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Missed opportunity Factor – What is it?

Why Consumers Are Overwhelmed And How To Remedy It

Consumers have ample choices. In a world where we are told more choices is a good thing, you would think shoppers have no cause for complaint. Yet, the reality is that too many choices leave consumers confused and mentally exhausted.

Furthermore, studies show that people are less inclined to make a purchase when presented with too many options. The human brain is wired to worry about making the wrong choice and the expectation in today’s world of consumerism is “there might be a better opportunity elsewhere“.

Psychologists and economics have discovered that option overload paralyzes the decision-making process, because the brain comes under too much stress. Consumerism has reached a point where too many choices is counter-productive and subsequently damages a brand’s profit margins.

When people are presented with too many options, they are less likely to make a purchase. The assumption here is the risk of making the wrong choice is higher. You will probably know from experience that shopping can be overwhelming.

How many times have you found yourself staring at a shelf in the supermarket… with a blank mind… unable to make a decision…?

You are not alone. 😉

A paper published in the Journal of Personality and Social Psychology has become famous for revealing that when shoppers are given too many choices, people choose not to buy anything.

The study, conducted by social psychologist Sheena Lyengar of Columbia University Business School and a professor of psychology at Stanford, Mark Lepper, shows the downside of having excessive choices.

The experiment involved giving shoppers samples of jam. One section had an assortment of 24 jams while a smaller section had just six. Interestingly, 60% of shoppers veered towards the larger assortment of 24 jams because there were more choices.

However, from a business point of view, the statistic to note is that out of that 60%, only 3% made a purchase. In contrast, 30% of shoppers that considered the smaller assortment made a purchase.

 

Why do consumers not like too many choices?

One reason given for purchasing paralysis is the missed opportunity factor. Psychologists conclude that when we are faced with too many choices, we become concerned we will make the wrong choice. Rather than feel regret, we stay safe by not committing to a purchase at all.

The typical cognitive capacity of the human brain can only efficiently handle five options. Any more than that can be overwhelming. Some people stop browsing the shelf after the first five choices.

For costlier products, competition between brands is so fierce; consumers are aware they are never too far from profiting from a value for money deal. Knowing there may be a better option in the next store triggers an urge to research or bide their time.

This awareness typically has a knock-on effect known as the ‘ever-changing reference point’. An offer with a new feature driving the bargain suddenly becomes a focal point. And often, it is this reference point that sets a new bar.

For example, let’s say you are in the market for a new car. You see the Audi A4 offered for $36,000 and think that’s a good deal. But then you see the same car advertised with another dealer for $36,500, but with enticing extras thrown in.

Suddenly, these extras take priority because you are getting more for your money and the extra features appeal to your sensibilities, even though maybe, you don’t even need those. Once you hit this point, it is difficult to settle for less.

Purchasing decisions are not just about making the wrong choice. Consumers are afraid of missing out on a better deal.

 

Marketing in a packed market

The internet may have given brands more opportunities to sell their products to a wider audience, but the job of marketers has become exceedingly more difficult.

Research scientist, Benjamin Scheibehenne from the University of Basel in Switzerland, determined the level of information given by a brand can impact a purchasing decision. When presented with information the number of choices we have is not always a factor.

But providing information is not always enough. A study performed by IBM Institute for Business Value revealed that marketers are pushing out too much information. The modern consumer wants information rather than marketing, but they don’t want too much information.

So do marketers just have to tell consumers what they want to hear?

Not exactly. Brands still have to consider their proposition value and deliver on their promise. Otherwise, customer retention drops and trust levels deteriorate.

What consumers want is the KISS methodology: Keep it simple stupid.

Research undertaken by marketers have found that ‘decision simplicity’ is the most effective method of persuading consumers to make a purchasing decision and buy the product again.

What is “decision simplicity”?

Decision simplicity is the process of providing consumers with enough trustworthy information about a product or service without giving them too much to think about.

The key factors that make decision simplicity effective fall into three parts:

  1. Provide information consumers will trust
  2. Simplifying the buying process so people have to do less research material to drag through
  3. Publish transparent buying guides

A study performed by Corporate Executive Board (CEB) discovered brands that simplify the customer’s purchasing path have a model that is “four times stronger than any other marketing strategy for engaging customers.”

The research paper not only reveals that decision simplicity helps people make a purchasing decision, but increases sales. The figures suggest that a 20 per cent uplift in sales will also result in a 96% increase in customer retention.

Few firms have grasped the concept of decision simplicity. Apple is the best example of mastering the concept. The iPhone maker offers just one smartphone for each price point. Their competitors have a wider range.

Apple also adds emphasis on simplicity in the design and features of their products. This makes their iPhone models accessible and enables the Cupertino-based company to persuade their customers to upgrade to the latest model.

The rationale behind product simplicity is to publish customer-centric ads. Modern marketing has to move beyond appealing to the emotions of consumers and listing benefits. Consumers want to know about the specifics of your brand and your products.

Online platforms provide consumers with numerous resources to learn about products. Brands should be actively directing them to reviews, product ratings, product-to-product comparisons and opening the virtual doors to customers via live chat-bots and real-time responses on social media.

To help customers avoid the mental trappings of the missed opportunity factor, brands need to focus on understanding the marketing triggers that help consumers make a purchasing decision.

Do this and shoppers buy your brand.

Consumers feel more confident about brands that provide information that distinguishes a product from its competitors. Rather than providing huge chunks of information, be consistent with your message and draw out benefits that differentiate your product.

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