Dr. Sheena Iyengar is the famous jam researcher. 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. Although more customers shopped when more choices were available, 10 times more sales were made when the customer was offered fewer 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 underperforming 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.
Next page: How to provide more appealing choices
This is a great plan if you
This is a great plan if you want to eliminate price competition from the market. Thanks monopolists.
Thanks for reading and your
Thanks for reading and your comment.
I don't think there is a great risk of monopoly for a few reasons.
1. I am not sggesting that all choice be eliminated just the redundant so the consumer will have rationale choice.
2. Monopolies occur when there is only one source of supply, but if others can easily start to carry or manufacture then the market will correct itself.
Let's say a grocer had a typical line up of jam flavors plus carried a few exotic flavors. If the grocer sold the typical flavors at $2 per jar because the competition across the street priced similarly, the grocer is unlikely to mark-up the exotic brand by much. Only true kiwi lovers would buy at $6 a jar.
But if the grocer believed there was an unfulfilled kiwi niche and many customers did find kiwi a value at three times the average price for jam, then competitors would take notice and start selling as well.
With more supply prices will start to drop.
Claudia Girrbach