Business

Spoilt for choice: Why more is not always better for consumers

Updated : November 27, 2019 07:20 PM IST

When the options to consider are too many, making a choice can have negative effect on consumers’ well-being.

Choice overload can produce decision-making paralysis, depression and low-satisfaction with the choice finally made.

Having a coffee was never such a complex exercise in decision-making. The other day, the barista at the upscale coffee bar stumped me with a list of exotic cappuccinos, when all that I wanted was simply a cup of nice hot cappuccino. Truly, we live in an era of choices. The supermarket aisles are full of a whole range of chocolates, breads, chips and cereals. Universities and colleges offer prospective students a wide range of courses to choose from. Insurance sellers, matrimony portals, car dealers and banks provide us choices like never before. It seems as if, the law of the land is to offer as many options as possible to consumers who value having maximum choice. Having a choice is consistent with the much-cherished values of freedom, democracy, self-expression and autonomy.

Few would contest that having more choice is better than having less of it. This widespread belief is also supported by the Rational Choice Theory in economics. A rational consumer wants to maximise his or her utility from making a choice and a wider set of options provides a better opportunity to do just that. And indeed, well-educated consumers and the super-smart millennials are rational. They want the best and so they explore as many options as possible. Psychologists too contend that exercising choice enhances an individual’s sense of personal control and feelings of autonomy. No wonder ‘Yeh Dil Maange More Choice’. An increasing number of consumers are becoming what Barry Schwartz terms as ‘maximisers’. Nothing but the best works for them and thus they choose only after examining maximum possible options. Moreover, the diffusion of e-commerce, online sellers and internet-enabled tools has made product comparison much easier, further fueling the maximiser mindset.

Stiff competition

This trend has been captured as well as strengthened by product manufacturers and sellers. Manufacturers, retailers and supermarkets are locked in a stiff competition to provide more choices to the consumer. Mega shopping malls as well as online sellers wish to stand out from the crowd based on the variety, options and choice they offer. As consumers, it is common for us to prefer a shopping mall that offers greater choice, whether the product we seek be home furnishings, electronics, apparel or groceries. Offering widest possible choice assures the store managers of a higher footfall, which they believe translates into higher sales and profitability.

However, the story of choice is perhaps a more nuanced one. Having and exercising choice is indeed great. But how much of choice is good, is the question. When consumers choose amongst a manageable number of options, it is likely to bring positive rewards in terms of the satisfaction that the exercise of rational choice brings. Making a selection from a manageable set of alternatives also enables consumers to experience feelings of autonomy and freedom. However, when the options to consider are too many, making a choice can have a negative effect on consumers’ well-being.

Research shows that choosing from a very wide set of options drains the consumer psychologically. Choice overload can produce decision-making paralysis, depression and low-satisfaction with the choice finally made. Such consumers are likely to choose a product without an exhaustive scanning of all available options. This can make them less confident and sure about their own choices. Consequently, they are more likely to experience post-choice regret. They are likely to question their own choices (say, a designer bag) and indulge in comparison with choices made by others (say, a different designer bag bought by a friend) or with options that they did not choose (other designer bags that were available). Clearly, too much choice can dampen consumer well-being.

In contrast, when consumers choose a product from a smaller and manageable number of options, they process information about each available option more actively and then make their choice. Such consumers have greater confidence in their choices and tend to be more satisfied with their selection. Studies by psychology professors Sheena S. Iyengar and Mark R. Lepper, from Columbia and Stanford University respectively attest to this understanding. They also show that consumers are unaware of the linkages between the number of options they consider and its psychological impact on them. Instead, consumers report greater enjoyment with the decision-making process when they are provided more options to choose from; even though they find choosing among too many options both difficult and frustrating.

A manageable number of options

It seems a consumer is better-off choosing from a smaller and manageable number of options. But what is this optimal and manageable number? This number will depend on the type of product, its price and its importance to the consumer. For instance, the number of homes one may consider before buying one is likely to be different than the number of options one considers while picking a standard grocery item. As a general rule though, a consumer is better-off choosing from a set of options that is manageable in size rather than one which offers excessive options. However, consumers are not always aware of the curse of excessive choice. Only a few learn to happily choose a ‘good enough’ rather than ‘the best’ option from a manageable number of relatively fewer alternatives while paying little attention to what others around may be doing. No wonder, most consumers still prefer stores and shopping malls that offer them far more than the manageable number of options to choose from.

What about sellers and stores? Should they continue to offer consumers the maximum possible options to choose from? The studies above also suggested that consumers who consider products from a smaller and manageable choice set are more likely to eventually buy the product compared to those considering from an extensive choice set. Thus, sellers and stores would be better off optimising the number of options they offer in each product category. Blindly offering the most extensive choice-set in each product category may result in higher inventory costs and lower sales and that too alongside a psychologically drained and dissatisfied consumer. Stores and sellers should rely on credible research to work out the optimal range of products to keep. While the footfall in a shopping mall may still depend on the extensiveness of the choices it offers, it may not achieve the most optimal ‘sales to footfall’ ratio or the best possible profitability.

Well, I could finally get my cappuccino. Perhaps, the customers and sellers too could indulge in their cappuccinos to reflect upon the choices they have.

Nimish Rustagi has a PhD in Marketing from HEC Paris. He is a civil servant and the views expressed are personal.

Spoilt for choice: Why more is not always better for consumers

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