Show Loyalty Through Selection

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May 25, 2006
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By John Hennessy


Author and professor Barry Schwartz shared his thoughts on variety with the Annual Conference for Catalog, Internet and Multichannel Merchants in Chicago recently. Professor Schwartz opined that offering shoppers a greater variety of choice doesn’t necessarily lead to more sales.


According to Professor Schwartz, researchers are discovering that too much choice can cause shoppers:


  • Not to buy,

  • To make poor choices,

  • To feel dissatisfied with the choices they make.

In research he conducted, Professor Schwartz noted that, contrary to what was expected, a decrease in the variety of items carried in the catalog of an office supplies company resulted in an increase in sales, margin and profit. Increasing the variety decreased the results.


As other evidence of an emerging awareness of the negative impact of too much variety, Professor Schwartz points to Procter & Gamble’s reduction in variety across categories and the subsequent sales increases in those categories. He also notes Trader Joe’s success based on a very limited selection of items.


According to Professor Schwartz, the goal for marketers should be to find the sweet spot where the number of options enhances the quality of life for consumers and doesn’t detract from it. 


Moderator’s Comment: What are brands and retailers doing to demonstrate loyalty through product filtering and selection?


A band I enjoy is difficult to describe. Rather than work to develop a distinctive sound, they’re all over the place. If you know to expect random acts
of music, that’s fine. But try and convince someone to join you and you have nothing to hang your hat on – too much variety.


I have argued the band would be better served, their shows better attended and their fans more routinely pleased if they would lock into one of their many
styles and own it.


Retailers and brands face a similar challenge. They want to make sure they have what you need when you need it, but fail to understand that what you need
is often someone to save you time by selecting what you need on your behalf.


A number of retailers do a terrific job of filtering products on behalf of their customers. Shoppers shop there because they know the store works for them.
They don’t have to work so hard to make sure what they purchase is going to be of high quality. These stores earn loyalty through careful product selection on behalf of time-starved
shoppers.


Good brand marketers, such as P&G, go through similar exercises in filtering on behalf of their customers. When products in their portfolio become less
distinctive, those lines are shed. They are also careful in the product lines they add. Shoppers select products from these marketers in part due to this continual product filtering
that assures them quality products and saves them time.
– John Hennessy
– Moderator

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17 Comments on "Show Loyalty Through Selection"


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Mitch Kristofferson
Guest
Mitch Kristofferson
14 years 9 months ago

We have recently conducted research in grocery on this very issue, together with ACNielsen and Daymon, the leader in private label management. The findings were consistent – retailers can increase sales revenue and profit by rationalizing the assortment. We also found that, not surprisingly, assortment and price are closely intertwined – changes in one or the other produced gains, but the largest gains were achieved when both were considered together.

Bernie Johnson
Guest
Bernie Johnson
14 years 9 months ago
As a Sears Canada Catalogue agent owner (yes Sears Canada still has catalogue shopping) I am well aware of too much choice for the customer. I see this daily in online shopping, especially for major appliances. We have an online shopping desk in our store. When I take my customers online in search of, say a dishwasher, they initially feel overwhelmed by the selection too many brands (we carry all major brands) too many options, too much price and feature comparison work to do. I also hear this from my customers that have shopped Sears online at home. In the end they come in and simply say Bernie, this is what I want; this is my price range. What is the the best dishwasher for my needs? Yet I feel that one must be very careful in trimming selection. My store is located in a fairly affluent area; my customers are not always be satisfied with the Kenmore brand (good as it is) and demand appliances from European or high-end north American manufacturers. Perhaps what… Read more »
Ken Wyker
Guest
14 years 9 months ago

There’s no doubt that too many choices can be a bad thing. However, the solution isn’t necessarily to reduce the number of available items. A retailer needs to balance the desire to offer a limited variety with the desire to provide the items that customers want.

My company has found that another alternative to reducing customer choice is to help customers narrow the available choices to the ones that interest them. By utilizing loyalty card purchase histories, we prioritize every item in the weekly ad to present the most relevant offers to each customer. In doing so, we effectively filter out the many offers that are of no interest to the customer. Customers avoid the sense that they can’t find what they want and the retailer communicates a smaller set of choices that are relevant and motivating to that customer.

Peter Fader
Guest
14 years 9 months ago

Al McClain raises an excellent point about online vs. offline differences. The downsides of the “Tyranny of Choice” are more than offset by the upsides of the “Long Tail”….

