Barry Schwartz

The Paradox of Choice-- Why More is Less

We Share Ideas

Major Premise of the Book

1. An important trend that is developing in society is a significant increase in the number of choices available to individuals when making decisions

2. Increased choices may appear to be liberating but they can have an overwhelming effect that causes individuals not to choose at all or to be dissatisfied with the choices they do make

3. When it comes to choices, ignorance is sometimes bliss

We Share Ideas

Relevance to Your Business

1. Major changes in society often present new opportunities and new challenges for businesses

2. How would a significant increase in the number of choices available to your customers, suppliers and employers affect your business?

3. What new challenges would this present?

4. What new opportunities would this present?

We Share Ideas

Buying a Pair of Jeans

1. You must choose among slim fit, easy fit, relaxed fit, individual fit, baggy or extra baggy

2. You must also choose among stonewashed, acid-washed (faded), distressed or destroyed

3. Then you need to choose between button-fly and zipper-fly, low rise and regular rise

4. Finally, you must choose the color and the waist and inseam size

5. Then you realize you might be able to wear a 38-34 in the relaxed fit or a 40-34 in an individual fit

6. The combinations are almost endless7. What used to be a simple decision is now a complex

decision that requires a significant increase in time, energy and money and increased self-doubt, anxiety and dread

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Shopping

1. In the average supermarket there are 85 different varieties and brands of crackers, 285 varieties of cookies, 140 flavors and brands of juices

2. In the pharmaceutical aisles there are 61 varieties of suntan oil and sunblock, 80 different pain relievers, 40 options for toothpaste and 360 types of shampoo

3. Shopping for gadgets you can choose among 45 different car stereo systems and 50 speakers

4. Shopping by mail significantly adds to your choices while shopping on the Internet is almost unlimited

We Share Ideas

Choices Can Be Demotivating1. Researchers set up a display in an upscale gourmet

food store, featuring a line of exotic, high quality jams.• Customers could taste samples and were given a

coupon for a dollar off if they bought a jar

2. In one situation, 6 varieties of jams were available. In another, 24 varieties were available

3. The large array of samples attracted more people than the small array

4. Thirty percent of the people exposed to the small array of jams actually bought a jar

5. Three percent of those exposed to the large array of jams bought a jar

We Share Ideas

Choosing Prescription Drug Plans

1. In the presidential election of 2000, both Bush and Gore supported providing prescription drug coverage for seniors

• Gore thought it should be part of Medicare where a panel of experts would decide on the one best plan for seniors

• Bush favored leaving the decision up to individual seniors which plan was best

2. Ironically, the plan adopted by Bush has been severely criticized by seniors because of its complexity

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Choosing Retirement Plans

1. The trend of going from defined benefit plans to defined contribution plans will have a major effect well into the future

• One consequence has been that participants now have to decide among a wide variety of investment choices and plans

2. Fidelity Investments is helping solve the problem of increased choices by making available life cycle funds. The funds (Freedom Funds) have a target date, e.g. 2010. The asset allocation becomes more conservative as the target date is approached

• All decisions and allocation adjustments are made by Fidelity. All the client has to do is buy the fund that matches their retirement date

We Share Ideas

Choosing Medical Care

1. American drug companies have shifted their marketing focus from doctors to consumers. Witness advertising on prime time TV

2. Though 65 percent of people surveyed say that if they were to get cancer, they would want to choose their own treatment,• In fact, among people who do get cancer, only 12

percent actually want to choose their own treatment

We Share Ideas

Consequences of Error

1. As options increase, effort also increases

2. Mistakes “hurt” even more

3. More choice has 3 unfortunate effects: • Decisions require more effort• Mistakes become more likely• Psychological consequences of mistakes become

more severe4. As a result, more choice many times results in more

remorse and less satisfaction!

We Share Ideas

New Opportunities

1. As information becomes more available to the consumer, knowledge brokers such accountants, doctors, lawyers and travel agents become less valuable

• Ironically, if too much information becomes too available, the consumer may develop a need for someone to consolidate and analyze the vast amount of available information

2. Branding becomes more important because it reduces the stress and uncertainty associated with a large number of choices

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New Opportunities Cont’d.

3. Testimonials become more important

4. Word-of-mouth becomes more important

5. Customers want reasons to do repeat business with a supplier – they don’t have to choose another

We Share Ideas

Why Customers StayClient Satisfaction Matrix

At risk

At risk

At riskGone

Searching

Searching

Loyal

Loyal

RavingFans

Unsatisfactory Satisfactory ExceededExpectations

Uns

atis

fact

ory

Sat is

fact

ory

Exce

eded

Exp e

ctat

ion s

Client’s Personal Experience

Proj

ect O

utco

me

We Share Ideas

New Opportunities Cont’d.

6. Software programs that optimize choices become valuable

• Travelocity allows the consumer to check flights and fares out of three different departure cities and three different arrival cities at the same time

• Consumers can enter personal information and preferences on websites that then recommend the best choices in such things as long term care insurance, automobiles, colleges and potential life partners (www.ehealthinsurance.com)

7. Amazon.com’s recommendations of other books purchased by people with preferences similar to yours eliminates a number of possible choices

We Share Ideas

Questions

1. Major changes in society often present new opportunities and new challenges for businesses

2. Can you optimize (increase or reduce) the choices available to your customers? • Can you “bundle” things together to reduce the

confusion of choices (and improve margins)? • Can you “unbundle” products or services to provide

more choices (and improve margins)?• Can you provide systems that either help customers

make choices, or entirely eliminate choices, based on profiles, known preferences or past behaviors?

We Share Ideas

Questions

3. What can you do to convert your customers to “Raving Fans”, thereby giving them the luxury of not having to choose another supplier?• An outcome that exceeds their expectations

And• An experience that exceeds their expectations

Barry Schwartz

The Paradox of Choice-- Why More is Less