Marketing Jun 1, 2010

Cor­ralling Con­sumer Choice

Opti­miz­ing assort­ment size based on per­ceived attractiveness

Based on the research of

Alexander Chernev

Ryan Hamilton

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?”

About the Writer

Christine Harmon is a freelance writer based near Chicago, Ill.

About the Research

Chernev, Alexander and Ryan Hamilton. 2009. Assortment size and option attractiveness in consumer choice among retailers. Journal of Marketing Research 46:410-420.

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