Tuesday, July 3, 2007

The Paradox of Choice

I just plowed through The Paradox of Choice, Barry Schwartz’s 2004 analysis of “Why more is less,” and, “How the culture of abundance robs us of satisfaction.” It’s a good, quick and well-reasoned read, though less business-centric that I had expected. And, it’s an interesting corollary to The Long Tail (my previous read).

Choice is good, right? Well, as one of my grad school profs repeatedly opined, “it depends.” Schwartz contends the promiscuity of choice is harmful. Here's his take from a 2005 interview:

Take any of the most commercially successful websites - Amazon.com, for example - and look at what they offer. Click Bestsellers; down come 20. My view is, when people look at 20 book titles, each of them is competing with the others, making the others less attractive. This one looks exciting, this one looks educational, this one is about my own childhood, but this one is exotic and will take me into a world of imagination. Each is attractive in some way.

The result is that you look at 20 and buy none. But what if Amazon did a simple experiment of not showing 20 books, but only the top five? You can always click to the next screen and see more. My prediction is that if you reduce the choice set, you increase the number of books sold. This should be true of anything you're selling - office chairs, CD players, vacation packages; the shorter the list, the more attractive the items on the list will be.

A contemporaneous example: I’m helping a band of amigos create and launch a new company, Ziraffe. The striped giraffe will sell high-end baby and infant gifts, primarily apparel and accessory items. We faced a choice early on: Do we offer a bountiful selection of hard-to-find individual products (the fall-out-of-bed, brain-dead approach), or do we simplify and concentrate our focus. And, if we navigate the latter path, how so?

Our answer is to bundle various products into gift packages, pre-packaged and (hopefully) artfully combined to (hopefully II) simplify the selection and purchase of baby shower, birthday, holiday, and other special occasion gifts. Buyers will navigate based on age, price, occasion, and gender. By reducing choice, we believe Ziraffe will increase satisfaction (for consumers and gift givers) while differentiating the company's offering from myriad online stores. If we can execute, hopefully Ziraffe will make a few bucks too. Results TBD.

In The Paradox of Choice Schwartz weaves a wide range of research from psychologists, economists, market researchers, and decision sciences in his evaluation of choice and decision-making. He makes five primary arguments:
  1. We would be better off if we embraced certain voluntary constraints on our freedom of choice, instead of rebelling against them.
  2. We would be better off seeking what was “good enough” instead of seeking the best (have you ever heard a parent say, “I want only the ‘good enough’ for my kids”?).
  3. We would be better off if we lowered our expectations about the results of decisions.
  4. We would bet better off if the decisions we made were nonreversible.
  5. We would be better off if we paid less attention to what others around us were doing.
Lessons for entrepreneurs? If business is the application of common sense in the allocation of resources, applied common sense dictates that simplicity – targeted, meaningful, and valuable – trumps cluttered chaos or mass selection or being lots of things to lots of audiences. Simplify your offering. Mitigate potential buyers’ remorse. Focus on a specific, actionable, identifiable, and self-referencing market segment. And, keep in mind that “good enough” is often just that; it’s not essential to be or offer “the best”.

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