Sheena Iyengar is a Professor of Business in the Management Division at Columbia Business School and the Faculty Director of the Eugene Lang Entrepreneurship Center. She is known for her research on choice, culture, and innovation
The average American reports they make 70 decisions per day. A study was done by following CEOs around, and found they completed 139 tasks, and 50% of their decisions were made in 9 minutes or less. Only 9% of decisions took longer than an hour.
The choice overload problem is summarised by a grocery store that can offer hundreds of types of olive oil or jam. Sheena was fond of such a store, and found they had hundreds of tourists but very few people bought anything (including herself). She ran an experiment where she offered jams for tasting – once she offered 6 flavours, another time she offered 24. While people were more likely to stop and taste the 24 flavours, nearly noone bought a jar. She got 6 times more sales from the experiment with only 6 flavours. This can happen even with more significant decisions such as saving for retirement. A study looked at participation in 401k plans, each of which offered a different number of funds within them. Those that offered only 1-2 funds had participation of 75%, and participation decreased until the plans with 59 funds recorded only 63% participation.
There are 3 main consequences of offering people too many choices
- Engagement – they tend to procrastinate
- Quality – Make worse choices
- Satisfaction – they are less happy with their choice, even if their decision is objectively better.
This is because it is difficult to properly compare all choices – it is fun to gaze at a wall of mayonnaise, but how can you really decide which one is best?
Sheena suggests 4 techniques in your businesses to prevent choice overload in customers.
- Cut – reduce the redundant options. This will increase sales, and lower costs. When Proctor and Gamble reduced their Head & Shoulders line from 26 products to 15 their sales increased 10%. Aldi offers only 1400 products (compared to Walmart offering 100,000) and is the 9th largest retailer in the world. If people can’t tell the difference between 2 products, don’t force them to choose.
- Concretisation – Relate a decision in terms that mean something. Sheena described a road in terms of it’s surroundings and accident statistics (one of the most dangerous roads in the world) and asked who would want to visit it. She then showed photos of the road, and more people seemed keen. By showing the photo it seemed more real and easier to decide, even though there was less concrete information about the road. Similarly, when saving for retirement, thinking about what how you want your retirement to be can make saving easier.
- Categorisation – Reduce the objects into categories that mean something to the chooser. For example – putting 600 magazines in categories makes it easier to pick one. Of course, categorising by industry jargon that can’t be understood by the consumer is useless.
- Condition for Complexity – Gradually increase the complexity. When custom making a car, a lot of decisions need to be made eg engine, gear shifter (with only a few choices each) or paint colour (with 56 choices). People stay engaged longer if they are presented with the smaller sets first – they get exhausted making the largest decision first (paint colour), and will tend to pick the default thereafter.
While Sheena focussed on business owners, the same principles should be applied whenever you are trying to convince someone of something. By presenting the options in a more concrete form – what it means to them, or grouping a few similar options together, you could make it easier to win them over.
I am a big fan of simplifying, and Sheena’s talk did not disappoint. She gave useful advice, and explained it so well that it all made sense. Strongly recommended for business owners focussed on consumers, and great background info for everyone else.