopper selection at the Menlo Park, Mark Lepper, set up a jam-tasting booth near the us (Sheena Iyengar) conducted a well-known entrance of the store. Every few hours, the booth As might be expected, 60 percent of the incoming switched between offering an assortment of 24 jams and offering an assortment of six. The researchers for some time. For example, in the mid-1990s, one of wanted to know which assortment would attract more The Multiple-choice Problem The peculiarities of choice have been evident alternatives, you’ll be one of those rare companiesofferings whose rise to the top by raising customer spirits. people and which one would leadobserved to the shoppers higher as sales. they They moved fromthe the jam booth aisle, to which boasted 348 varieties. shoppers stoppedbut when only 40 24 percentplayed. stopped jams when Clearly, six were people jamsmore found were displayed, attractive. dis- the However, when largerwent these assortment to same the shoppers jam aisle to pick up a jar, the shoppers Kanika Agrawal [email protected] is a research assistant at the Columbia Business School and a graduate of Columbia’s MFA program in writing. (Twelve, 1. Cut the number of options. 2. Create confidence withrecommendations. expert or personalized 3. Categorize your offerings so thatter consumers bet- understand their options. 4. Condition consumers by graduallythem to introducing more-complex choices. Offered together, these actions can distinguish your The goal of a new approach to choice That is why, rather than helping consumers better company. Rather than trapping people in a morass of should not be to manipulatemaking consumers into choices that aren’t right forrather them, to but collaborate in a waythe that consumer benefits and both the marketer. Although people tend to bemakes skeptical to of “guide” them, when any it attemptsyou comes to a truly choosing, can business helpaccomplish this, here consumers are help four actions themselves. you To can take: satisfy their preferences, themade it explosion more of difficult overallidentify choice what for they has want people and to how to get it. Thus, if the market foris your saturated product with choice, you can’tcompetitive gain edge by a dumping more choic- es into the mix. Instead, you canand outthink outperform yourturning competitors the process of by choosing into an experience that is more positive and less mind-numbing for your customers. You can design a more helpful form of choice. idea. There are neurological limits on humans’ abilityprocess to information, and the task of havingoften to experienced as choose is suffering, not pleasure. Sheena Iyengar [email protected] is the S.T. Lee Professor of Business at Columbia University and a recipient of the Presidential Early Career Award. She is the author of The Art of Choosing 2010), from which this article is adapted.

features marketing, media & sales 3 features marketing, media & sales 4 Vanguard Group, Iyengarcollaborators, and Wei her JiangHuberman, tried and to Gur determineso why few of the 900,000 employees cov- ered by Vanguard were participating in their defined-contribution retire- ment plans — also known401(k) as plans. Analysisrevealed of that participation fell the signifi- data cantly as the average number of funds in a plan rose. By controlling for indi- vidual-level variables such as age and We see this frustrated response to “choice overload” These findings are particularly significant when you choosing, people often become overwhelmed andtrated. As frus- a result, they may forgoreach the for choice the altogether, most familiarthat option, ultimately or leaves make them ahad far decision expected less to be. satisfied than they even when the decisionexample, has in serious consequences. 2001, For atdirector the of request the of Center for Steve Utkus, Retirement Research the at the , as well as plan-level variables suchthe as company the and size the of extent of employertributions, matching con- Iyengar and herthe collaborators decline showed in that average participation ratesincrease was in due choice. When to plans an offered75 only percent two of funds, the relevant employees participated; when plans offered 59 funds,fell the to percentage 61 percent. of participants consider the benefitscompound , of -exempt contributions, and defined-contribution em- plans: ployer matching in many cases. Even randomlyfunds picking is still a better financial move than not participat- believe for managing those choices. People like the idea of choice. But they overestimate their own capacity But they overestimate their own capacity for man- These observations may seem to By observing the shoppers and eavesdropping on contradict what youabout consumers. People already like the know of idea choice. It’s exciting to hearexotic a flavors list and of toof see colorful a jars, wide anya wall larger of number of which choices cancan makes people be exercise feel yours. more that they Having consumers control like over the what promisenumber they of of options, choice: buy. the the greater And the greater likelihoodsomething of the that’s perfect finding for them. In short,that they having more choicesatisfaction. gives them more power and their conversations, the researchers discoveredsmall that assortment the helped narrow down choices,the whereas large assortment left people confusedtheir and unsure own of preferences. Oflarge those assortment, only who 3 stopped percent endedof by up jam buying the — a jar farjam fewer after stopping than by the the 30 smallment. assort- percent Taking who into bought that account the the larger display fact wasular, more Iyengar pop- andthat Lepper people were calculated more thanas six likely times to buysmaller display. jam if they saw the who had seen onlydeciding what six to purchase. jams had a much easier time aging these choices. Psychological studiestently shown have that consis- it’s very difficult totrast compare and the con- attributes of morethings. than When about seven faced different with the cognitive demands of

