Digital Nudge Series #3 - Overcoming the Paradox of Choice
Counter to the well-entrenched view that “more is better” is a finding from human behaviour research that actually “less is more”, at least when it comes to how me make decisions. This counterintuitive finding is known among behavioural economists as the Paradox of Choice, and commonly used as an example of how behavioural economics is better equipped at explaining consumer behaviour than traditional economic theory.
The Paradox of Choice
Psychologists Mark Lepper and Sheena Iyengar illustrated the paradox of choice by setting up a booth in a grocery store for tasting and buying jam. The critical manipulation in their study was one booth presented grocery shoppers with 24 types of jam and the other booth only presented 6 types of jam. After observing how grocery shoppers reacted under the limited choice condition (6 types of jam) and the extensive choice condition (30 types of jam) the researchers discovered something unexpected. Even though the more people were interested in checking out the booth with 24 types of jam than the booth with 6 types of jam, people were 10X more likely to buy jam from the 6-jam booth than the 24-jam booth. In fact, only 3% of people ended up buying jam when they had to pick between 24 types of jam.
Importantly, that study extended the paradox of choice effect beyond just picking between different types of jam. In the same research paper, they reported that students were motivated to write better quality essays when they were forced to pick between 6 topics versus 30 topics. Also, they found that people reported having a better experience picking a chocolate when faced with 6 types of chocolates versus 30 types. Taken together, these empirical findings point to the counterintuitive insight that we can increase our happiness and motivation by limiting the amount of choice that we have.
Does the quantity of choices actually matter?
The insight behind the paradox of choice makes for a compelling story. One that you probably have already heard if you’ve been to a talk on behavioural economics at conference, webinar, whitepaper, etc… But, that story may not be entirely accurate. It turns out that recent studies were unable to replicate the paradox of choice finding from the original Lepper and Iyengar study. Curiously, a meta-analysis revealed that the number of choices we have actually had no impact on our happiness or willingness to make a choice.
Does this mean then that choice doesn’t matter at all? Well, not quite, but what it implies is that we shouldn’t think of the “paradox of choice” in terms of the quantity of choices we can choose from, but of the quality of those choices. In other words, it doesn’t matter that much if I can pick from 6 types of jam or 600, if I don’t even like jam in the first place.
For retailers, it is important to ensure they strike a balance between the quantity and quality of the different options (i.e. choices) they present to their customers. Striking that balance in the physical space can be easier for retailers since brick-and-mortar stores have physical limitations on the number of options they can display on a shelf. But, in the digital space, there are no limitations for the number of options that retailers can show their customers. How then can retailers decide on the number of options they should present to their customers in order to provide the optimal online shopping experience?
Chunking Choices
The best way to solve this problem is through a psychological process called “chunking”. You may have heard of chunking if you are familiar with research on short-term memory, but for those of you that are not familiar with the term, chunking refers to the process of combining larger amounts of information into a smaller, more meaningful group (or chunk).
You can think of chunking as a memory hack. Instead of having to remember a bunch of individual bits of information, you can group related bits of information into a single chunk. That way, we just have to remember the “chunk”, which will act as a cue to help us remember the individual bits of information.
As an example, consider how difficult it would be to remember the following list of letters presented if they were presented like this:
N Y C I B M F B I A O L N B A
Now, how difficult do you think it would be to remember list of letters when presented like this:
NYC IBM FBI AOL NBA
Combining the individual letters into meaningful chunks helps de-clutter the amount of information into manageable bits that we can easily remember.
Chunking helps improve our decision-making
Chunking does not just help us remember, but it also helps us make better choices. When we are faced with a lot of choices, we can be overcome with “information overload” while we try to decide what is the best choice. Chunking all of that information into meaningful bits helps us parse through the pros and cons of various factors that contribute to our decision.
And this does not just apply to complicated decisions. Think back to the jam example. Someone who wants to buy jam is actually faced with a multitude of information. Just consider all of the information that factors into the decision to buy jam.
How much does it cost?
Is it on sale?
Is it a better deal to get the bigger size?
How much sugar is in it?
Are these preservatives good for me?
How many calories are in a single serving?
Is it organic?
What fruit was used to make the jam?
How close is it to its expiration date?
Have I bought this brand of jam before?
All of that information goes into our decision, and that is not even an exhaustive list. But why are our heads not exploding at the thought of going grocery shopping? The answer is because we automatically parse all of that information into chunks that we can easily assess. See how chunking helps makes the above information helps make it easier to understand.
Price Chunk
How much does it cost?
Is it on sale?
Is it a better deal to get the bigger size?
