A Look at Behavioral Economics: Don’t Overwhelm with Choices
July 26, 2011 2 Comments
Whatever you are selling, understanding your customer’s behavior is key to your success.
There’s actually a science called Behavioral Economics that seeks to explain why people behave the way they do. Behavioral Economics combines psychology and economics to understand the purchase decision. It looks at how customers make decisions and why they make them.
I’m sure many of you are wondering whether or not science done by some university Ph.D. is applicable to real world business– my answer to you is absolutely! (at least in this case)
Understanding why consumers buy what they buy is extremely valuable knowledge. In my next few blog posts, I am going to look at some interesting findings on consumer behavior and how you can apply them to your business.
Let’s get started…
Fewer Choices
Too many choices can overwhelm customers and make them less likely to purchase. A study done by Columbia University psychologist Sheena Iyengar found that too many choices can actually cause a type of “information overload” in the mind of consumers. The classic experiment offered grocery shoppers a selection of 24 varieties of jams one day and only 6 the next. 30% of shoppers who were faced with the limited selection of 6 made a purchase, whereas only 3% given the 24 variety selection made a purchase. That’s right—fewer choices led to 10 times more sales.
The Takeaway
Choice isn’t always good. In fact, too many options can actually reduce sales by forcing customers to think too hard. Because of this, offering fewer choices can be a huge differentiator. Apple, Trader Joe’s, and In-N-Out Burger are a few brands that have adopted this approach and made the purchase process easier.
If you enjoyed this article, you may be interested in some others from the Understanding Customer Thinking series:
- Part 2: The Framing Effect
- Part 3: Decoy Pricing
- Part 4: The Anchoring Effect
- Part 5: Minimize Risk
- Part 6: The Placebo Effect
About Donald Cunningham
Donald – of course you are right. I appreciate the study you cited to solidify the point. I have also found, in high-involvement selling it really helps to have a few choices, but then to recommend to the buyer what you think is best for them based on the discovery you’ve conducted. This almost always leads to a shortened sales cycle. People don’t like to make mistakes, and often don’t trust their own judgement when buying in areas they have no experience.
Thanks for sharing your experience Dave. You make a great point, oftentimes buyers simply want you (the seller) to tell them what product will fit their needs. An example of this can be seen in the 65+ crowd. When they go to Best Buy to purchase a new computer, they rely totally on the sales person’s experience and expertise.