New research regarding online dating websites shows that when it comes to presenting customers with choices, in fact “less is more.” And while marketers inherently know that too much choice leads to cognitive meltdown, sometimes we’re confounded with the best way to remove options presented to customers. Is there an ideal way to cull customer choice?
Sometimes marketers believe that customers want more choice. According to an MIT Technology Review article, however, in the online dating market new research shows that, “users presented with too many choices experience cognitive overload and make poorer decisions as a result.”
The Technology Review article cites research from two professors from National Sun Yat-Sen University in Taiwan where in an experiment they presented online dating users with wide and deep selection of potential matches. After all, customers want more choice–right?
Not so according to the study: “More search options (led) to less selective processing by reducing user’s cognitive resources, distracting them with irrelevant information, and reducing their ability to screen out inferior options.” In effect, users suffered from data overload where too many choices prohibited them from making an optimum decision.
Here’s where statistical analysis can help reduce choice overload.
Online dating sites often attempt to use sophisticated computer applications and proprietary algorithms to divine appropriate partner matches based on user inputs such as preferences for race, religion, eye or hair color and more. EHarmony’s matchmaking algorithm, for example, helps select potential partners based on a 258 question personality test.
With a deep historical data set of what EHarmony determines as “success” (236 marriages a day according to the site) this online company believes they can predict matches with a high degree of probability.
For sites like EHarmony, Match.com or others, the challenge isn’t showing all relevant results (like a Google search that delivers 2,000 hits) but just the top ten and maybe worst case–twenty. This of course, assumes that the algorithm is based upon the right “predictors” of successful match making, and that the science behind the scenes can be trusted.
The lessons for online dating companies–much less any business–is due to carrying costs or customer confusion, less choice can actually increase sales and profitability! In fact, some large U.S. retailers are starting to investigate this idea by reducing the variety of different products carried by up to 15%.
The experiment run by the Taiwanese professors shows that when it comes to choice …. less is more. If this hypothesis is true, how then does a marketer decide which choices to reduce?
Reduction in customer “options” must be based on carefully considered variables and analytical analysis. For example, a category manager at a retailer–let’s say the toothpaste aisle–shouldn’t automatically assume that the products with the lowest sales should be removed.
Careful analysis including variables such as year-over-year sales comparisons, seasonality, pricing, profitability, trade promotion dollars, etc should be considered. In addition, market basket analysis may inform the retailer that a brand of slow selling toothpaste is in fact often purchased with other very profitable items. Indeed, assortment optimization and shelf space allocation can be a very scientific exercise. A company should also set up control groups for experimental purposes to test a hypothesis before making any permanent changes.
The use of algorithms and careful analytical analysis are two ways that companies are reducing and optimizing customer choice. In the end, customers may not ultimately want more choice–just more relevant options.
Questions:
- In online dating, some users may want more results (choices) presented because they feel that they can judge a “match” more effectively than a computer. Are there instances where delivering more choice options is the better strategy?
- Are there dangers of optimizing customer choice–especially when it comes to encouraging new innovative products/services with no sales history?
- Predictors of a “good match” in online dating can be highly subjective. How would you counsel online dating companies to improve their matchmaking capabilities?
Related article: Less is More in Consumer Choice
Tags: algorithm, analytics, cognitive overload, consumer choice, decision making, prediction
Paul,
I was really glad to see your post today… Perfect timing for me because I am currently reading “The Paradox of Choice: Why More is Less” by Barry Schwartz, psychology professor at Swarthmore College (and a 2009 MarketingProfs B2B Forum keynote), and it provides the psychological research (and more studies/examples) behind your post here today.
I suggest all marketers/business folks read it for their business and personal lives…it’s very eye-opening.
Here’s a video of Barry speaking at TED (to give folks a glimpse into the paradox of choice): http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html
Beth Harte
Community Manager, MarketingProfs
@bethharte
P.S. I can’t answer questions regarding online dating because I was married before these sites existed. LOL!
But I do have an additional comment:
“how then does a marketer decide which choices to reduce?”
I think a lot of companies have multiple products/services in a line because they want variations that mean all things to all customers. A lot of times that’s based on assumptions or only listening to their top customers (Pareto). I truly believe if companies stopped and actually “listened” to what customers wanted, they’d fine they could limit (or combine)the amount of products/services.
I have also witnessed a fear in management that if they cut back on offerings, sales will decline. But from a top down perspective, I would think that limiting the amount of products/services would also streamline other operational and marketing areas that could perhaps lead to outstanding customer service and in turn… higher sales.
Or…is that some business utopia I am thinking of?!
Beth, I appreciate the link to Barry Schwartz’ TED talk and the mention of his book. I’ll add it to my reading list.
You said, “I think a lot of companies have multiple products/services in a line because they want variations that mean all things to all customers. A lot of times that’s based on assumptions or only listening to their top customers (Pareto).”
I wonder how many companies first define who their top customers are, and then have metrics (sales, profitability etc) that support the notion that these customers are truly their “best” customers. It’s my experience that in many cases, companies may “think” they know which customers are driving their profits, but in reality they either don’t know, or are surprised when they find out the real answer!
When reducing customer choice, a company should be very sure they’re not taking away valuable “choices” of their “best” customers (depending on how a company is defining “best”).
Paul,
Great answer to Beth’s question–the facts are that unless a company commits to understand its best customers, it cannot know what product and services to offer, let alone how to reduce customer choices once it finds itself trying to sell to the masses. The old adage applies–if everyone is your customer than no one is your customer.
In retail the choices offered are determined by shelf and floor space, so a Wal-Mart can carry many choices while a local market must understand precisely who its customers are and what they want from that market.
This is a subject for a book and so I will stop here. No way I can completely address the subject.
