Choice is Good... but too much of it is BAD

The TVC for a noodle brand shows a kid asking a series of questions to arrive at the fact that choice is good.

There have been a lot of arguments in favour of providing choices. It leads to personalization of offers. One can target greater population. A seller can provide more options. And finally, the customer feels empowered and in control of the buying process when he can select and decide the item to purchase from various options available.

I would advise the product managers and marketers to exercise caution when providing options. Let’s walk through the customers’ mental buying process. For sake of example, we will consider an item which is fast becoming a frequent purchase – a mobile handset.

When a customer has decided to purchase a new handset, there is a set of features and functionality that forms a checklist in his mind. He looks at various options available and shortlists those models that meet the mandatory and sufficient needs from this check list. Finally, he zeroes on one model and purchases the same.
What happens next is very interesting. Have you ever considered why you are dissatisfied after you buy a product?

When the customer has purchased the product, his universe of options now reduces to just two. The first option is the model he has recently purchased and the other option is a “collation” of all other models. So it is now a comparison between one model and the “best features” of all the remaining models that was originally being compared. When this evaluation plays in his mind, he obviously feels a doubt that his decision was not correct and he feels disappointed. Sometimes this process happens even while the purchase is being processed. Ever noticed that slight tinge of doubt on your decision and purchase while your credit card swipe is being authorized?

Most often this disappointment gets translated into dissatisfaction with the product purchased and eventually with the supplier or manufacturer.

It is very important that the choices be kept at an optimum. Cause the fact there is a choice of options forces the customer to take one more decision. Any step in the buying process delays the sale and every step is a potential drop from the purchase process. Thus choices can delay the sales closure since the customer now has to perform one extra evaluation and take an additional decision. Even when a customer does make a decision, the post purchase evaluation will result in dissatisfaction with his decision. The blame will ultimately rest on the supplier / manufacturer. Hence, I reiterate, keep the choices at an optimum. Let there be a real reason for the option to exist.

In case of the noodle, whenever I walk down the breakfast aisle, I take the easy way out. I pick up one of each flavor and dump it in the shopping cart. That’s one less decision for me.

And as for the mobile handset, I still get the tingle that maybe the E72 was not the right handset to buy…sigh!!! Especially when I use my wife’s phone … an E5 from the same manufacturer at 60% the cost…sigh! sigh!!. Ford was so right… any colour as long as it is black.

If you read this, do leave your feedback / comment.

Happy to be PETER

Finally I got to contributing to my blog again. My earlier company had stopped me from publishing in my personal blog and expected me to contribute to the official blog. For some reason this bought about the most dreadful thing to writers -- A writers Block. I just could not get to write any more ... any where. A change of job resulted in change of mindset and I am back in action here.

Today I write about online insurance. Recently I bought a term insurance online. One of the reasons, I went online was the very low premium. Initially I was sceptical about the low premium and thought maybe the claim process will not be good. But somehow I convinced myself to get a policy online.

The past few days I did some research on the online v/s offline policies being sold. Some insurers have similar policies being sold online as well as offline (via agents). But there is a huge difference in the premiums being charged. I thought it might be the savings on the agent commission and selling expenses. But then, that is high only in the first year, whereas the premium is a constant low throughout the policy term.

A lot of research and reading various articles by insurance experts and the following came about:

1. People buying online are educated guys.
2. Educated guys are more knowledgeable about health issues.
3. Guys buying online are likely to be in white collar jobs.
4. White collar job workers have lower mortality rates than the blue collar job workers.

So the expected claim ratio from online policies are much lesser and as such the insurers can charge much lower premiums.

Which means, when I bought the policies offline (via agents), I was clubbed with the general population and ended up paying a higher premium to offset the losses from the segments with higher mortality experience. This reminds me of my earlier article Robin Hood Pricing wherein I had highlight how good customers end up subsidizing the bad customers. Today, the insurer treats the online policy buyers as a separate market and does not club it with the rest of the population. The cost of serving the online policy customer is less and as such the premiums are lower.

Now as I hold my policy documents I feel happy to be Peter and happy that the insurer did not rob this Peter to pay some Paul.