Business Psychology - Latest Findings

Article No. 311
Customer Psychology Findings, by James Larsen, Ph.D.

More Variety Please

Discoveries concerning customer perceptions of variety offer business owners a new choice.

Pity Fred, the grocer, standing in front of his display of barbeque sauce pondering the perennial demand of customers to provide more variety. Good Grief! Look at all the choices customers have now. New flavors and new brands seem to appear every month. What’s he supposed to do, carry all of them?! In every aisle, he seems to have the same problem: soups, magazines, bread, snacks, health food, and on and on it goes. If he offers too much variety, customers are bewildered and end up buying nothing. If he offers too few choices, they complain. Where is the balance?

As Fred ponders this dilemma, a customer greets him and shows him an entry on his shopping list: “barbeque sauce,” including brand, flavor, and size. Fred picks out the matching bottle and hands it to the customer who thanks him with a smile and walks away. As he does so, another customer appears, but the entry on his shopping list reads simply “barbeque sauce” and nothing more. Fred motions to the display, and they both feel pretty helpless. Neither of them knows which bottle will satisfy this customer, and Fred leaves him wondering if he’ll buy anything at all.

Now consider Catherine.

Catherine owns a restaurant, and she has a very creative cook. Every week or two, Catherine is handed a bite of some new concoction to taste, and it always comes with a snappy name and an enthusiastic argument to add it to the menu. There’s already a lot on the menu, and Catherine worries about bewildered looks she sees in the faces of some of her customers, but not the ones who simply ask for a specific dish as they ignore the menu. It’s the customers who don’t know what they want and look to the menu to help them choose.

Both Fred and Catherine have encountered patrons that illustrate two types of customer studied by Cassie Mogilner, a Ph.D. candidate at Stanford University. The first Ms. Mogilner labels a preference matcher. This customer knows exactly what he wants. If the match is made, then he’s happy. The second customer Mogilner calls a preference constructor. This customer may have some ideas about preferences, but he must translate those ideas into an actual selection, and he relies on the information in the product display to guide him.

Preference matchers and preference constructors have different ideas about variety. For the matchers, if their product is offered for sale, then it doesn’t matter how many other options are on the shelf. Preference constructors have an entirely different task to accomplish, and the variety and organization of the display is important to them.

Mogilner conducted a series of experiments in which she studied how preference matchers and preference constructors react to complex product displays. She was particularly interested in how customers react to product choices that are divided into categories. Specifically, she tested reactions to displays of 77 magazines arranged on a display rack and 50 coffee flavors arranged on a menu.

Mogilner found that preference constructors react very negatively to complex displays that are not divided into categories. They felt overwhelmed when asked to make a choice. When the display was divided into categories, this reaction was reversed, and they were quite happy. They not only enjoyed the experience of making a choice, they believed the display with categories contained much more variety than the display that lacked categories. Preference matchers did not have strong reactions to displays with or without categories.

Next, Mogilner studied the requirements for categories. Do they need to describe real differences between groups of choices? Surprisingly, she found they do not. In her experiment with coffee flavors, menus with choices randomly divided into ten categories each labeled with a letter of the alphabet were received nearly as well as fully informative labels describing real differences in flavor.

Next, Mogilner explored the source of the pleasure that preference constructors reported in the choice experience. She found that customers felt in greater control of the choice task with categories dividing the set of choices. She describes it as a stronger feeling of self-determination.

Finally, she considered an obvious discrepancy: customers perceived greater variety in a display with categories even though the number of choices remained the same. She found that the presence of categories conveys a message of greater variety that customers sense without actually considering. Mogilner explains it this way: each category must contain similar items, that’s why they’re together in a single category. Multiple categories are necessary because differences between individual choices are great enough to warrant them. So, if categories are present, then great variety must require it.

The obvious choice for Fred and Catherine and for any business owner who wants customers to be satisfied with the variety of their offerings is to use categories in their displays. It’s simple, and it costs nothing. This is especially true where customers must negotiate displays with many options. Without categories, it is likely that preference constructors will feel bewildered and walk away with nothing.

Reference: Mogilner, Cassie, Tamar Rudnick, and Sheena Iyengar (2008) The Mere Categorization Effect: How the Presence of Categories Increases Choosers’ Perceptions of Assortment Variety and Outcome Satisfaction. Journal of Consumer Research, 35 (August), 202-214.

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