Marketing Jun 1, 2010
Corralling Consumer Choice
Optimizing assortment size based on perceived attractiveness
Squeezed by declining sales and tight financing, retail marketers face a difficult dilemma about sizing their selection of merchandise. Large selections may provide a better chance that consumers will find a match with their preferences, which boosts sales potential. But offering smaller selections can reduce retailers’ costs—an especially tempting alternative in a budget-cutting environment. So the question arises: is more choice always better? Do consumers prefer a smaller assortment under certain conditions? With ever-increasing choices in categories ranging from TV channels to paint, is there a point at which too many choices can overwhelm a consumer and block decision making entirely?
In consumers’ decisions about selecting one retailer over another, the effect of assortment size is directly linked to the relative attractiveness of the options. Research conducted by Alexander Chernev, an associate professor of Marketing at the Kellogg School of Management, and Ryan Hamilton, an assistant professor at Emory University, indicates that consumers actually prefer a smaller assortment of items when the selection is considered more attractive than alternative options. Chernev and Hamilton’s study shows how choice and the relative attractiveness of selections interact to generate predictable outcomes in consumer behavior.
“Consumers don’t always want more choices. Sometimes a larger selection can lead to less satisfaction or even not choosing at all,” Chernev says. For example, people who are considering investing in mutual funds may ultimately keep their money in cash because they cannot decide which mutual fund best fits their needs. Many retailers recognize this repercussion and trim their assortment choices to make decisions easier. However, offering a smaller selection can cut into sales volume by not appealing to enough consumers. So, optimizing the assortment size is a very real challenge. “One of the factors that is overlooked is the composition of the assortment and the tools we have to define ‘attractiveness.’ When will a large assortment or a small assortment be better?” Chernev asks.
Preference for Assortment Size Interacts with “Option Attractiveness”
Chernev and Hamilton’s research studies how consumers weigh the relative attractiveness of the assortment in making decisions about whether they prefer a large or small assortment. They found some surprising results: with a “more attractive” selection, consumers prefer a smaller assortment of items; in a “less attractive” selection situation, buyers preferred a larger assortment.
Chernev and Hamilton say that increasing the attractiveness of the options in both larger and smaller assortments is likely to bring the assortments closer together in terms of the perceived consumer benefits (Figure 1). Faced with options that are less attractive, consumers see more benefits in a larger assortment. But when the options offered are very attractive, a smaller assortment appeals to buyers.
Figure 1: Perceived benefits as a function of assortment size and option attractiveness
Chernev and Hamilton conducted an experiment in which sixty participants ordered lunch from one of two sandwich shops; they had to choose either a menu with nine sandwiches or a menu with 38 sandwiches. One group of participants was told that both sandwich shops used premium ingredients for great-tasting sandwiches that rated 4.5 stars out of 5 on a taste scale. The other group of participants was told that both shops used only average ingredients and were rated 1.5 stars. The menus were sealed so that the participants could not preview the sandwich descriptions; they had to pick a menu based only on the number of sandwiches offered.
Participants who had to select from the high-quality shop preferred the smaller assortment to those at the low-quality shop. Among the group that was given menus from the higher-ranked shop, 40 percent preferred the smaller nine-item menu. In contrast, only 13.3 percent of the participants who had to choose from the lower-ranked shop wanted the smaller assortment of nine sandwiches.
Chernev points out that “option attractiveness” in the real world can also mean the perceived quality of a manufacturer or the retailer’s image, as well as quantifiable rankings of quality, such as the star-ratings of the sandwich shops in the experiment.
In their next experiment, Chernev and Hamilton used more diverse products and found even stronger preference for the small-assortment/high-attractiveness option. Using three different product categories—data CDs, dating services, and vitamin water—244 participants were asked to imagine that they had to select one of two retailers from which to purchase the product. In each case, the choice was between a high-quality retailer and a low-quality retailer. For the data CDs, the stores had one-star or five-star rankings; the dating services used either one or twenty matching characteristics; for the vitamin water, the stores had either the most popular brands or only low-priced economy brands. Each seller presented a different assortment size: six brands or nine brands of data CDs, eight potential matches or 24 potential matches from the dating services, and eight brands or 30 brands carried by the vitamin water stores.
