Podcast Episode 101: The Choice Overload Effect

 Click here to listen to Choice Hacking Podcast Episode 101: Choice Overload Effect now, or watch below with available closed captions on YouTube.

EPISODE SUMMARY

We often assume that giving people more information is better. But to customers, more options can be paralyzing. In this episode, we'll explore the behavioral science of the Choice Overload Effect, and talk about how we can use it to our advantage in business, marketing, and experience design.

And we'll answer the question, "How can I create an amazing customer experience in a world where more is less?"

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EPISODE RESOURCES

If you'd like to learn more about the materials I've referenced in this podcast, be sure to check out the links below: 

EPISODE TRANSCRIPT

0:00:01.8 Jennifer Clinehens: This week on Choice Hacking.

0:00:03.1 Speaker 2: No, no, no, it's just... [0:00:05.9] ____ you're gonna tell yourself, that's it, that's the cellphone I'm gonna need. Whatever else happens, you got that cellphone problem. I had it all. I had a [0:00:16.3] ____ that was very decent, a wardrobe that was getting very respectable. I was close to being complete.

0:00:23.4 JC: Many of us in the Western world grew up with these types of messages. All we needed to do was follow the expected path, go to college and then grad school, go into debt with student loans, buy a house, fill it with furniture, buy a new car, buy a new wardrobe. If you can't afford it, get another credit card. But now, there's a new trend taking over, a sort of pushback to generations of these types of messages. It's called minimalism, and it's all about living with less, less financial burdens like debt and unnecessary expenses, less clothes in the closet.

0:00:53.3 Speaker 3: We're talking about work uniforms, if you will. One woman is making a bold decision to just simplify her wardrobe and wear the same outfit every day. She's done it for the past three years.

0:01:03.3 JC: They're moving into smaller houses.

0:01:07.4 Speaker 4: It is tiny. Even for a tiny house, it's pretty small, at 10 x 10, it's 100 square feet. And I'll be honest, it's a little bit small for me.

0:01:16.6 JC: Minimalism is even bleeding into what we watch on Netflix.

0:01:20.7 Marie Kondo: Now, my name is Marie Kondo. I'm the author of The Life-Changing Magic of Tidying Up.

0:01:29.0 JC: I'm Jennifer Clinehens. Join me today on Choice Hacking, as we look at the effect too much choice has on our brains, lives, businesses, and well-beings. We'll examine the psychology of the choice overload effect and explore the question, "How do we create amazing customer experiences in a world where more is suddenly less?"

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0:02:05.4 JC: But before we get started, let's give a shoutout to the company who's bringing you this podcast today, Audible. Now, if you're like me, you love audio, podcasts, radio shows, and audiobooks. And now more than ever, audio content is becoming a way to learn, connect and entertain. Check out choicehacking.com/audible to get your free 30-day trial of Audible Plus. Personally, I'm living listening to two audiobooks at the moment: The Psychology of Selling by Brian Tracy and The Sandman by Neil Gaiman and Dirk Maggs, narrated by Riz Ahmed, Kat Dennings, Taron Egerton, James McAvoy, Bebe Neuwirth, Andy Serkis, and Michael Sheen. And don't forget, you can get the Choice Hacking podcast ad free when you join our premium Substack newsletter. For only $7.99 a month or $79.99 a year, you'll get access to subscriber-only and ad-free episodes, exclusive content, webinars, e-books and a quarterly book club. And for a limited time, you can get a free 30-day trial. Check out choicehacking.com/subscribe for more details. Now on to the show.

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0:03:22.0 JC: So I wanna start today's podcast by asking you a question. Have you ever experienced analysis paralysis? So that's that feeling of anxiety you get when you have so much information that any action you take, it feels like the wrong one, so you don't do anything at all. Now, this is really common in businesses, you'll see this, they do so much market research that they can't quite figure out the right thing to do is, but you also see it in people's personal lives, particularly when they're shopping. And it's really no wonder that the average person can feel overwhelmed by information, options and choice. So I'm gonna give you a few statistics here, some of them make you feel kind of bad, some of them may blow your mind, but I've got three for you.

0:04:05.4 JC: So number one, every year, 30,000 new products are released into the market. That's a lot. Number two, in the '90s alone, the amount of brands on store shelves tripled. And number three, the average American grocery store, so not a superstore like a Walmart, just a normal-sized grocery store, has more than 30,000 options on their shelves. An average Walmart, well, it has more than 120,000 products. And get this, that's after a company-wide effort to reduce their SKUs or the number of products and product options on their shelves, by 15%. That's after they've reduced it by 15%. So as entrepreneurs, marketers and designers, we often assume that giving people more information and more choice is better, but in reality, more options can be paralyzing.