aktn,mda&sales & media marketing, 5 features qiisa h ubro pin oe undermining rose, options well-being. financial of long-term their number of the wisdom as accepted avoid equities entirely the to likely more on became advisors), (based financial equities contribu- to their of percent tions 90 to should 80 allocating who been long-term 20s, have their in in employees markets Even . Un- and all. bonds at outperform to equities guaranteed virtually are to equities them, contributions for fortunately their allocat- of avoid market to any money likely ing more or also were bond to they to and contributions funds), opposed their (as of funds less equity percent employees 3.28 plan, allocated a in offered funds additional 10 every For options. more with chose plans from they when average, on worse made participated who em- ployees the that discovered Kamenica it. skipped just or decision the off put- ting of kept choice, many much yet too And annual by bonds). overcome employees, total and the stocks percent of 9 mix a a on (assuming return income of her percent who or 5 peer save his identical and immediately an participate than to have 60 chose would retirement age her at year or account one his savings in just less US$18,540 for with plan up ended 401(k) her in or participating postpone medi- his 25-year-old to chose a study, who the earner salary of an time the At all. at ing hspeet osdrbeopruiyfrmarketers, for opportunity considerable a presents This decisions. healthcare choco- making buying and jobs, as for applying varied late, as situations in observed been naohrsuy yna n Emir and Iyengar study, another In h eeeiu fet ftomc hiehave choice much too of effects deleterious The netetdecisions, hnPotr&Gml inwdits winnowed Gamble & Procter When nidnrf hmo ont 15, to down shampoo anti-dandruff 6vreiso ed&Shoulders & Head of varieties 26 ae updb 0percent. 10 by jumped sales hsdsr u totnde oehr hngood. than harm more does often it but — desire fulfill this to order in options and product expanding keep businesses and choices, more the for desire of a expressing one at keep People way choice: different consumer of contradictions a essential in looking requires it but ote.Tefloigfu prahswl epyou help will challenge. that approaches meet four following it The give them. to challenge to your it’s And fun.” want “They have said, might Baskin-Robbins of Robbins Irvine As them. want, they really what they not what them give should We no. and Yes want? they what consumers give to have Don’t marketers Fun and Trust, Confidence, 0wrtsligofrnsi h ml-a a itrcate- litter cat small-bag the its in of offerings worst-selling rid 10 got Corporation Cat Golden In the percent. case, similar 10 a by jumped sales popular, least the nating elimi- 15, to down shampoo anti-dandruff Shoulders Head & of varieties 26 its winnowed Company Gamble & Procter when mid-1990s, the In consumers. ex- for perience can choosing the trimming improve and careful sales, increase But costs, lower competitors. their shelf to losing space of afraid they’re consumer because offer of of they number context products the reducing the avoid in companies Most rarely choice. but more,” is “less atmr hie oeotnta o,te actual- they not, than often more choice, more want .Ctteralternatives. their Cut 1. ywn better a want ly say hywn.We osmr a they say consumers When want. they hoigexperience. choosing ofe ofdn ftheir of confident feel to hie,ntquestion their not enjoy choices, to and want trust they process; choosing the during tent compe- and preferences o’ehadi adthat said it heard You’ve hywant They

strategy+business issue 61 gory. This led to a 12 percent increase in sales and slashed costs by half; the end result was an 87 percent hike. Another example comes from a 2001 study that tracked an online grocer that had made substantial cuts in the number of products it offered, across 94 percent of all the product categories. Not only did sales rise an average of 11 percent across 42 cate- people don’t need to become specialists in jam or mutual gories, but 75 percent of its customer in- funds to make decisions expertly. In fact, even if they did creased their overall expenditures. become experts, their knowledge would be limited to a If you’re working hard to explain to your customers specific domain and would not allow them to make bet- — and perhaps even to your employees — the differ- ter overall choices. However, novice consumers can ences among the variations you offer, then it’s time to become expert general consumers by learning to rank think about making a few cuts. If the poor performers and structure their choice sets the way that experts do. aren’t evident from sales figures, focus groups and online Marketers can thus help novices make more edu- networks can help you separate the wheat from the cated guesses and create confidence in their choices by chaff. Potential consumers should be able to zero in on giving them easy access to expert reviews and recom-