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 9 months ago

Different perspective….

The focus on the consumer loyalty topic today is centered on the wrong part of a winning loyalty equation for retailers.

This isn’t to say variety isn’t part of creating loyalty. But, the retailers better pay attention to service, service, service; and the “experience” in shopping their shops.

Sales associates and their politeness and knowledge means more than how many brands are available.

Case in point: Shopper wants answers and solutions to their shopper activities, like quick return, where to find items, and how can they communicate their thoughts to the retailer.

Makes sense. Or more sense? Hmmmmmmmmmmm

Rick Moss
Guest
14 years 9 months ago

Retailers “brand” themselves by way of their approach to selection. Sure, Trader Joe’s makes a strong case for editing the mix tightly on behalf of the consumer, but there are also specialty retailers that offer a dizzying array of choices within certain categories and are known and loved for that characteristic.

In today’s fragmented market, consumers are rotating between two and three favorite food stores in order to fulfill all of their desires. Within a two-month period, they may visit a conventional supermarket 5 times; a club store once; and a natural foods specialty store a few times. With each trip comes different expectations for selection. Sometimes, they’ll be satisfied with a few choices within a category, assuming price is the main driver; other times, they enjoy choosing from 46 offerings of olive oil or 25 varieties of espresso.

As long as the retailer is clear and consistent on the brand differentiation and edits the mix toward that end, customer loyalty should follow suit.

Michael Tesler
Guest
Michael Tesler
14 years 9 months ago

You can edit, select, streamline and filter in some categories and not in others…blanket statements about this I do not believe to be valid. It also depends where and what type of experience consumers are looking for. In an Anthropologie it is about variety within a lifestyle and lots of choices and newness is what makes the store work. It is also about trust…consumers trust Apple and they can make a store work on about 20 SKU’s…nobody trusts Wal-Mart so they need to offer everything (75,000+SKU’s) at the very lowest prices to work. Retailers need to find their own space based on product, location, store theme and experience, target customers, competition, etc. and because of this they all have very different right answers to this question

Karen McNeely
Guest
14 years 9 months ago

I think there is a happy medium that has to be met.

Yes, being over-assorted can hurt you if there is much duplication between items and if presentation is compromised, making it difficult for the customer to find what they want.

On the other had, most consumers these days are time-strapped and frankly, a bit spoiled. They want what they want and they don’t want to run to 3 or 4 different stores to find it.

So look at your assortment, figure out how many skus in the category can effectively be displayed, then edit to that number by justifying each item based on the benefits it provides and giving enough differentiation between them.

Bernice Hurst
Guest
14 years 9 months ago
John, I like the way you phrased this question – what are brands and retailers doing to DEMONSTRATE loyalty (as opposed to attempting to solicit it). With few notable exceptions in the UK, I would say, “not a lot.” While Professor Schwartz was pretty much stating the obvious and repeating what many before him have discovered in their own presumably lucrative research, the methods used by brands and retailers to demonstrate loyalty rarely take advantage of opportunities. These pretty much boil down to precisely what everyone is saying today – preselecting in order to offer choices that you know, from experience, will suit your market and then selling them by using good customer service in a pleasant, comfortable and possible even fun environment. I’m sure we can all come up with multiple cases in point but today I had a very relevant shopping experience. I set off for my nearest big town on one of my occasional but regular outings and, this time, decided to look at perfume departments. Talk about too much choice combined… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 9 months ago
My, we are so erudite and esoteric today, citing all sorts of research to further complicate the issue of variety, selection, and choice. Out of all of the research, however, the same conclusion seems to be reached: Uh, give customers only the amount of selections they can handle. Here’s a better conclusion: Constantly invite customers to try new things, and keep the things they like. They can handle as much as you can throw at them. This issue is cyclic, surfacing every few years to confound and confuse us, and to give researchers grist for their mills. The last big hoo-haw on this subject revolved around Wal-Mart offering too many items. “It’ll confuse those dithering shoppers!” We all know how that turned out, and we all know the nature of research questions. If you ask shoppers if there’s too much stuff out there to buy, they will say “yes,” because the stuff they’re interested in represents less than one percent of the total of all choices. The thing is, their one percent is unique, and… Read more »
Al McClain
Guest
Al McClain
14 years 9 months ago

One piece of this not discussed is the difference in variety for bricks and mortar and online modes of shopping. Retailers can use their websites to fill in gaps in product offerings but I think pure online retailers like Amazon have a significant edge in terms of the variety they can offer combined with ease of use to get to the desired item.

