Sheena Iyengar, author of The Art of Choosing, was the morning keynote at TMRE 2011. Sheena’s book was one of the top 10 business books on Amazon in 2010.

Her topic was the most pressing problem related to choices in the modern world, a problem known by many different names. The head of Fidelity research called it “the narrowing down problem”. McKinsey described the same problem but called it the “3 by 3 rule”. Rush Limbaugh said “it was the stuff of pointy headed intellectuals who didn’t know the marketplace”! It has also been called the “jam problem”.

What’s the jam problem? Draeger’s Grocery Store has an incredible variety of options: for instance, 75 olive oils including those in a locked case coming from a 1000-year old olive tree. She asked the manager if this abundance of choice worked. They have 348 different kinds of jams. Sheena set up a tasting booth with either 6 jams and 24 jams. Fifty percent more people stopped when there 24 jams. Only 3% who looked at 24 bought jam, while 30% bought when they looked at 6 jams. As a result, people were 6 times more likely to buy jam if they encountered 6 jams than 24 jams. They are intially attracted to more choices but when in the moment they are overwhlemed.

For an experiment with undergraduates, Sheena offered undergraduates any chocoloate they wanted. “We either showed them 6 different kinds or 30 kinds. All they had to do was tell us how it was delicious it was and they could get paid or get a box of chocolates.” The same chocoloate chosen from 30 was perceived as less delicious than if chosen from 6. They were more likely to choose money if they had 30 choices.

“This isn’t the jam problem, but the choice overload problem.” It has three negative consquences:

  1. Commitment – The more choices consumers have the more likely they are to delay making a choice, even when it goes against their best self interest. For instance, people not saving for their futures because of too many options.
  2. Decision quality – People make lower quality choices the more choices they have.
  3. Satisfaction – The more choices people have the less satisfied they are with the choice they made, even when they have objectively done better.

The three causes of choice overload are cognitive limitations, indistinguishable options and pressures to choose.

Cognitive Limitations

When do we experience choice overload and when don’t we? “It lies in our expertise, when we can systemize and categorize our choices. For instance, Garry Kasparov is contemplating 8 moves ahead.” If he contemplated every single move for the next 8, he has more choices than the number of stars in the galaxy. Instead, he sees the board as lines of attack and patterns, allowing him to skip suboptimal options. The modern world is designed for experts. Unfortunately, expertise doesn’t scale up — being an expert in rock music doesn’t scale to being an expert on wine.

Indistinguishable Options

This problem even happens with businesses whose customers desire more and more choices. “You wouldn’t go to get a manicure from a salon with 5 nail polish colors but you would go to a salon with 75 or more colors. Being blind, I can’t see the colors and I can’t see what others are choosing,” Sheena said. “I was deciding between two light shades of pink: Adore-A-Ball and Ballet Slippers. The ladies said if only I could see them I could tell the difference. I took the bottles for an experiment: 50% accused me of playing a trick, 50% picked Adore-A-Ball. When I put a label on, 50% picked Ballet Slippers.”

The differences are so small but we think we really should be able to tell the difference. This is because we expect our choices to say something about us. “In the modern world, I am not asking what I want but who am I? And given who am I, what do I want? And given what I want, what should I choose?” It allows us tremendous self-expression but it becomes difficult as the options proliferate. Choice is not a solitary activity: “every act of choice is as an act of communication”. Each choice we make sends a message: “I am a unique but you can still relate to me: I am an individual, not an outcast.”

In one study Sheena did, everyone thought they were unique, but people liked nothing too bland or too bizarre and settled on something just right. We aspire to be unique but want to be unique like everyone else.

Pressures to Choose

In today’s world, the act of choosing has become “high stakes”. We expect our choices to present our distinictions”. “Modern individuals are not merely ‘free to choose’, but obliged to be free, to understand and enact their lives in terms of choices.” – Nikolas Rose

Consumers want more and more choice but they are likely to become confused and overwhelmed. “On top of that, their choices aren’t as different from others as they think. They want to feel confident in their choosing and that they have chosen right.”

Strategies for Simplying Choices

Here are three simple techniques you can use to help your customers:

  1. Cut – Less is more. Companies are afraid of cutting product lines, fearing losing shelf space, but cutting leads to an increase in sales and a reduction of costs. Both P&G and Golden had success cutting the breadth of product lines (Head & Shoulders and Golden cat litter). “If your employees can’t tell you how these choices are different, your consumers can’t.” Use focus groups to find out what products consumers can’t tell apart. Get rid of those products.
  2. Categorize – When products really are different, make it transparent to customers what those differents are. Best Cellars offers 100 wines in 8 categories: fizzy, fresh, soft, luscious, juicy, smooth, big and sweet, rather than conventional oenophile descriptions. Categorization is extremely useful and low cost. People can handle many more categories than choices: “For Wegmans, we looked at magazine aisles that were identically shaped but had twice as many choices: 300 or 600. If you provide 600 options in 6 categories, that is overwhelming, but 400 options in 20 categories appears to offer more choices. People can handle 20 to 25 categories, as long as the choices per category are small: 5 to 10 choices per category. “The category names should not be expressing the thoughts of the choice maker but should be useful for the consumer.”
  3. Condition for Complexity – “We regularly throw ourselves into very complex choosing exercises, convinced than when I am in the moment, the right expression will simply jump out at me. We can handle more choices than I told you earlier, provided we handle it slowly. This is particularly useful for custom-made products. This works for sandwiches and custom made suits, but I will show you this for a car manufacturer.” For this make of car, each buyer makes up to 60 configuration decisions. As an experiment, the manufacturer tested the process from high choice (56 colors) to low choice (4 engines) vs. from low choice to high choice. “We measured how often consumers selected the default choice: those going from high to low were more likely to hit the default; those going from low to high were more likely to make their own choices and were more satisfied.” The earlier, easier choices increase engagement for the harder, later choices.

To recap, “We’ve talked about choice overload, its consequences and costs and ways to structure choices. All of these techniques are designed to improve the choosing experience, not to manipulate customers to buy what they don’t want. They are designed to increase their competence and satisfaction with their choice.”