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/ / / Sometimes consumers benefit from fewer rather than more options.
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GfK MIR / Vol. 3, No. 1, 2011, pp. 8 – 15 / New Strategies doi 10.2478 / gfkmir-2014-0051
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9 New Strategies / Vol. 3, No. 1, 2011, pp. 8 – 15 / GfK MIR
The Paradox of Large Assortments
One of the decisions that managers — in both manufac-
turing and retail — have to make involves designing and
managing their product lines and product assortments.
Offering too many or too few choices can lead to subop-
timal performance, so the question is how to decide on
the
optimal number of alternatives to make available.
Conventional wisdom suggests that offering an extensive
variety of options — although costly for the company —
tends to benefit, and therefore attract, consumers. Indeed,
research surveys indicate that when asked to state their
preferences, consumers opt for the retailer (and brand)
offering the greatest variety. Hence, when deciding on the
size of their assortments, managers typically try to maxi
-
mize the number of options offered to consumers, subject
to cost constraints on the part of the company
.
Recent research argues that the assumption that con-
sumers always benefit from having more options to
choose from does not always hold and that in some
cases consumers will benefit from fewer, rather than
more, options. In particular, the empirical data document
an interesting paradox: when choosing among assort-
ments — such as deciding on a retailer — consumers
typically prefer the variety offered by larger assort-
ments. Yet, when making a choice from a given assort-
ment, consumers often find it more difficult to choose
from assortments offering large selections, are less
confident and less satisfied with their choices, and are
more likely to walk away without making a choice. This
preference inconsistency implies that consumers cannot
accurately predict their need for variety and tend to sys-
tematically overestimate the benefits offered by larger
assortments.
The inconsistent pattern of consumer preferences for
larger assortments and consumers’ inability to accu-
rately predict their own need for assortment variety
raise the question of identifying conditions in which
larger assortments will benefit consumers, as well as
conditions in which consumers are better served by
smaller assortments.
When More Is Less and Less Is More:
THE PSYCHOLOGY OF MANAGING
PRODUCT ASSORTMENTS
Alexander Chernev
THE AUTHOR
Alexander Chernev,
Associate Professor of
Marketing, Kellogg School of
Management; Northwestern
University, Evanston, IL, USA
ach@kellogg.northwestern.edu
This article is a summary of the
findings published in the articles
cited at the end of the text.
The strategy of giving customers what they want can backfire when it comes to designing
and managing product assortments. Not only does offering more options lead to higher
costs for the company, larger assortments often lead to lower probability of purchase and
decreased satisfaction due to choice overload. Surprisingly, most consumers (as well as
many managers) are unaware of the drawbacks of larger assortments, displaying prefer
-
ence for the greater variety of options even in cases when such variety makes consumers
less confident in their decisions and lowers their satisfaction with choice. Understanding
the psychology of choice gives managers a competitive advantage, allowing them to design
assortments and product lines that create value for both the company and its customers.
10
The Pros and Cons of Large Assortments
So why do most managers think that variety facilitates
choice? Reasons abound:
>
Better match between preferences and options. Larger
assortments offer an opportunity for a better match
between a consumer’s preferences and the benefits
provided by the options available in the choice set:
the more options available in a given assortment, the
greater the chance that each individual consumer will
find the “ideal” option.
>
More choice flexibility. Larger assortments are also
preferred because they allow consumers to keep their
options open, allowing them more flexibility when mak-
ing a selection.
Thus, consumers who know what they
are looking for but have not finalized their preferences
tend to prefer larger assortments because they offer
them the flexibility to reconsider their initial selection.
In this context, a lack of variety might create negative
sentiment among consumers who feel that their choice
is restricted by an insufficient menu of options.
>
More chance to explore possible options. Consumers
might also experience additional utility simply from
having multiple items in the choice set because it al-
lows them to explore a more complete roster of op-
tions available in the product category. Variety is espe-
cially relevant for consumers who want to determine
the entire range of attribute values available and learn
more about the different features and benefits among
the choice alternatives before making a decision.
>
Reduced risk of missing a superior option. Larger as-
sortments also reduce the uncertainty of whether the
choice set at hand adequately represents all poten-
tially available options. Indeed, consumers may opt
not to make a choice if they think that the available
assortment does not adequately represent the entire
set
of possible options. In addition, consumers might
feel more confident when selecting from a retailer
that offers a larger assortment because it is less likely
that a potentially superior option is not represented in
the available choice set.
