Executive Summary
One striking aspect of many contemporary markets is the abundance of choice. Having many choices is intuitively appealing, but it can just as easily demotivate, prompting buyers to delay or even abandon a purchase that would actually make them better off. The problem is that product clutter sometimes feels more like a burden than like a freedom, making decisions too difficult. Importantly, practitioners fear the proliferation of choice causes many consumers to disengage and settle for inferior alternatives purely because they cost less.
Our research shows this fear may be unfounded. This article tests the simple prediction that, in some instances, richer (denser) assortments drive shoppers toward rather than away from high-quality products. Driving this idea is the belief that consumer often learn how much they should care about quality during the purchase process. Specifically, the authors argue that consumers uncertain of their preferences infer from seeing assortments that are surprisingly rich in choice that other consumers must be much more careful about buying the “right” quality than they are. This perception motivates consumers to revise how much they care about quality to match the rest of the market and consequently be prepared to pay more for high-quality products and less for low-quality products than they were initially.
The authors find support for this prediction in experiments conducted in both the laboratory and the field. In one experiment, for example, shoppers presented with 21 types of dark chocolate were prepared to pay 33% less for a low-quality chocolate and 40% more for a high quality chocolate relative to those presented with only 5 types. The results of further experiments, in which consumers chose from assortments of wines or binoculars, revealed that manipulating the perceived density of an assortment could similarly affect people’s sensitivity to quality. The authors also analyzed sales data from hundreds of lots sold through an auction house over a two-and-a-half year period, finding that the same phenomenon holds true in the field. In all cases, consumers were consistently prepared to pay more for higher-quality offerings and less for lower-quality offerings as the density of an assortment grew.
This research has several implications. Manufacturers might decide to extend their product line to better convey the importance of the innovation and higher quality offered by their products. From the perspective of retailers, while luxury items tend to be presented in isolation for branding reasons, this article implies that sufficient competition is necessary to underscore the quality difference carried by high-end goods. Conversely, if retailers want to convey an image of affordability, they are better off limiting their assortments. Finally, from a consumer protection point of view, one interpretation of this article is that denser choice sets concentrate price competition on the low end of a market, so that the poor are potentially paying less and the rich are potentially paying more—which may or may not be considered desirable.
Biography
Marco Bertini is an Assistant Professor of Marketing at London Business School. He holds a BA in economics and commerce and a BA in political science from the University of Melbourne, a MBA from IESE Business School, and a DBA from Harvard Business School. Professor Bertini’s research interest focuses on consumer decision making, with particular emphasis on the psychological aspects of pricing and price promotions. His work has been published in academic and practitioner journals including Marketing Science, Journal of Consumer Research, and Harvard Business Review. He has also written several case studies on pricing strategy and worked with companies in both consumer and business markets on developing pricing policy.
Luc Wathieu is an Associate Professor of Marketing at McDonough School of Business, Georgetown University. Before that, he was on the faculty of ESMT in Berlin, Harvard Business School, and the Hong Kong University of Science and Technology. Professor Wathieu holds a master’s degree in economics from the University of Namur and Management from INSEAD. His PhD is from INSEAD. His research combines economics and psychology to understand the determinants and processes of consumer engagement and empowerment. His recent work has been published in Management Science, Marketing Science, Journal of Consumer Research, Journal of Marketing, and Harvard Business Review. He is a board member of the INFORMS Society for Marketing Science.
Sheena Iyengar is the inaugural ST Lee Professor of Business at Columbia Business School and the Research Director of the Jerome A. Chazen Institute of International Business. She holds a BS in economics and a BA in psychology from the University of Pennsylvania and a PhD in social psychology from Stanford University. Professor Iyengar’s primary research interest is how people perceive and respond to choice, and for her research on this topic, she has been the recipient of honors including the 1998 Society of Experimental Social Psychology Best Dissertation Award and the 2002 Presidential Early Career Award for Social Scientists. Her first book, The Art of Choosing, which explores the mysteries of choice in everyday life, was chosen as a finalist for the 2010 Goldman Sachs and Financial Times Business Book of the Year award and was named one of Amazon.com’s top 10 books of 2010 in Business & Investing.
Journal of Marketing Research, Volume 49, Number 1, February 2012
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