How to Use the Psychology of Choice to Increase Online Sales

| July 28, 2015
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How much choice is too much?
The common belief is that more choice is better. But when it comes to online sales, is that actually the case?

Two researchers named Sheena Iyengar and Mark Lepper conducted a study to understand the psychology of choice and how we’re influenced by the number of options we have to choose from.

They set up a jam tasting booth in Draeger’s, an upscale grocery store in Menlo Park, California. Half of the time they displayed 24 different flavors of jam, and the rest of the time they only displayed 6 flavors. They looked at two things in particular during their research; in which scenario were people more likely to:

  1. Stop and sample some jam
  2. Buy a jar of jam

Here’s What They Found

The results were counter-intuitive. When researchers displayed 24 flavors of jam, 60% of people stopped, and 3% of those who stopped bought a jar. But when they displayed 6 flavors of jam, 40% of people stopped, and 30% of them bought a jar of jam.

So even though people were initially more attracted to the display with more options, when it came down to buying, consumers were at least 6 times more likely to buy when they encountered 6 options than when they encountered 24. But why is that?

Why Fewer Options Lead to an Increase in Sales

When people are presented with an exhaustive list of options to choose from, they find it very difficult to make a decision. The more choices you offer people, the more likely they are to delay choosing—even if it goes against their best interest. Psychologists call this choice overload.

The process of understanding all the information, evaluating the options, comparing them to competitors, and deciding whether or not to buy takes so much mental effort that it’s easier to just choose nothing and move on to something else.

Photo Credit: Sharon & Nikki McCutcheon

Photo Credit: Sharon & Nikki McCutcheon

Enter: Paralysis of Analysis

In another study, Vanguard (the giant mutual fund) gave Iyengar access to the 401(k) retirement plan records of 739,749 different employees at about 2,000 different companies.

Her team of researchers found that for every 10 mutual funds an employer offered, the rate of participation decreased by 2%. That means if a company only offered 5 funds, 10% more employees would participate than if they offered 50.

Why would so many people pass up thousands of dollars each year from their employer, who would be happy to match their contribution? Well, because with 50 options, it’s really difficult to figure out which fund to choose. The confused mind freezes up.

With 50 options, it’s really difficult to figure out what to choose. The confused mind freezes up.

When you give people 50 choices of mutual funds, or 24 types of jams, they become paralyzed and end up choosing nothing instead. You can increase the chance of a purchase simply by reducing the sheer number of options. For example, Procter & Gamble saw a 10% increase in sales when they went from 26 different kinds of Head & Shoulders shampoo to 15. But you’re probably wondering how this works on digital channels…

How to Increase Sales: Fewer Options, More Sales

Fewer options leads to more sales in grocery stores and higher participation in 401(k) plans, but does this work online? Absolutely! The psychological principle of choice overload directly applies to how users navigate websites and apps.

If you’re willing to get rid of extraneous, redundant, and unnecessary options, you’re likely to see more sales, lower costs, and a better user experience. Now let’s look at some examples of companies in different industries that are benefitting from offering a limited number of options:

Ecommerce (Amazon)

Even though Amazon offers millions of products, they avoid choice overload in a few different ways. First, they highlight 4-7 different categories of products on their homepage, each with 2-7 product options (depending on the size of your screen).

amazon-1

They also apply this principle on product pages by offering 3-10 accessories in the “Customers Who Bought This Item Also Bought” section (again, depending on the size of your screen).

amazon-recommended

Tech Products & Web Apps (Twitter)

Back in 2009, Twitter used to ask users to take 7 different actions on their homepage. Here’s what it looked like:

twitter-2009

Even though you could do all these things on Twitter’s homepage, they really only wanted you to do two things: sign up or sign in. One of the ways they’ve increased their conversion rates over the years was to remove all of the extraneous elements and really focus on driving the two primary user behaviors that matter to them. Here’s what their homepage looks like in 2015:

twitter-2015

B2C Tech Products (Basecamp)

Basecamp is a product management tool that requires users to pay a monthly fee for their service. With SaaS products, people generally don’t want to pay for more or less than they need.

Basecamp does a great job of providing options for their light, medium, and heavy users without making the decision overwhelming. They offer 5 different packages and tell users exactly what’s different between each of them. This makes it easy for users to evaluate which option is the right fit.

basecamp-pricing

B2B Tech Products (New Relic)

New Relic is a software analytics platform that also requires users to pay a monthly fee. They offer three packages: lite, pro, and enterprise. They don’t overwhelm users with too many options, and it’s easy for users to tell what they’re going to get, and how it differs from the other options.

new-relic-pricing

The lite package allows curious users to test the waters and see if the product is right for them. The pro package is appealing for the small business folks. And the enterprise package caters to larger companies who have the budget and the need for a high-touch relationship, customized features, and customer service as soon as they need it.

The Categorization Technique

Finally, there’s another technique that will help you eliminate choice overload and increase your online sales. It turns out people can handle more categories than we can handle choices. We don’t get as overwhelmed by categories because they help us tell things apart.

amazon-back-to-school-categories

Amazon uses categories to make it easy for users to tell things apart.

In another study, Sheena Iyengar found that if you take 400 magazines and divide them into 20 categories, people will believe you’ve given them more choice than if you took 600 magazines and divided them into 10 categories.

If you have a wide variety of products, put them into categories. Once a user selects a specific category, give them more options to choose from. They’ll be able to understand the information better, it’s be easier on their mind, and they’re more likely to make a purchase.

Users will be able to understand the information better, and it will be easier on their mind.

For example, instead of giving people 24 options, give them a choice of 6 categories, and then another choice of 4 options. When you try to give people 24 options right off the bat, less people are going to click on any of those options.

Zappos is a great example of this technique. When you look at the left hand side of their homepage you’ll see that they have: Shop Women’s, Shop Men’s, and Shop Kids’. Underneath each of those options are 4-5 choices. They make it easy for users to tell things apart and quickly find what they’re looking for.

zappos-homepage

 

How Many Options Should You Give Customers?

When it comes to online sales, the old adage is true: less is more. Consumers are at least 6 times more likely to buy when they encounter a limited number of options than when they encounter an exhaustive number of options. Some choice is better than no choice, but if you give people too many options they’re far less likely to click, subscribe, or buy your product.

There isn’t a “magic number” for getting more online sales (just like there’s no “silver bullet” for growth). The best number of options is going to be different for every business depending on your product, your users, your industry, and your business model. And the only way to figure out that number is to consistently experiment and find out what works and what doesn’t for your own product or site.

Additional Resources

If you want to learn more about the psychology of choice, here are a few resources you’ll enjoy: