Barry Schwartz

1
The Paradox of Choice -- Why More is Less

• Barry Schwartz

2
Major Premise of the Book

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

3
Relevance to Your Business

• Major changes in society often present new
  opportunities and new challenges for businesses
• How would a significant increase in the number of
  choices available to your customers, suppliers
  and employers affect your business?
• What new challenges would this present?
• 4. What new opportunities would this present?

4
Buying a Pair of Jeans

• You must choose among slim fit, easy fit, relaxed
  fit, individual fit, baggy or extra baggy
• You must also choose among stonewashed,
  acid-washed (faded), distressed or destroyed
• Then you need to choose between button-fly and
  zipper-fly, low rise and regular rise
• Finally, you must choose the color and the waist
  and inseam size
• Then you realize you might be able to wear a
  38-34 in the relaxed fit or a 40-34 in an
  individual fit
• The combinations are almost endless
• 7. 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

5
Shopping

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

6
Choices Can Be Demotivating

• 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
• In one situation, 6 varieties of jams were
  available. In another, 24 varieties were
  available
• The large array of samples attracted more people
  than the small array
• 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

7
Choosing Prescription Drug Plans

• 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

8
Choosing Retirement Plans

• 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
• 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

9
Choosing Medical Care

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

10
Consequences of Error

• As options increase, effort also increases
• Mistakes hurt even more
• More choice has 3 unfortunate effects
• Decisions require more effort
• Mistakes become more likely
• Psychological consequences of mistakes become
  more severe
• As a result, more choice many times results in
  more remorse and less satisfaction!

11
New Opportunities

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

12
New Opportunities Contd.

• Testimonials become more important
• Word-of-mouth becomes more important
• Customers want reasons to do repeat business with
  a supplier they dont have to choose another

13
Why Customers Stay
Client Satisfaction Matrix
Raving Fans
Exceeded Expectations
Project Outcome
Satisfactory
Gone
Unsatisfactory
Exceeded Expectations
Unsatisfactory
Satisfactory
Clients Personal Experience
14
New Opportunities Contd.

• 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)
• Amazon.coms recommendations of other books
  purchased by people with preferences similar to
  yours eliminates a number of possible choices

15
Questions

• Major changes in society often present new
  opportunities and new challenges for businesses
• 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?

16
Questions

• 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

17
The Paradox of Choice -- Why More is Less

• Barry Schwartz