Most of you are probably familiar with the paradox of choice: The more choice shoppers have, the harder they find it to decide and the less that end up buying something.
The Jam Study is one of the most famous experiments in consumer psychology. Basically, the study, conducted by psychologists Sheena Iyengar and Mark Lepper, found that consumers were 10 times more likely to purchase jam on display when the number of jams available was reduced from 24 to 6. Less choice, more sales. More choice, fewer sales. What’s more, participants actually reported greater subsequent satisfaction with their selections after the number of purchase options had been limited.
This phenomenon, replicated in numerous other product categories from chocolate to financial services has come to be known as the ‘Paradox of Choice‘ or ‘Choice Overload’. From a rational perspective, you’d think that the more choice you offer shoppers, the more sales you should make simply because you’d be satisfying more shopper needs. But the research has clearly shown time and time again that choice can actually be demotivating and get in the way of sales. So why are large choice sets more overwhelming? Simply because shoppers are forced to identify differences among too many options. And from an evolutionary perspective, we are just not wired this way.
This is one of the less publicised reasons why shoppers are deserting the big 4 supermarkets and heading for the discounters: More mentally manageable choice in-store.
Now a new study, ‘Choice overload: A conceptual review and meta-analysis‘ by Kellogg researchers at North Western University Alexander Chernev and Ulf Böckenholt has re-analysed the data from many Paradox of Choice studies and identified specific occasions when reducing choices for shoppers is most likely to boost sales.
1. Complex choices: When people want to make a quick and easy choice
2. Difficult choices: When making the right choice matters/selling complex products
3. Incomparable choices: When you show options that are difficult to compare
4. High effort choices: When your customers are unclear about their preferences
And a relatively straightforward solution to choice overload in each of the above scenarios is to improve product segmentation and sub-categorisation Why? Because splitting products into smaller, clearly definable categories allows shoppers to evaluate the variety available in smaller ‘chunks’. Simply splitting product groups into larger numbers of smaller categories and sub-categories will often alleviate the detrimental effects of choice overload. In summary, sub-categorisation can make a large choice set more cognitively manageable.
Finally, here are 4 category management suggestions to help shoppers overcome choice overload:
Complex choices: When people want to make a quick and easy choice
Make sure to cater for the shoppers that just want to make a quick ‘Grab & Go’ purchase. A good example being the Food To Go area in the supermarket: A relatively small area in-store that stocks just the right amount to balance good choice with manageable selection.
Difficult choices: When making the right choice matters or you are selling complex products
Identify the key shopper needs (a maximum of 3) and ensure they are clearly communicated in-store, on shelf and on pack. In addition, offer shoppers some form of error insurance such as clearly displaying the returns policy, not just at the checkout, but also in the aisles where complex purchases are made
Incomparable choices: When you show options that are difficult to compare
However spurious, give shoppers an either/or option within the category. Taking the coffee example mentioned earlier, hero a small number of products to take away the need for comparison. ‘No1 best-selling instant coffee’, ‘Voted best tasting freshly ground’ etc. Incidentally, this is how offers often work. It isn’t that shoppers seek out the best added value, it’s just that the promoted products are ‘heroed’ by the more prominent promotional SELs, FSDUs etc.
High effort choices: When your customers are unclear about their preferences
When shoppers themselves don’t know what they think they want, then promote ‘any’ reason to buy. ‘Approved by the Soil Association’ or ‘Good Housekeeping recommended’, for example.
So there you have it, we now have a retail landscape where shoppers have too much choice to cope with (even after the likes of Project Reset, 1, 2, 3, et). One answer lies in guiding shoppers more effectively along the purchase funnel. Gone are the days of just headline signposting the aisle: Pasta and Rice. We now need to also signpost by individual sub-categories such as Microwave Rice and Wholemeal Pasta. Present shoppers with not just a wall of product, but with the individual bricks within the wall.
Incidentally, when we have conducted our own shopper research into the real (not claimed) impact of improving sub-categorisation and signposting, we have seen category growth of 6%, 15% and even 45%.
Want to improve category segmentation? Or perhaps you are just curious to know what makes psychologically good shopper oriented sub-categorisation? Either way, Let’s talk.