Posting in Cities
We all want the freedom to make choices, but the way the decision-making process is architected and presented can impact the outcome.
Choice. It's what consumers demand. Whether they're deciding on buying a car or which retirement fund to select, consumers say they want options. But research led by Sheena Iyengar, a professor at Columbia Business School, shows that we're often bored or befuddled by the process of making choices. In a TED Talk, at a TEDSalon event in New York City late last year, she laid out a process for making the act of choosing more engaging and easier. TED made a video of the talk available last week.
The typical American has to make 70 different choices a day, according to a 2000-person survey Iyengar conducted. And for a project she conducted while studying at Stanford, she found that consumers in a grocery store were more likely to buy a bottle of jam if they were given six flavor choices, compared to when they were when given 24 flavor choices.
She also found a correlation between the number of funds offered in a retirement plan and the level of participation. The more choices available in a plan, the fewer people participated in the plan.
This research led her determine that in cases where people have too many choices, which she calls "choice overload," they tend to become disengaged in the decision-making process, they make poor choices and they tend to be dissatisfied with the choices they make.
She lays out a four-point design for improving the decision-making process for consumers.
1: Reduce the number of choices. This might sound counter to conventional wisdom, but she points to business cases where reducing the number of products on the market actually improved profits for a number of brands.
2: She calls the second step "concretization" and says "in order for people to understand the differences between the choices, they have to be able to undersand the consequences associated with each choice." By asking consumers to think about the things that they could do with their retirement savings, ING found that they could entice more people to enroll on a 401K program. They all knew it was a smart thing to do, but a retirement plan, on paper, is hard to appreciate. Focusing on the longer term benefits is key to getting buy-in.
3: Putting choices into categories helps consumers handle the number of choices. In an experiment with a magazine rack in a grocery store, consumers considered 400 magazine titles broken into 40 categories to be a larger selection (and therefore a better selection) than 600 titles broken into just 20 categories.
4: The final step is to "condition for complexity." This refers to the number and complexity of decisions we need to make, and the steps in which we need to make them. When deciding on components and options for a new car, for example, having them make the easiest decisions first and then increasing the complexity of the each design keeps the consumer more engaged in the process than if the more complex decisions are presented early on.
Jan 25, 2012