Lewis, really appreciate your insights and comments.
You said, “In retail the choices offered are determined by shelf and floor space, so a Wal-Mart can carry many choices while a local market must understand precisely who its customers are and what they want from that market.”
The hyperlinked WSJ article in the column is interesting in that we often assume large retailers have sizeable space and thus should be able to carry more variety. But the WSJ article points out that for many retailers, more choice can translate into less revenues and some big box stores are actually trying to reduce the number of choices in key categories.
There is a lot of science, mathematics and psychology behind what goes on the shelves at big box retailers. This statement holds true for smaller retail chains (stores of 15-20+) as well!
Good post, Paul. Like Lewis, I find it impossible to respond to all of the points you’ve raised here. It would, indeed, fill a book.
Let me say this. CPG manufacturers and retailers, as well as service providers, have for the most part, always been over-assorted. Two issues have driven this: the fear of losing potential customers to competitors and the perceived need to match competitors’ offerings tit for tat.
Enter the major players and the big box stores. Beginning with Lechmere a few years ago, the Dayton-Hudson spin-off, merchandising began to change. It became more sophisticated.
Specific customer demographics were targeted and marketed to. Assortments were programmed and POS information calibrated the turns and profitability of each sku. Turn and sales per foot criteria were put in place for each category and sku. Items that didn’t meet those criteria were eliminated from the mix. The hottest consumer products in the universe were not added to the mix if they didn’t make sense based on Lechmere’s intimate knowledge of its customers–except for a few seasonal and niche items that rotated in and out of the assortments. Period.
While big box stores carry large assortments, they don’t do so indiscriminately. Here I disagree with Lewis. Wal-Mart has elevated its game by using RFID technology in its DCs and stores and very sophisticated POS data on the front end.
However, this isn’t enough now either. As consumers retrain themselves and spend less money overall (and this trend shows no signs of abating), assortments need to shrink to meet the demands of a new marketplace.
In the past, overassortments prompted retailers to send product back to manufacturers for credit or sell it to jobbers. Now it can mean the difference between surviving and going out of business. The smaller the operation, the more critical to hone the product mix to what the majority of customers are looking for. BTW: What’s wrong with special ordering for those customers who want something else? It’s called service and retailers are dying because of the lack of it.
Claire, wonderful input! You said, “As consumers retrain themselves and spend less money overall (and this trend shows no signs of abating), assortments need to shrink to meet the demands of a new marketplace.”
Taking a retail example, do you believe that the overall quantity of assortments (number of overall units in a given category or store) needs to shrink, or just the choices within a category? For mass merchant retailers, do you think consumers are asking for less choice, or more relevant options based on new realities (less discretionary spending, environmental consciousness etc)?
Paul,
Thanks for the article, there is another angle to consider in the more choice scenario – the supply chain. Claire and Lewis touch on the topic with the number of products in a category.
Another example is the auto industry. Assembly line production evolved into mass customization with hundreds of potential options on each car model. The number of options confused the sales process with the different selections. A lot of the foreign car companies ignored this approach and went with option packages; providing a few per car model.
Smaller number of selections reduced the information overload on customers, and improved quality control by simplifying the supply chain/manufacturing process.
NW Guy, thanks for adding some depth to this conversation! Speaking of auto manufacturers, I call out (in the previous article – see link above for “Less is More in Consumer Choice) an example in the auto industry of Ford Motor. The WSJ link in the article mentions Ford and their attempt to remove complexity and refine choice options for a SUV. Sometimes a simple idea (let’s give customers more choice), births complexity– “millions of options”. Better to keep it simple, smart and effective.
Thanks for the post, Paul.
In my own point of view, I think that as the communication tools we commonly use these days like mobile phones and computers evolve, the trends that go along with them change, too.
I am particularly referring to social media, mobile phone applications as well as — peculiar it may seem — online dating.
I just couldn’t believe that forty years ago, meeting a person of the opposite sex almost required a rough interrogation from your potential partner’s parents.
But now “less is more?” Now that’s what I call evolution.
SGA, your comments are much appreciated! The rough interrogation you refer to that was once conducted by our parents is now conducted by very complex algorithms (at least on dating sites)! Taking hundreds if not thousands of options and whittling them down to a truly relevant set of 20-30 – now that’s progress!
Great article!
Customers are drowning in too many choices. The result -
- They walk away
- They make the wrong choice
- They are frustrated
- Poor customer experience
It also impacts the sales force effectiveness and productivity. Sales reps struggle to sell products with too many options, and quickly present/recommend the best choice.
http://www.emcien.com
Paul and NWguy!
Great comments on the auto industry. The auto industry is built on a ‘push supply chain’ with no idea of what the customer wants. Once the car is delivered to the dealer, it becomes the dealers problem to sell it. Shouldn’t the car OEM’s be monitoring the dealer sales and help them to stock the right stuff? Isn’t the dealer lot just an extension of their supply chain?
Well! inventories are low now…. let’s see how they get stocked now. Will we see the same old bad habits …..
Jeff, thank you for commenting. Considering an extremely capital intensive business, the concept of “choice” is challenging for the auto industry. Just think of all the variables they must consider: local tastes (more sunroofs in CA), regulations (like CA’s P-ZEV), 4×4s in mountain states and the list goes on and on. I’ll be the first to admit that the current “push cars to dealers” model could certainly meet halfway a better pull model (requirements from customers). That said, I think auto makers have done a pretty good job of getting their regional and local product mixes optimized.
You may have a different opinion however…
Sorry Paul. I do not agree. Good mix implies that the inventory is turning. It means you know what choices customers are making. It means you have visibility into what they are buying. It means you are helping the dealers to stock the right stuff. It means your supply chain is lean. …… you decide