Carol Spieckerman
Guest
14 years 9 months ago
My work with juvenile products companies in particular has confirmed that too many choices make consumers nervous, intimidated and often times angry. Moms and dads shopping for baby products look at all of the options and assume that if an item has a presence in the store, it somehow has a purpose. Therefore any inability on their part to understand the purpose makes them feel guilty, concerned about their parenting, the safety of their child and the child’s overall well-being. This is no exaggeration. The same can hold true in pet products. Of course, implied need is a powerful selling tool but if your store is carrying ten varieties of the same thing without clearly differentiating between them, you run the risk of alienating your customer. Also, if you carry items that the customer “tries” and finds useless, you also create ill will (get mothers talking about car sun shades, various car seat accessories, and other seemingly beneficial items and they will provide vivid descriptions of their frustrating experiences ending with anger at feeling duped… Read more »
jack flanagan
Guest
14 years 9 months ago
30 years ago I was taught by a mentor that the job of a merchant in a mass environment is to search the universe for great items and then edit the assortment. The (great) merchant’s job was most definitely not to scour the universe and present the original item and its umpteenth line extensions (developed over the next dozen years) as well as the “me too” items and let the customer sort it out at the point of sale. In his view, “choice” (or, variety, if you will) was not about the absolute number of items offered in a category. Rather “choice” was about acting as his customers’ agent and providing them with choices that were very relevant to them, saving them both time and money. In my view, those retailers who continue to try to make money on the buy side (and the FMCG companies who enable this practice) with item proliferation that is not acutely relevant to consumers will continue to decline. Just to be clear, the above relates to the specific question… Read more »
Herb Sorensen
Guest
14 years 9 months ago

When shoppers make a purchase, they “pay” for that purchase with three currencies:

* Time

* Money

* Angst

It is this third payment that professor Schwartz is focusing on, and it is a HUGE portion of the price. Multiplying SKUs is costly to brands and shoppers. (Retailers have to be more ambivalent because slotting allowances contribute to SKU proliferation.)

For the shopper the “angst” cost includes the difficulty of finding what you want, justifying that SKU to yourself in making the selection, and then living with the choice, post purchase.

I highly recommend professor Schwartz’s book, “The Paradox of Choice,” and note that he will be a key note speaker at the IIR Shopper Insights in Action conference in July.

Warren Thayer
Guest
14 years 9 months ago

This ties into a lot of research undertaken over the last several years, and I think retailers and manufacturers are addressing it with increasing sophistication all the time. But on a related matter, as a build, I was talking to a broker recently about time spent developing store plans, doing resets, etc. He found that after a certain amount of time working on this, you reached a point not just of diminishing returns, but decreased returns. The tendency was, he said, to start adding in a slower-moving SKU at the expense of a facing or two of faster movers. It produced more “variety,” and got in the No. 4 SKU, perhaps, but the category as a whole suffered. I guess the moral of the story is not to overanalyze categories; pick the low-hanging fruit, and move on. There truly ain’t time enough in the day.

Bernie Slome
Guest
Bernie Slome
14 years 9 months ago

You can’t be all things to all people. Good retailers already know this. They have discovered their niche. Sorry Professor, but you aren’t saying anything new. But I will grant that maybe it bears repeating. Information overload and choice overload leads to confusion which leads to indecision.

Products are basically the same from retailer to retailer. Prices are basically the same also. Thus what distinguishes one retailer from the next and creates loyalty is the customer experience. Retailers need to find out what their customers want and then measure if they are giving it to them. That will create loyalty and increase sales.

A wise person once said to me, “You can’t improve what you don’t measure.”

Mark Lilien
Guest
14 years 9 months ago

Some businesses are assortment-driven and some are edit-driven. Abercrombie & Fitch customers love the stores because they are carefully edited assortments. Same with Brooks Brothers and Ralph Lauren. No one wants Barnes and Noble’s web site to limit the choices, although many people appreciate suggestions. If a retailer (or the product packaging or web site copy) makes it clear why the product is being offered (its unique selling proposition), there can be value. Look at the web sites that encourage side-by-side comparisons.

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