Choice Paralysis is a term coined by psychologist Barry Schwartz in his 2004 book “The Paradox of Choice: why more is less” and popularized through his TED Talk which, at this point, has over ten million views.
Schwartz argues that the general belief of having more choice will increase overall wellbeing is wrong. In his view, more options to chose from actually decreases consumer wellbeing since it increases regret and raises expectations to unreasonable levels.
According to Schwartz, choice paralysis is a side effect of having more (i.e. too much) choice – people are paralyzed by the abundance of available options and end-up not making a choice (i.e. forever postponing the decision).
While, in some areas such as retirement investment funds, choice paralysis does occur, in other areas such as retail choice paralysis occurs less often than one would predict, considering the overwhelming abundance of choice.
Choice paralysis should be the nemesis of all retailers in the developed world. If people can’t make a choice when faced with an abundance of options to chose from, then sales should go down. Yet, to the best of my knowledge, there is no comprehensive study to show that an increase in the number of options leads to a decrease in sales. Below are a few potential explanations for the absence of choice paralysis.
A lot of choices is good for business
According to the author of “The Paradox of Choice”, when faced with a lot of options to choose from, people experience choice paralysis, which leads them to not make a choice. In the case of a purchasing decision, choice paralysis would take the form of people not buying the product.
This view ignores the existence of an original choice. Before making a choice of which product to buy, people need to first choose where to buy that product from. Shops with a large selection of variants of the same product, generally, are preferred by customers.
For example, the US retailer Total Wine claims to have more than 8,000 variants of wine.
Choosing what to buy from eight thousand options definitely is a drag and it can give a headache worse than that of a mean hangover one gets from over-drinking (bad) wine. Nonetheless, offering a ridiculously high diversity of options is a good selling point to bring customers through the door.
Such excessive diversity of options makes consumers perceive the shop as the place to go for buying wine.
There can be several drivers behind this perception, such as perceived expertise (if they have so many variants of wine, they must know something about wine) and perceived future satisfaction (out of those 8,000 variants of wine, one will for sure be right for me).
Strong motivation to buy
In your regular American supermarket, there are more variants of toothpaste than there are teeth in a human’s mouth. Yet, it seems this over-abundance of choice doesn’t make people not buy toothpaste.
If you have toothpaste on your shopping list, you are not going to leave the supermarket without toothpaste.
Even if the experience in the oral-care aisle is going to be sub-optimal (which is a polite way of saying between bad and horrible), you will still buy toothpaste. Toothpaste manufacturers know that there are too many options, yet they don’t reduce the number of offerings – SKUs. The reasons for not reducing (sometimes even increasing) the diversity of toothpaste has very little to do with the customer’s experience on the shopping floor.
Each manufacturer (brand) knows that by reducing the number of options there’s a chance that it will lose some competitive advantage over its competitors. Say, Crest will reduce its number of SKUs, then there is a chance that the retailers will push to reduce the number of facings on the shelves – after all, why have 50 facings of the same product variant (SKU)? In turn, this can lead to shoppers opting more for Colgate which, now, has more variants (SKUs) than Crest and, subsequently, more facings. Naturally, this will negatively impact sales for Crest.
Customers developed coping strategies
Choice abundance, at least in the USA, isn’t exactly new. In the decades that the diversity of options available to consumers grew, people developed ways in which to cope with “choice overload”. Such coping strategies may take the form of simple rules of thumb such as buy what I bought last time or buy whatever is on sale.
For example, toothpaste buyers minimize the time spent making a decision at the oral-care aisle. FMCG marketers know all too well that most oral-care products are “grab and go”. People buy them, yet give very little consideration to the act of making a choice.
Can you really go (terribly) wrong?
Choice Paralysis is driven mostly by our ability to experience anticipated regret and our desire to avoid experienced regret. One important reason for which the coping strategies work is that, in many cases, it is very difficult for a shopper to make a terribly wrong choice. Sure, your five-year-old son might cry for an hour because you got the Spiderman toothpaste and not the Ninja Turtles one, but that’s not exactly a tragedy.
There are several reasons for which one can’t really go terribly wrong when making a purchase in a supermarket.
First, people are satisficers, not maximizers. Even if choice abundance implies the promise that a shopper will find the variant that perfectly fits her needs and preferences, our thinking is driven first by avoiding the worst rather than seeking the best option.
Second, product quality increased so that there are very few terrible options available to choose from. For example, in the USA, wines priced between $8 and $12, in general, are good enough to not trigger any alarm bells. Having this in mind, a shopper can simplify her decision-making process as follows: one choice between red and white wine which reduces the choice set roughly in half (sorry, but I simply can’t see rose as wine) and then pick at random from the wines priced between $8 and $12 per bottle.
In the case of buying toothpaste, things are even simpler because it is virtually impossible to choose a bad product. For a consumer’s dental health, it makes little to no difference which toothpaste she chooses as long as the toothpaste has fluoride. Fluoride-free toothpaste is nothing more than flavor.
Third, most retail purchases are relatively low stakes. Even in the scenario in which a shopper finds a terrible option to purchase, the damage is relatively small.
Structured choice lends a hand.
Retailers help their clients to avoid Choice Paralysis and deal with choice abundance (overload) by offering structured choice sets.
On Total Wine's website, one doesn't see all eight thousand variants of wine displayed together on the same page. Rather, the offering is structured, at least to some extent. There are several filters such as type of wine (red, white, sparkling etc.), country of origin etc.
Sure, not all structured choice sets give the best possible experience, but in general structured choice sets are better than unstructured ones.
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Summing up, Choice Paralysis doesn’t occur too often because:
A wide variety of choice, in many situations, draws clients in. Before being faced with making a difficult choice out a myriad of available options, people have to first chose where they will make that choice. People choose the choice-set (i.e. the vendor) from which to make the final choice based on the variety of options available.
Strong motivation to buy. If a shopper decided to buy wine and went to the wine-shop, there’s little chance that she will leave without a bottle of wine.
Customers developed strategies to cope with choice abundance which include simple rules of choice such as buy Argentinian red wine priced between $ 8 and $10. Moreover, in a retail context it is very unlikely that a shopper could make a terribly wrong choice, thus the occurrence of regret is highly unlikely.
Structured choice sets help reduce the cognitive burden.