a product’s defining characteristics and explain why it is mendations. In other words, you can attract consumers features (or is not) appealing to them. If people respond vaguely by allowing them to skip over much of the information- or inattentively, that’s a signal that the choices you offer processing component of choosing, thereby minimizing are not distinct enough and should be consolidated. their cognitive stress and enabling them to make good 2. Create confidence through recommendations. choices. Even non-expert advice can prove useful when sales & media marketing, Reducing options works well when the variations there is consensus among a large number of reviewers or among products are relatively small. But for highly dif- when the consumer trusts the source. This is one reason ferentiated — books, prerecorded music and for the popularity of shopping websites with user video, clothes, and many housewares — you can’t get reviews (such as Amazon), and also for the growing pop- away with offering a small selection. (Even if you could, ularity of retailers that post recommendations for some you probably wouldn’t want to, because niche purchases of the products they carry (such as Whole Foods or New can cumulatively contribute heavily to sales.) Instead, York’s Fairway grocery chain). you have to offer a wide variety while helping consumers Another way to give consumers access to recom- navigate the complexity so they still have a positive mendations, especially when tastes vary or ratings aren’t choosing experience. How do you give consumers easily available, is to set up automated systems that gen- enough confidence to overcome the complexity of a erate suggestions based on consumers’ expressed prefer- 6 large choice set? By turning to the people who already ences. These systems, also known as “electronic agents,” have that confidence: experts. are software programs that guide people by analyzing Through study and practice, experts in any field their prior purchases or their answers to survey ques- learn to simplify, categorize, and prioritize information, tions. If consumers are willing to invest a little time and to recognize patterns. This allows them to create teaching a well-designed system about their preferences, order out of seeming chaos. For example, a chess player then the system can serve as a personalized expert for thinking eight moves ahead is presented with as many them. People don’t usually trust programs as much as possible games as there are stars in the galaxy. He or they trust other people, but trust in well-performing she can’t possibly consider every option. The critical dif- electronic agents tends to develop over time. ference between novice and master is the ability to For example, the Internet radio service Pandora has eliminate the vast majority of moves and con- acquired 50 million users who tune in for an average of centrate only on the most promising ones. The novice 12 hours a month, even though (or perhaps because) suffers under the pressure of choice, but the master they cannot directly choose what they’ll hear. Pandora’s knows how to relieve that pressure. “mission” is to “play only music you’ll love,” and it In high-choice conditions, the ideal consumer is the accomplishes this by combining human expertise with most expert consumer. That doesn’t mean someone with an automated system. First, trained analysts determine in-depth expertise in any one type of product. Most the musical attributes of every song in the database.

su 61 issue strategy+business For certain kinds For novices, who may not be able to cre- established by a marketer or retailer provide ate categories on their own, the categories shopping experience. reported greater enjoyment of their overall tively small. Customers in these stores also the number of magazine titles was compara- the store offered more choice, even when of subheadings created the perception that ranging the magazines under a wider range Garden,” that each display provided. Ar- as “Health & Fitness” and “Home & mattered was the number of categories, such ber had no effect on buyer satisfaction. What branches ranged from 331 to 664, but this num- The number of magazines available at various magazine aisles in several Wegmans supermarkets. Tamar Rudnick, discovered this when studying the 4. Condition them for complexity. To simplify the choice process, limit your categories For example, Iyengar and her collaborators, Jona- Iyengar and her collaborators, Cassie Mogilner and did in its heyday. Both retailers thrived by creatingter a bet- choosing experience. Back then,customers more this choice; now, meant it giving means giving them less. to no more than 20,When with you 10 hold or to fewer these optionsfeel limits, in consumers each. are empowered likely by to unlikely the to number miss of any choices, offerings and that are weren’t included. of decisions, you can set consumers up forcouraging success by them en- to learnown from, previous choices. and This is build especially upon, valuableproduct is if their customizable. your than Levav, Mark Heitmann, andconducted Andreas a Herrmann, study with aturer. major This German car automaker manufac- allows its customers to design a framework for making sense of a largekeeping assortment, thus consumers fromdaunting being task discouraged ofoften by make choosing. the same the Because distinctions between products theseexperts that make, they categories also provide a general overview offield, the which catalyzes consumers’and understanding the development of of their it preferences within it. ’s You can also help Wine Enthusiast 3. Categorize their options. To be sure, wine experts may not use the same cat- The easiest way to do this is to categorize. For example, Best Cellars, novices by teaching themment. to For emulate an expert expert, there judg- product is or no service; completely rather, unique each offeringtive is combination a of distinc- attributesseen that before. Thus, the where the expert novice has ferent sees 100 items, dif- the experteight sees relevant maybe qualities sevenways, or with interacting one in or twoimmediately novel important stand features out. that The tricknovice is to to see things get as the the expert sees them. (Pandora calls this the Musicwhen Genome Project.) users Then, tellsearches the for other system music with what similarlisten attributes. music As to they their they personalized music like, streams,the it users system know can how let well it theEventually, matched system their comes to preferences. “know” the users sothat well they no longer have tojust provide sit feedback. back They and can enjoy. egories that Best Cellars uses,principle but when they they apply make the their choices.the same By wines into pre-sorting categories, the retailerat helps novices look the worldfounder through Joshua expert Wesson lenses. says,when “We Best it all Cellars comes want to co- these simplicity make types of wine decisions…. shopping We try as to Note much that fun this as is wine the drinking.” flip side of what Baskin-Robbins Retailer of the Year in 2009,ing makes process the a choos- breeze forsulting its with customers oenophiles by in con- on advance. their advice It to limit draws itsquality, variety to reasonably 100 high- pricedwines wines. could Since still be 100 anfor overwhelming novices, Best number Cellars divides the wines into eightple sim- categories, such as “fizzy,” “juicy,” andnovice “sweet.” has The to deal withnow, only eight which units of can information novice be has managed chosen fairly awine easily. category, within he Once that category or the by she readingthat the can accompany detailed all labels choose the bottles. a