Nutrition Chunk
How much sugar is in it?
Are these preservatives good for me?
How many calories are in a single serving?
Is it organic?
Product Chunk
What fruit was used to make the jam?
How close is it to its expiration date?
Have I bought this brand of jam before?
Without even knowing it, we chunk all of the information in a way that tells us whether we should buy this jam because it is inexpensive, nutritional, and/or it is a familiar brand. It is almost effortless how we come to that decision, but that is in part because we have built up all this experience with grocery shopping that we already know what information to use before we decide what we want to buy.
We are all expert chunkers
The notion that experience helps us to “chunk” better was actually uncovered in expert chess players, who were better able to chunk more meaningful information about the layout of the chessboard than novices. Experts are then better equipped to decide their next move because they rely on their wealth of experiences of various chess moves that they’ve encountered in all of their past matches. Essentially, they’ve chunked all the different types of chess moves they’ve encountered, so that when they see a particular layout on the board, that automatically cues the optimal “chunk”, or move in this case, they should choose.
Interestingly, the same study found that expert chess players did not have a “chunking” advantage when the chess pieces were positioned randomly on the chessboard. This meant that the chess player’s expertise was only able to help them chunk information when it was presented to them in a familiar context. Since chess players do not have experience playing when the pieces are positioned randomly, their expertise does help them chunk information when presented in an unfamiliar context.
Even though we are all not expert chess players, we do expertise at shopping and going online. Even if you don’t like shopping or going online, they are still things that almost all of us do every single day. All of those experiences help “guide” us to know what to look for before making a purchase or where to look navigate a website.
The combination of expertise at shopping and going online is the ideal set-up to help us make better choices when are online shopping. But in order to make better choices when we are shopping online, the e-retail experience has to be set up in such a way to leverage our expertise. Just like how the expert chess players had no advantage when the chessboard was randomly arranged, our shopping and online expertise does not offer us any advantage when the e-retail experience is not properly arranged.
Chunking improves the digital experience
E-retailers can use chunking to help optimize their digital user interface (UI) to fit how their customers shop online. Examples of this can include the layout of a landing page that effectively groups relevant pieces of information into categories that make more sense to the user. In the examples below, you can see how American Apparel, Eventbrite, and SeatGeek used chunking on their respective site's landing page to fit the type of options that were relevant to their customers. Over time, all three companies evolved the options they presented on their site based on how their customers chunked the various sections on the landing page.
Chunking the site’s UI is an example of helping customers make smarter choices, and not just by limiting their number of choices.
E-retailers can take chunking to the next level by looking at how their customers shop online AND looking at their shopping preferences. What do I mean by that? Well, let’s take the example of shopping for patio furniture on The Home Depot’s site. In order to search for patio furniture, we will apply a filter to only show us the patio furniture that is most relevant to us. We can filter out any patio furniture that is over $500, under 3 stars, and is green. The information from our filter informs Home Depot about our shopping preferences, so right there, they have enough information to chunk the filtered listing to help us choose the right product instead of showing us a laundry list of every product that falls under our criteria.
But they can take it a step further and use the information about how our online shopping behaviour to chunk those filtered choices into even more relevant categories for us. Before we even start filtering out products on The Home Depot’s site, they already know certain markers about us that can inform how they should chunk their products. Continuing on the patio furniture example, lets also say this was our first time on their site, we arrived at their site after we searched “patio furniture” on Google, and we are using a tablet to browse online. All of those markers can tell The Home Depot what kind of shopper we are – we are not familiar with their site’s layout, we already have an idea of what we want to buy since we searched for it on Google, and we are open to browse a lot of options since it is easier and more enjoyable on a tablet.
With that information in mind, you can expect that we will group different products together differently than someone who is coming to The Home Depot’s site for the 10th time, they entered through a bookmark, and are on their mobile device. Even though both people can be searching for the exact same type of patio furniture, how they will chunk the different products into groups can be very different. As a result, their inevitable decision to buy one type of patio furniture or another, or none at all will largely depend on the quality of the choices in front of them.
Chunking the digital trend
While the current e-retail trend has embraced the idea of giving customers literally unlimited amount of choices (e.g. infinite scrolling on Etsy; ‘long tail’ product distribution on Amazon), it does not ensure that people will still be able to decide what they want to buy. Helping customers navigate the wide array of choices they have when shopping online is critical for e-retailers to create an ideal user experience. Without taking into consideration how people make choices, just the number of choices that e-retailers provide their customers will have impact on willingness to make a purchase. For e-retailers, the bottom line is being smart about “chunking” can help them overcome the paradox of choice and help their customers make the right choice.