0:05:01.2 JC: When Sheena Iyengar was a graduate student, she liked to visit a luxury market called Draeger's in Menlo Park. It was close to the campus where she was studying, Stanford University. And she loved to browse the expanse of shelves. They were filled with more than 3,000 cookbooks, 500 kinds of produce, 250 kinds of cheese, thousands of condiments. In fact, there's almost 250 kinds of mustard alone. Sheena also loved the sampling stations where she could taste a few of the thousands of products on offer. And although she loved to pore over the items in the market, she rarely, if ever, bought anything, and that struck her as odd. If having huge amounts of choice was a good thing, why did it make her feel so overwhelmed, so anxious? And why did she almost never buy a product? Intrigued, Iyengar and her advisor, Mark Leper, devised a series of studies that replicated the problem of too much choice. The most famous of these studies used luxury jam.

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0:06:07.4 JC: To measure the effect that choice had on customers, their research team set up a booth of jam samples. Every few hours, they would switch from a selection of 24 jams to a group of six jams.

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0:06:28.8 JC: When there were 24 jams, 60% of customers, so most customers, would stop and get a sample, and 3% of those customers would buy a jar. When there were only six jams on display, 40% of people stopped, so not as many. But here's the really interesting part. When there were only six jams on display, 30% of these people bought jam. In other words, lots of options attracted customers to browse, but fewer choices got them to buy. After the jam study, as it's now known, was published, it took off. It was covered in the Wall Street Journal, the New York Times and National Public Radio. Even conservative radio host Rush Limbaugh had a hot take on the study. He described it as "Pointy-headed intellectuals who failed to understand the essential wisdom of the market, capitalism and entrepreneurship." This assertion that too much choice could be a bad thing had clearly hit a nerve.

0:07:26.4 JC: Now, the adverse effects of too much choice is really down to a behavioral science principle known as choice overload. It's the idea that while some choice can be good, too much choice will overwhelm customers. The negative effects of choice can be more severe than just a missed sale. So research shows, and we'll link to this in the show notes, that when there are too many options, customers feel anxious. They'll disengage and they can even become depressed. So if choice overload is such an issue, how do we overcome it? So first, we have to acknowledge that choice is a double-edged sword. And as we saw in the famous jam study, having lots of choices did serve a function; it increased the propensity or the likelihood for customers to stop and browse, even if they were less likely to buy something. So if conversion is your problem, consider offering fewer choices.

0:08:15.6 JC: Now, Procter & Gamble did just that. In fact, they decreased the number of Head and Shoulders shampoo options, and they found that having less choice resulted in a 10% increase in revenue. You also need to make sure that it's easy to compare features across products. So if you wanna make it easy for customers to choose between non-equal options, make sure you frame the use of each. So I'll give you an example. So Calendly, which is an online calendar software, uses basic, premium and pro options to reduce the number of choices. And then underneath each one of these, the basic, the premium and the pro, they compare features really clearly across products in a table that's really simple and easy to digest.

0:09:00.9 JC: But if your problem is not conversion, but is consideration and awareness, consider the upside of having more options. Variety on the shelf can send a signal to the market that your brand is well-known, well-loved and successful. Lots of options can be a type of social proof for customers, sending the message that more people prefer your brand because it's overshadowing competitors. It can also help reduce costs by providing economies of scale across manufacturing, fulfillment, operations and marketing.

0:09:29.9 JC: Now, if you do go down this path, consider grouping or chunking your products into sub-groups that have options that are easy to compare. Or as in Amazon's case, invest in data solutions like algorithms that can help present related and suggested items to customers. If you do decide to increase or decrease the amount of options you have, consider spending some time and research dollars experimenting to find that sweet spot where you have just enough options to attract customers, but not so many that people get overwhelmed and choice overload takes over.

0:10:05.4 JC: Part of the reason that there are so many options is because of competition. If we restricted choice through legislation or legal guidelines, we may find that less competition results in worse quality products. And if we take the lead of the minimalist we talked about at the top of the show, we as consumers might make the ultimate choice, which is to choose nothing at all.

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0:10:29.6 JC: So maybe that's the answer. Choice can be a tool in the hands of entrepreneurs and designers, but it can also be a weapon for people to fight back against the ramifications of too much choice.

0:10:43.0 JC: That's it for today's episode. If you enjoyed this podcast, please consider checking out my book, Choice Hacking, available on any major Internet book retailer like Amazon, Apple, Kobo and Google Books. And it's also now in audiobook form on Amazon and Audible. And you can even download the first chapter free if you visit choicehacking.com/freechapter. As always, you can find me, Jen Clinehens, on Twitter, @choicehacking, all one word, or follow Choice Hacking on LinkedIn, Instagram or Facebook. Until next time.

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