Why do companies make customer buying complicated? For a small business, this question is critical
Surprisingly, giving customers too many choices is likely to lead to fewer sales. It may be time to think about reducing the number of product and service offering in your business.
Whilst these ideas appear counter-intuitive, marketing fewer products or services can lead to more sales and happier customers.
Many business owners running small companies want to sell as many products and services as they can. When the business grows, one of the first things that happen are that products or services to add to existing lines. The thinking is: “More choices, more sales.”
Research and experience indicate that this is almost certainly wrong. In fact, a now-famous study of consumer buying behaviour, published a dozen years ago in the Journal of Personality and Social Psychology, shows just that.
Researchers set up tables at a supermarket where customers could sample jams. On some occasions, they put out 24 flavours of jam for tasting. At other times, only six flavours were offered.
The result? Offering 24 flavours got more people stopping to sample the jams — 60% of all those who walked past. That contrasted with 40% stopping to sample when just six flavours were available for tasting. When it came to buying, the results differed. Far fewer people actually bought jam when they were presented with 24 flavours. Customers with a limited choice were more likely to purchase.
Many large companies have learned that too many choices are counterproductive. Some have made fortunes in the process.
In 1996, when Steve Jobs returned to run Apple, one of the first things he did was reduce the number of computers that Apple made. At the time, Apple had dozens of product lines to meet the needs of different retailers and market segments. Jobs came in and slashed Apple’s products to just four.
Customers with too many options experience “choice overload.” It is easy to assume that customers want lots of options.
However, when they are actually confronted with all those choices, they not only have trouble making decisions, which means they are less likely to buy, but they are less satisfied when they do make a purchase. That means they are less likely to buy again.
What is the best number of choices to offer? Many companies clearly think three choices are about right.
When looking at many goods or services, typically three options are seen – the equivalent of economy, regular, and super. There may be others like premium, professional, expert; or silver, gold, platinum. Three works well because many people gravitate naturally toward the cheapest choice and others to the most expensive.
Customers expect businesses to help manage choices for them. Too many choices are confusing, and when confused customers feel stupid. When they feel stupid, they don’t buy.