The list of reasons why larger assortments are likely to
benefit consumers is impressive, which explains why the
belief in the universal “goodness” of offering more op
-
tions to consumers is so popular. And yet, as the title of
this article suggests, larger assortments are not always
beneficial to consumers and in some cases can hamper
rather than facilitate choice.
There are several reasons
why this might happen:
>
Information overload. Extensive assortments often
lead to information overload because consumers
evaluating large assortments have to process more
information than those evaluating relatively smaller
assortments. Thus, consumers often find it easier to
deal with smaller assortments simply because they
have to evaluate fewer options and consider fewer
attributes on which these options are described. The
effect of information overload is often compounded
in assortments in which options are poorly organized
since the very lack of structure further complicates
evaluating the available options.
>
Choice overload. In addition to information overload,
larger assortments are also more likely to lead to
choice overload in cases when the available assort-
ment yields more than one acceptable option. Indeed,
the more attractive options one is given to choose
from, the more difficult it is to make the decision.
The
choice among attractive options is especially difficult
when these options are attractive because of different
attributes. Decision difficulty in this case stems from
consumers having to decide which of these attributes
are more important and determine the exact trade-off
involved—that is, how much better an option should
be on one attribute in order to compensate for a defi
-
ciency on another attribute.
>
Higher consumer expectations. Larger assortments
are also likely to complicate choice by raising con-
sumer expectations about the likelihood of finding
the “ideal” option. When choosing from large retail-
ers specializing in a particular product category (i.e.,
category killers), consumers of
ten have much higher
expectations and more precise ideal points than when
shopping at a retailer offering a relatively smaller
selection. The higher the expectations of the match
between the “ideal” and the available options, the
greater the probability that consumers will walk away
from the assortment if a perfect match is not avail
-
able. Figure 1 summarizes the pros and cons.
T
he Role of Consumer Expertise
Selecting the “right” assortment size is not a trivial task.
There are clearly conditions where large assortments will
benefit consumers, as well as scenarios in which larger
assortments will be detrimental to consumer choice. So,
when do consumers benefit from having fewer options?
Recent research suggests that consumers’ reaction to as
-
sortment size is a function of their expertise, and, in par-
ticular, their know-ledge of the attributes and attribute
levels describing the choice alternatives, as well as the
degree to which they have established preferences for
GfK MIR / Vol. 3, No. 1, 2011, pp. 8 – 15 / New Strategies
11
either a larger (24 options) or a smaller (6 options) as-
sortment of Godiva chocolates. Prior to making a choice
some
of the respondents were asked to write down
their preferences for each of the attributes describing
the choice alternatives (e.g., chocolate type, flavor, and
texture), as well as to rank-order the attributes in terms
of their importance, whereas respondents in the other
group were not given this preference articulation task.
After they made their chocolate selection, all respon
-
dents were given the option to switch their choice with
the most popular item from the entire Godiva collection.
(
The rationale was that consumers who were less confi-
dent in their decision and less satisfied with their choice
would be more likely to switch to the “
default” option
preferred by the majority of consumers.)
The data show that “novice” consumers were more con
-
fident when choosing from small assortments, whereas
“
experts” were more confident when choosing from
large assortments. Thus, when choosing from the smaller
assortment, only 9% of “novices” opted to replace their
selection with the “default” option, compared to 27%
of “experts.” However, when choosing from larger as
-
sortments the preference pattern was reversed: 38%
of “novices” opted to switch—indicating a rather low
degree of confidence in their choice—compared to only
13% of “
experts” who were unhappy with their selec
-
tion and opted to switch.
The preference articulation task
these options (meaning that they know how to trade off
options’ benefits and costs on different attributes). Thus,
consumers with product expertise and readily articulated
preferences—for simplicity let’s call them “experts”—
are more likely to benefit from the variety afforded by
larger assortments than “novices” who are unfamiliar
with the product category and do not have articulated
preferences.
The theoretical rationale underlying this argument is
that “experts” are better able to deal with information
and choice overload than “novices,” who are less certain
in their preferences. Indeed, when evaluating the avail
-
able options, “novices” are faced with the dual task of
forming their ideal point and choosing
the option that
is the closest to that ideal point. In this context, the task
of simultaneously articulating preferences and making a
choice presents consumers with a decision that often in
-
volves a greater degree of latitude than they can handle,
which in
turn makes it less likely that consumers will end
up making a choice.
So, how should firms design assortments targeting “nov
-
ice” consumers without articulated preferences?
