Why Choice Can Kill the Deal

There are few truisms in business that I am aware of that are universal; that is, they apply in every situation.  But there is one that is pretty close:  Too many choices is a bad thing.

In reading that, you may have the knee-jerk reaction to disagree (as I did years ago).  After all, not having a choice is a bad thing, right?  And how many retailers have built their image around the subject of having many choices after all?

But a situation in which a consumer has no choice is light years from the situation in which the consumer has too many.  And the science involved with bringing a customer in is different than the science of selling him once he's there.

In 2000, two professors, one from Stanford and one from Columbia, published an academic paper in the Journal of Personality and Social Psychology relating a series of experiments that reinforced similar findings.  Their first experiment involved a jam tasting booth at a grocery store. They first set up a booth with 24 choices.  Later, they substituted a booth with just 6.  (When Choice is Demotivating: Can One Desire Too Much of a Good Thing? (Iyengar and Lepper, 2000, Vol 79, No. 6)

There were two criterion in the study, the likelihood a person would stop at the booth and the subsequent purchasing behavior.

As most marketers would predict, the booth with 24 selections drew people in significantly more often - 60% to 40%.  However, interestingly, the number of samples tasted remained statistically the same - 1.5 each customer.

The real surprise was in the purchasing behavior.  30% of tasters purchased from the 6 choice model.  Only 3% bought from the 24 choice one!

The result was 10 times more sales with fewer choices!

The researchers went on to conduct a similar experiment with Godiva Chocolates.  This time, however, there were three variations:  30 choices, 6 choices and no choice, i.e., "would you like to try this piece of chocolate?".

To cut to the chase, here is the shocker from that one:  Those that chose from the display of 30 rated the process the most enjoyable.  The group that purchased the most was the one that had 6 choices, purchasing 48% of the time.  But the no choice and 30 choices group were virtually identical at 10% and 12% respectively!  

Giving a customer lots of choices is no more effective than forcing them to take a single option!

Indeed, and this is important, those studies that measured the metric showed that the customer is more likely to be dissatisfied with the purchase (buyers remorse) when they have lots of choices.  They are always wondering if they made the right choice.

These outcomes have been replicated in other studies including ones involving 401k plans.  In fact, that study showed that not only do fewer people participate when the number of choices is large but is also indicated that people make riskier decisions.  Ironically, the US Government has been encouraging more choices in plans.  The average plan now has about 16 options.  (See the 2003 article in the Washington Post and the 2000 study by the Financial Planning Association for more detail.)

Regardless of the situation, information such as this can be both valuable and easily applied.  If you are in sales, reducing the choices you show a customer to a small number will likely increase, not decrease, your closing ratio and your income.  If you are a job seeker, the employer is more likely to be happy with the hiring decision if you are in a small group to choose from.  If you run a car dealership, a large inventory will bring them in, but steering them to a few targeted choices will convert them to buyers.

So, the final question really becomes, what is the best number of choices?  

Most data suggest that it is between 3 and 6.  I tend to go with 3.  It seems to me that we are somewhat wired as humans to respond to threes.  Frank Lloyd Wright's architecture often used motifs involving three identical elements.  Interior designers are taught that three is the optimal number of items for a shelf display.  And the best guitar solos use triplets rather than eighth or sixteenth notes.  

Giving the customer what they want will get them in the door.  But helping them make the decision by narrowing the choices is the key to making the sale!

Tom Faulconer is an attorney, CFP?, and marketing professional and helps businesses with training and sales based in Indianapolis, Indiana. He is also a contributing author to Startus magazine and premium content author for lesson.ly.

He can be reached at [email protected].