One sunny Saturday morning in 1999, two American psychologists opened a pop-up in a large grocery store in Menlo Park, California, offering free tastings across a range of 24 flavours of jam. The following Saturday they ran the same pop-up, but this time with just six flavours.
Three percent of tasters in the first week went on to buy a jar. In the second week, thirty percent went on to buy. Read the study here
Yes, you read that right. The conversion rate from six options was ten times the rate from 24.
And this isn’t a one-off experiment; variants of it have been repeated many times by many people, with similar results. The effect even has a name in psychology literature: choice overload.
I wrote a brief article about this a few years ago when Tesco announced that their response to Aldi’s market share gains would be to launch a new range of products, positioned between their existing Value and Standard ranges, to tackle Aldi head on. It was a bad idea then, it’s a bad idea now, and Dave Lewis’s plan to slash Tesco’s entire range by 30% doesn’t go anywhere near far enough.
One fundamental principle of good retail is that the store’s expert buyer has personally chosen the products on sale. From all of the options out there, he or she has selected these few, with great discernment and care, to grace their shelves and to delight you, the customer. But somewhere in the “race for space”, and in the hangar-sized edge of town store formats, that discernment and care got lost.
“More range means more choice for the customer. How can that be a bad thing?” But of course, that’s exactly what it is. And that’s exactly why Aldi is so popular. Virtually all the products are good because there are so few of them, and because the buyers are able to invest the time and care to keep it like that. The choice for shoppers is utterly simple, they really can’t go wrong, and they know it.
And of course, Aldi’s prices are much lower. They get more economy of scale than Tesco on a fraction of the total sales, because every Aldi shopper is buying pretty much the same things. But all of those things: price, quality and simplicity, stem from one deeper advantage that Aldi has over almost everyone else. They “get” the truth about choice.
Bottom Line: People don’t want more choice. They want better choices and fewer of them. It’s up to you to make the hard choices so your customers can make the easy ones.
©2015 Binley Drake Consulting