Platt Perspective on Business and Technology

Productivity and abundance, and the paradox of choice – 1

Posted in startups, strategy and planning by Timothy Platt on April 17, 2012

The immediate assumption that we all bring to a proposed increase in choice is that it is enabling and good. And increasing selection options and choice frequently is. Competition can force businesses to increased efficiency and to improve the quality of what they offer. Increased choice in the marketplace allows consumers to more carefully and fully seek out and find specific products and services that best meet their needs.

When Henry Ford first began building assembly line, mass produced automobiles he is famously noted as having said that “you can get one in any color you want so long as that is black.” This is held up as an almost archetypal example of a lack of choice and more modern auto industry offerings often center on the range of options that a consumer can select from, and not just in car color. The Toyota Motor Corporation Scion is in fact built and manufactured as a basic, core car design to which individual consumers can add a seemingly endless selection of factory-added modifications and customizations. The Scion in effect represents the far end of a spectrum of choice and selection that Henry Ford’s Model T represents the other extreme for. But increasing choice does not, on fuller examination, always lead to greater customer engagement or satisfaction or to increased sales. And it does not always mean better products reaching the consumer’s hands or increased utility or usability either. And I begin that part of this discussion at the supermarket shelf.

Consumers want choice. They demand it. But when they are confronted with more than some threshold of selections for any given product type, they actually start purchasing less of it, and across all selection options. Consumers may want to see more than one type of ketchup on the shelf to choose from but they do not want to see 317 choices to select from – this one made with heirloom tomatoes and that with specially roasted tomatoes, and those 17 over there made with their manufacturer’s variously differing secret blends of seasonings and spices.

A customer walking in that store intent on buying ketchup and just one particular brand and bottle size who finds it will probably pick that up and bring it to the cashier to purchase. But when a customer is simply thinking about picking up some ketchup and does not have an overwhelmingly great need to do so now, and does not have any particular brand or style in mind – they may very well look down this long isle of bottles and walk away. Actually, the customer seeking out that one specific brand may end up just walking away too, because they cannot find the selection they want in all of that clutter – at least before they run out of patience in their search.

• Where is that threshold beyond which increased choice passes a point of diminishing returns for the consumer?
• The answer to that will vary from consumer to consumer and depending on the context in which they approach the store in the first place. Someone rushing to get home who is simply stopping off at a store to pick up a few items they would like to have on hand, is going to hit that point of diminishing returns a lot faster than that same shopper when they are not rushed and when they are thinking in terms of a full grocery list – or that same shopper even if they are rushed but they absolutely have to bring a bottle of ketchup home with them and that evening.
• One point of distinction here that is not entirely dependent on the consumer and their frame of mind does stand out, however. Product distinctions that as a matter of explicit content really make a difference for the consumer can have the effect of simplifying the selection process for them – if, that is, those consumers can find the specific selection choices that meet the criteria that count for them. For ketchup that might mean organic ingredients only, and for some that might be further restricted and mean ketchup that is certified as being free of genetically modified organism (GMO)-derived ingredients.

That said, a vast selection range can become a marketing specialty – for the product types that are offered with that seemingly all-included choice range. And consumers who are looking for brands or types that are not generally sold in other stores will go to the ones that give the widest range of options for specific product categories. To take that point out of the abstract with a real world example, I like hot pepper sauces and there are a scattering of stores that I remember and like and go to for them for when I want more than just the most commonly offered standard brands. There are consumers like me for a wide range of products. But this approach to inventory works best as the exception and as a niche market offering – and not everywhere, where too many choices simply become that extra clutter for most.

And I have not even raised the costs here of maintaining lots of slow-moving items on the shelf with expiration date issues and the cost of keeping capital tied up in inventory that is not moving. If this set of issues affects the consumer it affects the business too.

I began this with a storefront context, and I will turn in my next posting to this short series to consider online stores and their web sites. Meanwhile, you can find this and related postings at Business Strategy and Operations – 2 (and also see Business Strategy and Operations.) I have also included this series in Startups and Early Stage Businesses.

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