Given that consumers differ in preferences, product variety is seen as beneficial to consumers as a wider assortment will logically better-meet their diverse preferences than a narrower assortment. Research is now calling this ‘variety-is-good’ belief into question. Conventional wisdom says that a marketer can address the needs of the consumer by offering her more options. But new research seems to suggest that giving too many choices can prove to be counter-productive for companies.
For years, companies have expanded their product lines in an attempt to better meet the needs of target customers. Typically, they do so by adding new flavors, package sizes, formulations, features and options. As a result, where the Coca-Cola Company once sold a single formulation of cola, it now sells over 10, including Classic Coke, Diet Coke, Caffeine-Free Diet Coke and Cherry Coke.
Confused by choice: It is observed that when assortment sizes increase consumers,
1. could postpone or even avoid – choice (example, “I can’t decide which mutual fund to invest in so I’ll just do it later)
2. Might defect to an area or brand that offers less choice (example, I can’t choose from 30 flavors of Brand X ice-cream, so I’ll just choose Brand Y which offers only vanilla)
3. Or might choose extreme alternatives (example, I can’t decide which features of cars to choose, so I’ll buy the very basic version or fully loaded version)
As an example, for one online grocer, decreasing assortment by 20% to 80% across product categories increased revenues by 11%.
These results speak to the potential negative impact of product assortment on consumer choice an effect we refer to as ‘over-choice’.
An ‘aligned assortment’ is defined as a set of brand variants that differ along a single, compensatory dimension, such that each variant has a specific quantity of that attribute. Examples would be several bottles of headache medicines that vary in tablet count; air conditioners that vary in cooling capacity; and milk that varies in fat content. Such assortments require tradeoffs within a single attribute such as the quantity capacity, or amount of an ingredient.
In contrast, a ‘non-aligned’ assortment is defined as one in which the brand variants vary along multiple non-compensatory dimensions, such that while one alternative possess one desirable feature, a second alternative possesses another desirable features. Examples would include flavors of ice-cream (if you have chocolate you cannot have strawberry) and body styling of cars (if you have a sedan you cannot have the station wagon). Assortment size helps in the case of an aligned assortment but hurts in the case of a non-aligned assortment.
One could simplify the cognitive effort required to make a given choice. This might be done through a strategic simplification of information presentation. For instance, other manufacturers have opted to lead the consumer through the decision making process.
A marketer could reduce the potential for regret by instituting a liberal exchange policy.
Money-back guarantees could serve the same purpose. Interestingly while such policies are broadly used in practice to encourage sales, our research would argue that these policies will significant more effective in the case of increasing non-aligned assortments than increasingly aligned assortments. .
Finally, a manufacturer could simply recognize the potential shortcomings of a large non-aligned assortment and reduce its offerings.