Kigo Blog

The Constraint of Choice

Vacation Rental Websites

Why Too Many Options is Bad For Business.

This sounds wrong, right? Choice is good! Give your customers more choice, they can get exactly what they want and you can reach more potential customers. It’s a pleasing thought; more choice will eventually result in better products, better experience and more power in the hands of the consumer. Companies will offer us more in an attempt to lure us in and we can disperse with all the unwanted extras we’ve been saddled with for years. Choice is a modern miracle that modern capitalism grew and nurtured until we emerged into our current consumer utopia. We’re freer, more self-determined and more likely to choose a better option than if our choices were restricted. The only problem is that it’s not true.

the constraint of choice

The truth is that providing choice does not result in better products, more satisfied customers or easier and clearer purchasing experiences. It confuses and distracts customers. And, it has a negative impact on sales.

In one study cited by Schwartz, researchers set up two displays of jams at a gourmet food store for customers to try samples, who were given a coupon for a dollar off if they bought a jar. In one display there were six jams, in the other 24: 30% of people exposed to the smaller selection bought a jam, but only 3% of those exposed to the larger selection did.

In addition to sales, it also reduces the level of general engagement:

Vanguard, a gigantic mutual-fund company, and found that for every 10 mutual funds the employer offered, rate of participation went down 2% – even though by not participating, employees were passing up as much as $5,000 a year from the employer who would happily match their contribution.

Increased choice in these examples has resulted in poorer sales of the same product and less participation. And it applies to choosing a vacation rental, too. Imagine you’re heading to New York for a week and are looking for somewhere to stay, it would seem that having more choices of vacation rental would mean that you have more power as a consumer and the process should be easier and better value.

But, the paradox is, if you have one option – no choice – you are forced into the decision and the weight of responsibility is removed from you. If you have a choice of 100, there is surely the optimum choice for you within that. To make a choice is to gamble on very little information, or invest valuable time in checking and comparing every single option and variation. It is possibly better to be forced into a bad option and to make the best of it than to make a choice but have the silent worry and fear that you’re missing out on something better.

If we make what could be perceived as a wrong choice, you are a failure. Suddenly, the emphasis has shifted from the quality of the product to your ability to make a decision. The producers are no longer accountable for their product. They gave you, the consumer, the choice and all the information you could need to pick the very best. And if you can’t manage to make the best judgement, you must be the stupid one. This is what leads to customers becoming overwhelmed and opting not to make the purchase.

Every business has to consider what it offers that no other business can match rather than adding more and more in an attempt to keep up with the competition.

Paypal founder Peter Thiel argues that monopolies are good things and that competition, often, doesn’t help either businesses or customers. “In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.” Competition, in short, is for losers.

So, as a vacation rental manager where does this leave your business? Should you eliminate choice from your business and offer a pared-down version?

Unfortunately, we are not at the stage where consumers actively seek out less choice, customers are still attracted to a large number of choices. Having a huge amount of available properties is still a great hook to get customers to your site and viewing your properties. It’s at this stage where you can lose them. Suddenly, pages of pages of impressive looking properties start to look overwhelming.

The secret is to categorize your properties into smaller groups. Then when people come to your site they can navigate to the properties that they need. Your site needs to bypass the extra properties that might look appealing but are ultimately just distractions to booking. Someone who is looking for modern, beachfront properties should be able to just choose from the three or four that meet their criteria. One of the first tasks of your website is to get this crucial information from your guests and distil this choice into just the relevant properties. You can still present your business as having a wide range of choice but without swamping your guests and having a negative impact on your bookings.

Managing choice is the task of a good website. It should be able your guests past hundreds of irrelevant choices and to an eventual booking. Choice is still an important tool for online business but knowing when to avoid it will help you convert more browsers into bookings.

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