In all product-choice groups, the same pattern appeared as before. Respondents preferred larger assortments from the low-quality sellers and smaller assortments from the higher-quality sellers. Of the data CD buyers, 55.3 percent of the participants chose the smaller assortment when the perceived quality of the store was high; only 32.3 percent took the smaller assortment from the lower-quality store. In the dating services scenario, 62.5 percent of the participants went for the smaller assortment from the higher-quality service, while 22.2 percent preferred the smaller assortment from lower-quality service. Among the vitamin water choices, the smaller assortment was preferred by 64.6 percent of the participants who selected from the store with more-popular brands, compared to 35.4 percent who wanted a smaller assortment from the economy-brand store.
Developing Retail Strategies Based on Assortment-Size Research
Chernev and Hamilton point out that their research offers real-life implications for retailers—not only to adjust overall assortment size but to fine-tune specific product lines or merchandise offered at different locations. Using strategies based on the research, retailers can reduce inventory and optimize shelf space. But the real value in the assortment size research helps answer a core marketing question, notes Chernev: “What is better from a consumer’s standpoint?”
Chernev, Alexander and Ryan Hamilton. 2009. Assortment size and option attractiveness in consumer choice among retailers. Journal of Marketing Research 46:410-420.
-
How Much Do Boycotts Affect a Company’s Bottom Line?There’s often an opposing camp pushing for a “buycott” to support the company. New research shows which group has more sway.
-
5 Takeaways on the State of ESG InvestingESG investing is hot. But what does it actually deliver for society and for shareholders?
-
Could Bringing Your "Whole Self" to Work Curb Unethical Behavior?Organizations would be wise to help employees avoid compartmentalizing their personal and professional identities.
-
When Do Open Borders Make Economic Sense?A new study provides a window into the logic behind various immigration policies.
-
Which Form of Government Is Best?Democracies may not outlast dictatorships, but they adapt better.
-
How Has Marketing Changed over the Past Half-Century?Phil Kotler’s groundbreaking textbook came out 55 years ago. Sixteen editions later, he and coauthor Alexander Chernev discuss how big data, social media, and purpose-driven branding are moving the field forward.
-
What Happens to Worker Productivity after a Minimum Wage Increase?A pay raise boosts productivity for some—but the impact on the bottom line is more complicated.
-
Why Do Some People Succeed after Failing, While Others Continue to Flounder?A new study dispels some of the mystery behind success after failure.
-
What Went Wrong at AIG?Unpacking the insurance giant's collapse during the 2008 financial crisis.
-
Why Well-Meaning NGOs Sometimes Do More Harm than GoodStudies of aid groups in Ghana and Uganda show why it’s so important to coordinate with local governments and institutions.
-
3 Tips for Reinventing Your Career After a LayoffIt’s crucial to reassess what you want to be doing instead of jumping at the first opportunity.
-
How Are Black–White Biracial People Perceived in Terms of Race?Understanding the answer—and why black and white Americans may percieve biracial people differently—is increasingly important in a multiracial society.
-
Podcast: Does Your Life Reflect What You Value?On this episode of The Insightful Leader, a former CEO explains how to organize your life around what really matters—instead of trying to do it all.
-
Immigrants to the U.S. Create More Jobs than They TakeA new study finds that immigrants are far more likely to found companies—both large and small—than native-born Americans.
-
In a World of Widespread Video Sharing, What’s Real and What’s Not?A discussion with a video-authentication expert on what it takes to unearth “deepfakes.”
-
College Campuses Are Becoming More Diverse. But How Much Do Students from Different Backgrounds Actually Interact?Increasing diversity has been a key goal, “but far less attention is paid to what happens after we get people in the door.”