Em-
pirical data suggest that the drawbacks of large assort-
ments can be attenuated by helping “novice” consumers
articulate their preferences prior to making a choice.
To
illustrate, in one study respondents had to choose from
FIGURE 1:
e Pros and Cons
of Large Assortments
PROS CONS
> Better prefer ence
match
> Decision flexibility
> Preference learning
>
Representativeness
> Information
overload
> Choice overload
> Raised
expectations
New Strategies / Vol. 3, No. 1, 2011, pp. 8 – 15 / GfK MIR
12
that preceded making a choice from larger assortments
clearly helped increase decision confidence and choice
satisfaction among novices.
Choosing an Assortment versus Choosing an Item
Despite the fact that large assortments often lead to
more complicated choices — especially for novice con
-
sumers — empirical data show that, when given a choice,
both novice and expert consumers universally prefer
larger to smaller assortments.
This is the paradox of
large assortments: when choosing among assortments,
consumers prefer the variety offered by larger assort
-
ments, even when these assortments lead to less con-
fident decisions and lower satisfaction with the chosen
option.
This paradoxical behavior calls for identifying the
reasons causing this inconsistency in consumers’ choice
behavior.
The paradox of large assortments is best explained when
looking at choice as a hierarchical decision process that
comprises two different stages: selecting an assortment
and, subsequently, selecting an option from that as
-
sortment.
Thus, the observed discrepancy in consumer
preferences when choosing an assortment and when
choosing an item from the selected assortment can be
attributed to the nature of the consumer decision pro
-
cess and, in particular, to whether these two stages of
the overall decision are considered jointly or separately
. If
the choice of an assortment and the subsequent product
selection are viewed as two independent decisions, then
choosing the larger assortment is likely to be perceived
as the optimal strategy. If, however, both decisions are
considered jointly, the choice of an assortment is likely
to be influenced by a consumer’s desire to optimize the
subsequent choice as well. As a result, when consumers
believe that choosing a product from the larger assort
-
ment is likely to have substantial drawbacks, such as
increased decision difficulty
, the probability of choosing
that assortment is likely to decrease.
To illustrate, consider two consumers who are choosing
among assortments that vary in size, such that one con
-
sumer is focused only on choosing among the available
assortments, whereas the other is focused on both se-
lecting the assortment and the optimal product from the
chosen assortment.
The different tasks faced by these
consumers are likely to activate different decision strate-
gies. A consumer who is focused only on choosing among
assortments will be more likely to display a preference
for larger assortments because of uncertainty about
future preferences and a desire to put off the effort of
making
trade-offs. In contrast, a consumer who focuses
simultaneously on choosing an assortment and on the
subsequent task of selecting an option from the chosen
assortment will be less likely to display a preference for
larger assortments because of the anticipated difficulty
of making a choice from a large selection.
The inconsistency in consumer preferences when choos
-
ing an assortment and when choosing an item from a
given assortment raises the issue of identifying strate-
gies that can help increase consumer preference for
smaller assortments in cases
when these assortments
are likely to lead to greater purchase probability and
stronger satisfaction with the chosen option. Because
consumer preference for larger assortments stems from
underestimating the decision difficulty associated with
evaluating multiple options, one strategy to increase
consumer preference for smaller assortments is to shift
their focus from choosing among assortments to choos
-
ing a specific option from a given assortment.
This shift
of focus is likely to make the difficulty of choosing from
large assortments more prominent, thus tilting consum-
er preferences in favor of smaller assortments.
To illustrate, in one experiment, respondents had to
choose between a small and a large assortment in the
context of several product categories. To direct their fo-
cus to the difficulty of choosing from large assortments,
some of the respondents were initially asked to select
their
most preferred option from another large assort-
ment in a different product category. When these re-
spondents were subsequently asked to choose between a
large and a small assortment, they were much more likely
to prefer the smaller assortment compared to those who
were not given the initial choice which highlighted the
difficulty of the decision task. In particular
, of the respon
-
dents who were not initially asked to make the “difficult”
choice, only 2% preferred the small to the large assort-
ment. In contrast, those given the “difficult” choice were
less consistent in their preferences for the larger assort-
ment, with 16% choosing the smaller assortment.
» One strategy to increase consumer
preference for smaller assortments
is to shift their focus from choosing
among assortments to choosing a
specific option from a given
assortment. «
GfK MIR / Vol. 3, No. 1, 2011, pp. 8 – 15 / New Strategies