Are you giving customers too much choice?

Why would giving your customers too much choice be a bad thing? Surely it’s got to be good for attracting new customers and generating more sales?

When McDonalds introduced their all-day breakfast a years ago, their like-for-like sales actually FELL. Instead of attracting more customers, existing customers chose the cheaper breakfast option and, as a result, their average sales transaction price fell. The complete opposite effect to their intended impact of that particular menu change.

A University in the U.S undertook a famous study some years ago to look at whether too much choice can actually be demotivating. A jam store was set up offering samples of 6 flavours and 24 flavours on different days. During the time when 24 were offered, 60% of people stopped to sample them whereas 40% of people stopped when only 6 were offered. More crucially, of the people sampling from 24 choices, only 3% purchased whilst of customers who sampled 6, 30% purchased.

I am sure many of us have left shops or restaurants without making a purchase simply because there was too much choice. It can be agony for the less decisive amongst us.

The pub and restaurant trade has a notoriously high failure rate and one of the signs they are struggling is usually an expanding menu when perhaps the old adage “less is more” would be a better bet. It would be a brave decision to reduce choice in times of difficulty but in fact, when we look at supermarkets like Aldi and Lidl, this has been a contributing factor to their success.

Getting the right product mix

This is one of those old business theories but the principles are still very relevant. Before making decisions about products/services you first have to know what your product mix currently is. The four dimensions to product mix are:

• Width – The number of product lines
• Length – The number of product lines multiplied by the number of brands within each line
• Depth – The total number of variations of each product e.g. size, colour and flavour etc.
• Consistency – How closely related products are to one another in terms of use, production and distribution

If you haven’t recently reviewed the products and services that your business supplies, it would be a worthwhile exercise to list them all out as you may just be surprised how many there are. You should then group them into 4 strategic units:

1. Cash cows – these are your products and services that sell well and are your core business
2. Stars – potential to generate fast growth and may require investment to increase market share and turn them into cash cows
3. Question marks – Low market share in a high growth market with potential to become cash cows or dogs
4. Dogs – Products/services with low growth in a declining market with no benefit to the business

This inward view is just as important as looking out at the competition.

• Do your products/services complement each other or are they conflicting or confusing your customers?
• Do you have ‘dogs’ that are draining resources which could be better invested elsewhere?
• Perhaps you have products/services which could be grouped together to provide a more appealing and enjoyable customer experience?
• What effect would adding or removing a product/service have on your existing portfolio?
• If you could free up some more time, could you focus on making those ‘question marks’ a success?

How A4G can help

In spite of all that has been said, offering more choice might be what is needed to help you achieve a particular goal, whether that be increasing sales or fending off competition. However, the above shows that more choice is not the only choice. A4G understand that our clients know their business best and we can’t come up with all the solutions. What we can do is ask the right questions to help our clients find the right answers.

Book a pricing discovery meeting with us where we can review with you your products and services. Email enquiries@a4g-llp.co.uk or call 01474 853 856.