features marketing, media & sales 7 Consumers can handle a large number of options, if they start off in the shallows and slowly move toward the deep, all the while building skill and nerve.

their new cars from a long list of options, choosing lies in better design of the shopping experience, fueled

everything from the engine to the rearview mirror. In by better awareness of human capabilities. When you features the study, researchers presented the first eight design take this approach, the goal of your marketing is no choices in different sequences to different groups of car longer to give people what they say they want. Instead, buyers. One group had to first choose interior and exte- your goal is to invite consumers to enter into a collabo- rior color, with 56 and 26 options, respectively. From rative, mutually beneficial relationship with you. sales & media marketing, there, they chose features in descending order by num- From the outset, your design shows them that you ber of options, ending with interior decor style and understand how they think and respect their desire for gearshift style (which were each limited to four options). both control and simplicity. The message is clear: In the A second group of buyers encountered the same choices short run, you are helping them navigate a bewildering in reverse order, starting with the design elements that and even debilitating world of options. In the long run, offered the fewest options and ending with the ones that you are inviting them to choose you. + offered the most. Although both groups eventually saw Reprint No. 00046 144 total options across eight categories, the buyers who moved from high choice to low choice had a much Resources harder time. They began by carefully considering every option, but they soon grew tired and settled for the Matthew Egol and Christopher Vollmer, “Major Media in the Shopping Aisle,” s+b, Winter 2008, www.strategy-business.com/article/08406: On 8 default. In the end, they wound up less satisfied with the growth potential of in-store media, and better use of this critical con- their cars than the buyers who had progressed from low sumer choice touch point. choice to high choice. Bridget Finn and Michal Lev-ram, “Recent Research: The Downside of This research shows that consumers can handle a Choice,” s+b, Summer 2009, www.strategy-business.com/article/09216: Corroborating research about the consumer dissatisfaction that stems from large number of options, if they start off in the shallows too many choices. and then slowly move toward the deep, all the while Nicholas Ind and Majken Schultz, “Brand Building, Beyond Marketing,” building skill and nerve. Beginning with fewer options s+b, 7/26/10, www.strategy-business.com/article/00041: Moving branding not only warms consumers up, it helps them better fig- practices toward a connecting strategy that promises to make consumer ure out their own preferences, which in turn enhances choice easier. their choosing experience. Over time, practicing this Sheena Iyengar, The Art of Choosing (Twelve, 2010): By describing the psychological impact of having too much choice, too little choice, and choosing technique will condition consumers to cope varying levels of autonomy, Iyengar shows how the conditions of choice with increasing complexity. influence business, society, and personal fulfillment. Barry Schwartz, The Paradox of Choice: Why More Is Less (Harper An Open Invitation Perennial, 2005): Another leading work on the “darker side of freedom”: the limits of the human mind in managing a surfeit of options. Each of these forms of customer engagement can be technologically enabled, for example, through online For more thought leadership on this topic, see the s+b website at www.strategy-business.com/marketing_media_sales. networks or social media. But the heart of this method strategy+business magazine is published by Booz & Company Inc. To subscribe, visit www.strategy-business.com/subscriber or call 1-877-829-9108.

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