Have You Ever?
You’re at a new restaurant with some friends and having a great time. You’ve been so busy talking and catching up that you haven’t paid much attention to the menu. When you open it up, there are pages and pages of choices. Should you go with something you know you’ll like, something that sounds interesting, or what your friends are getting? While you’re still reading, the server comes over to your table and starts taking orders. It’s suddenly your turn, and in a panic, you blurt out something safe. When the food comes out, you see what meals your friends got and immediately regret your choice. Why did you get so overwhelmed? What caused you to order a meal that you didn’t really want?
Economic decision-making can be affected by several outside factors. How a person feels, their preferences, their buying history, and other characteristics all affect consumption. Sometimes these external factors make a consumer’s decision harder. In the restaurant scenario, the time pressure of the server and the huge variety of options caused the consumer to become overwhelmed, make a rushed decision, and regret it later. This is an example of what economists call choice overload.
Definition: Choice Overload
Choice overload occurs when a consumer faces too many options and fails to make the most rational choice. The complexity of the decision-making process makes it harder to make the right choice, which leaves the buyer feeling dissatisfied. Choice overload can be caused by a few different factors like a lack of time, too much similarity between options, a chaotic presentation, or a lack of consumer preferences. These kinds of pressures can cause shoppers to get worked up and either regret their decision, choose a safe default option, or postpone the decision altogether.
How It Works
In 2000, researchers Iyengar and Lepper conducted a choice overload experiment about jam. They set up a jam stand at a local farmers market. Some days, the stand would offer 24 different jams, but on other days, there would only be six jams. After several weeks of conducting the experiment, Iyengar and Legger concluded that the stand with more variety generated more interest from shoppers. However, the jams among the 24 options were ten times less likely to sell than the jams presented as one of six options. While having a lot of choices may seem appealing at first, it actually decreases the chance of a purchase.
But wait, aren’t consumers supposed to like having a lot of options? Alvin Toffler, who developed the idea of choice overload, stated that for some goods, having choices doesn’t negatively affect decision-making. For example, people appreciate that grocery stores are stocked with a huge selection of different foods. There are some conditions where choice overload doesn’t apply. First, if the good is something that the consumer has purchased before or has prior knowledge about, choice overload can be negated. For example, even if someone has never been to a particular sandwich shop, the parts of a sandwich aren’t new to them. Second, goods that are purchased in a low-pressure environment lower choice overload. In other words, shopping in an organized store with plenty of time is easier than a cluttered store with limited time. Finally, goods that consumers already have preferences on can offer a wide selection without causing choice overload. This means it’s more stressful to buy wine than chips for a party, regardless of the number of options in each decision, because we have strong opinions on chip varieties.
Another factor that combats choice overload is brand names. Even when given a large number of options, consumers can still feel satisfied and confident with their decision if the alternatives are associated with familiar brands. Through advertising, previous experiences, or general popularity, consumers feel like they understand the other options. This is true even if the customer hasn’t actually tried the product enough to form a preference. For example, if name brand and generic sodas were each offered to customers, shoppers would feel more satisfied buying a brand name, even if they never tried any of the options. Brand names appear more familiar.
So far, we have discussed choice overload in the context of stores and restaurants, but it can also apply to larger purchases. Most adults have experienced choice overload when shopping for things like Internet providers or phone plans. The alternatives have different costs, contract lengths, quality, services, and features which complicates the choice. With the Internet, consumers have access to more information to make decisions and resources to guide them. However, online shopping also provides consumers with more options and conflicting information. Some sites offer confusing information to get consumers to just continue buying their service because shopping is too difficult. So in the future, when making big purchases, be sure to seriously weigh all the options but realize that there will never be a perfect choice. Choice overload affects people because they believe that out of all of the options available, there is an ideal selection, and we might miss it. However, that is not always the case, and we can spend too much time searching for a nonexistent choice.