Pricing And The Paradox Of Choice
While discussing pricing strategies and product line offerings with a client, I was reminded of a great TEDTalk by Barry Schwartz entitled The Paradox of Choice.
In the talk, he encourages us to break through the assumption that more choice equals more freedom and realize that we are often crippled by choice. In regards to marketing, people often refrain from purchasing something altogether if there are too many choices. Below is the TEDTalk. I consider it to be one of the most informative AND one of the most entertaining.
If you don’t have twenty minutes to spare, here’s a quick breakdown of Barry’s talk.
We all know what is good about choice. Here’s what’s bad:
Paradoxically, choices cause paralysis rather than liberation.
Example: Investment records from Vanguard have shown that for every ten voluntary retirement funds that were offered by an employer, ten percent fewer employees participated. With 50 funds to choose from, the fact that it was so hard to decide resulted in procrastination and a tomorrow that never came. Significant matching money (as much as $500/year was passed up).
Further, even if we overcome the paralysis of a decision that has many alternatives, regret is induced. This regret subtracts from the satisfaction of the choice that was made – even if the decision made was good and rewarding. We end up imagining the outcomes of the choices not chosen and become less content with the route that was chosen.
Example: A couple sitting on the beach in the Hamptons sits there dreaming about all the good parking spots they’re missing on West Eighty-Fifth Street in NYC. Everyone’s on holidays because it’s August and they could have prime spots in front of their building at home.
In summary, increased choices result in:
So, how should you apply this to your marketing strategy?
1. Don’t overwhelm your customers with too many product line and price options.
2. Don’t promise the world with your marketing and risk under-delivering. Create a situation where your customer is more than pleasantly surprised.