Variable Markup

Two researchers from Columbia and Stanford have written an interesting research paper which may contradict long held beliefs that product choice is king in retail.  They conducted three studies which reviewed the patterns and habits of people deciding a path when both a small and large set of options were provided.  I recommend that you read this paper and take it’s findings into account in your merchandising behaviors as well as site, store and catalog design. 

 While I understand the frustrations of  having many products to choose from, I suggest that it comes from a lack of clear information and assistance provided by the retailer which makes the process frustrating and demotivating.  

The good news is that this is a fantastic way to differentiate your business from the other retailers selling virtually the same products. 

Some interesting key points from the paper:

“The three studies described in this report demonstrate for the first time the possibility, that while having more choices might appear desirable, it may sometimes have detrimental consequences for human motivation. Studies 1, 2, and 3 provide compelling empirical evidence that the provision of extensive choices, while initially appealing to choice-makers, may nonetheless undermine choosers’ subsequent satisfaction and motivation.  “

 This is the first and most important take away from this paper.  While it is something that may seem like common sense in the context of this paper, it is not taken into account in many cases by merchants when deciding their product offering or how the products are displayed to consumers. 

“ In fact, studies show that the selection, evaluation and integration of information are all clearly affected by the available number of options—suggesting that, as the complexity of choice-making rises, people tend to simplify their decision-making processes by relying on simple heuristics (Payne, 1982; Timmermans, 1993; Wright, 1975). For instance, a comparison of the decision strategies of people encountering three, six, or nine alternatives revealed that 21% employed an elimination strategy in the case of three options, 31% employed an elimination strategy in the case of six options, and 77% employed an elimination strategy when there were nine options (Timmermans, 1993). The increasing percentage of subjects using an elimination strategy with a growing number of alternatives was also accompanied by a lower percentage of information used. This sharp decrease in the number of attributes considered as problem complexity increases suggests that information overload may produce a change to a non-compensatory but more efficient decision rule. “

 This section points out that a primary method of decision making is through the elimination of choices available.  Because of the automatic nature of people to start eliminating choices, it is key for the retailer to enable the consumer to eliminate products more easily.  This sounds counter intuitive since the merchandising manager worked hard at providing a large selection of products that the consumer would be interested in.   However, by providing a large selection of options, it has brought the customers into your store, on to your website or into your call center.  Once they are there, it is your opportunity to make the decision making process as enjoyable as possible. 

Some things you can do to increase the customer experience:

1. Utilize faceted search navigation in your website which will allow the consumer to quickly eliminate groups of products.  Make sure that the facets provided are relevant to the product and that help differentiate product selection.
2. Faceted search navigation is also important in your call center and kiosk applications.  Allowing your call center representatives to assist a caller in narrowing down the choices is also a good way of helping in a consultative sell.  Similarly, a kiosk application utilizing these methods in the power tools section of a DIY store is a great way to assist someone trying to narrow the 32 choices they have for power drills. 
3. Empower your sales people on the floor with the same or more information than the consumer has when they walk into the store.   The Genius Bar in Apple stores are a great example of this.  Providing educated product enthusiasts in the store can quickly help the customer narrow down which latop or Ipod from dizzying array of options is key to the success of Apple stores.
4. Utilize social feedback from things like product reviews on your commerce site and bring them into your stores and catalogs.  Even though it may be a more difficult medium to accept feedback in these channels, they are still prime targets for sharing this information back to the consumer.

The thoughts and research put into this paper reveal some interesting issues and data points.  The solution is not to reduce your product selection, but help your customers make the right choice in choosing the product.   By doing this, you’ll increase customer loyalty and satisfaction which will keep the consumer coming back.  What have you seen or done to make the buying decision process easier for your customer base?