Choice Overload And Why It Matters In Business

Choice overload is a phenomenon where consumers are overwhelmed by too many choices. Modern consumers have access to a bewildering array of products and services. Simply buying the ingredients for a morning cup of coffee involves choosing from a long and varied list of milk, sugar, coffee, and coffee machines. Indeed, connoisseurs who prefer 1% milk over 2% milk or coffee beans from a remote Ethiopian plantation are well catered for.

Understanding choice overload

But is this necessarily a good thing?

A lot of research has been done to attempt to answer this question. Psychologist Barry Schwartz coined the term “paradox of choice” in arguing that choice overload discourages consumers from making purchasing decisions.

However, a subsequent study explored the subject in more detail. By conducting 50 separate experiments on choice overload, researchers had mixed results. In some instances, large assortments of items hampered decision-making ability. In others, decision-making ability was unaffected.

Choice overload and the decision-making process

Disagreement over the validity of choice overload was quelled in a 2016 study conducted by Stanford marketing professor Itamar Simonson.

Simonson found that consumers do enjoy a large assortment of options, but the degree of enjoyment is based on where they are in their decision-making timeline.

Put differently:

  • When a consumer begins by considering whether they want to make a purchase or not, a large selection of products increases the odds that the consumer will make a purchase. 
  • However, if a consumer selects a single product from an assortment of products before considering whether to make a purchase, the larger selection increases indecision and reduces the likelihood that a purchase is made.

The decision to purchase under choice overload actually involves two decisions. As Simonson noted, “If your first decision is about whether you want to buy, then having more options is conducive to buying. But if your first decision is on which specific product to select, then having a big assortment can make it more difficult to identify the best option.”

Implications of choice overload for consumers and business

When a consumer becomes indecisive and fails to act, there are several negative consequences for businesses. Here are a few of them:

  1. Indecisive consumers tend to purchase less, hurting sales revenue.
  2. Indecisive consumers tend to put less thought into purchasing decisions. When a study gave participants the choice of several variants of the same toothpaste brand, most opted to avoid the pain of making a decision and went with a brand with a single variant.
  3. Indecisive consumers are less satisfied. Choice overload causes a consumer to become instantly dissatisfied with their purchase – even if no better alternative exists. This can lead to products receiving negative reviews and seriously hinders the ability of a business to build relationships with its target audience.

Implications for business

Businesses can address indecision by reducing the complexity or breadth of their product range. Perhaps counterintuitively, a smaller product range with fewer distractions can also improve conversion rates. This is because consumers are less overwhelmed and tend to make careful and reasoned purchasing decisions that meet their needs.

For those who absolutely must offer a large product range, improving site navigation on mobile and desktop can help avoid choice overload. Products should be grouped into categories where possible. However, a consumer without a particular product in mind might want to see a large range of unrelated products – so websites must incorporate this functionality too.

Key takeaways

  • Choice overload describes the tendency for consumers to become overwhelmed in the face of too many product options.
  • Choice overload occurrence is dependent on where a consumer is in the decision-making process. Consumers browsing a list of products without a specific preference in mind are more likely to be immune to this phenomenon.
  • Choice overload causes dissatisfied consumers who tend to purchase less often. When a product is purchased, the decision is based on a desire to avoid careful deliberation and not on whether the product satisfies their needs.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"