Friday, July 15, 2011

Lessons from Jam: Less Choice is Greener Choice

10 times more sales were made when the customer was offered fewer choices found a study on marketing jams.

Sheena IyengarDr. Sheena Iyengar is the famous jam researcher who conducted the study. In the mid-'90s while a doctoral student in social psychology at Stanford University, she and her colleague, Mark Leper, studied jam sales at an upscale grocer. When offering customers a sample of jam, decidedly more customers bought jam when offered fewer choices rather than more.

In this study, six choices beat out 24 choices. This counter-intuitive result -- that "less is more" when merchandising -- has since been confirmed by numerous studies by Iyengar and other researchers.

More importantly, large and small companies have applied this principle with great results:
• Trader Joe's is the gourmet food seller that provides a limited selection of items, less than 10 percent of a typical grocer. TJ's has a cult following and enjoys more than twice per square foot sales of the average grocer.
• SaraLee reduced its number of products by more than half and achieved a reduction of inventory of almost 40 percent while improving on-time deliveries.
• Best Cellars, a growing wine merchant, sells only 100 wines that are organized into eight categories to help the time-pressed find a great bottle of wine.
By simplifying, a virtuous cycle of savings may be reaped -- both financially and environmentally -- since under-performing products waste money and natural resources.

Fewer products improve the entire supply chain by eliminating excess shelf space, avoiding mark-downs and cutting inventory at the distribution center. At a macro level, sacrificing some products to achieve more sales per item also consolidates transportation and reduces manufacturing.

Why More Choice Leads to Less Sales
In her recent book, The Art of Choosing, Iyengar points out that many categories are organized to serve the "expert buyer."

An expert buyer has the knowledge and experience to categorize the multitude of offerings. She quickly gets to a short list of items that best satisfy her needs. The jam expert would focus on her interest, such as berry jam and would ignore the citrus, summer stone, tropical, and other fruit categories.

When a buyer is not a category expert or has no desire to become one, the buyer is overwhelmed by too many choices. Iyengar states that between five to nine choices is ideal. When confronted with more choices, the buyer often postpones the decision.

In the case of sampling and buying jam, the customer tries to weigh the boysenberry against the raspberry against the orange against the kiwi, etc. After a few moments, the customer tires with this cognitive effort and moves on.

If forced to make a decision, the buyer frequently throws out her nuanced selection criteria and rushes to select based on a simpler heuristic; such as price, most recent suitable offer or popularity. This binary type of selection criteria frequently ignores your marketing efforts.

How to Provide Appealing Choices
Iyengar shares methods to restore customer engagement while still providing choice.

1. Eliminate products that are redundant. Two products are redundant when the differences between them are slight or superficial from the customer's point of view. For example, most customers would not have missed if the upscale grocer of Iyengar's study had culled many of its 348 jams.

The International Jam and Preserve Association reports eight flavors account for more than 80 percent of the jelly and jam sales -- grape, strawberry, raspberry, orange, apple, apricot, peach and blackberry.

To own the category, the upscale grocer only needed a few more jams to show their breadth and sophistication. To keep interest in the category while maintaining a rationale number of items, the grocer could rotate more exotic flavors in and out on a regular basis.

2. Define sub-categories. To guide the buyer and offer only a few choices at one time, break the category into smaller sub-categories. A category may be divided by product benefits, features, or customer segments.

Finer categorization provides one more opportunity to eliminate products. Ensure that all the new sub-categories fit your marketing theme and avoid diluting your position by continuing to prune your categories and products.

One other benefit of organizing a large number of options into categories, the customer perceives that there are more choices available. In this case, categorization helps the customer to see the trees in the forest.

3. Provide a path. If multiple choices are required for selection, then break the process into steps to lead the customer through the process. To service the smaller niche of enthusiasts who are more sensitive to nuanced differences, selling on-line would support that niche efficiently. With tagging and search options available on-line a fine tuned set of products may be offered after querying the customer on preferences.

One final benefit that Iyengar uncovered, buyers are more satisfied with their purchases when provided thoughtful choices. Whether selling jam, sophisticated consumer electronics or equipment to industrial buyers, take time to design the choices you offer. You will find that a limited palette is a win-win-win for the customer, the company and the planet.

Imagine How IT Can Help You Provide Better Choices
Contact me to learn how to deploy:
*  Data analysis to eliminate low performing products
*  Category management schemes
*  Technology to guide the consumer through complex sales

No comments:

Post a Comment