Brands and the Paradox of Choice

One of the differences I've noted between London and New York is scale.

Everything comes in larger sizes (restaurant meals are best left unfinished unless you also desire to come in a larger size) and there are many more options to chose from - especially on the supermarket shelf, which groan under a bewildering array of alternatives in every product category.

Choice is equated to freedom and freedom is a necessary condition to ensure the unalienable right to pursue your own individual flavour of happiness - more options mean more freedom, which means more happiness.

Except it doesn't work that way.

Barry Schwartz points out in the Paradox of Choice (which you can read most of here thanks to Google Books) having too many options tends to make you unhappy, which is why he argues that hypercapitalist economies, which sanctify individual autonomy and thus force decisions at every possible opportunity, tend to less happier overall.

This insight is incredibly compelling because it feels right and yet wrong - freedom underlies the cultural foundation of western society and has been thoroughly internalised as part of your Freudian superego - so people know that they love choice, but find they hate making decisions.

The book is full of good examples of people doing almost anything to avoid making difficult decisions - ones where there is no clear, obviously better option, but the one that best highlights the conflicted drivers of consumer behaviour, is the jam experiment.

A supermarket experiments with sampling - alternating between offering 6 and 24 different flavours of jam to try. The 24 jam table always attracts more people [we love choice - amongst all those options there must be the right jam for me] but, having been attracted, they were forced to make a difficult decision [arrgh there are too many to choose from, lots of them are good, I just don't care this much about jam] which ultimately led to the 24 jam display selling 1/10 as many jars as the 6 jar table.

Dramatically increasing the number of options dramatically decreases the propensity to purchase.

Decisions with lots of options cause anxiety, paralysis, proleptic regret and a bunch of other negative responses mentioned in the Ted talk above. They increase the effort invested in the decision, the opportunity cost of any choice you make and ultimately can diminish the enjoyment you get from anything you do choose - the book explores these negative psychological effect in detail and suggests a strategy to avoid them, which is essentially lower your expectations and seek to make good enough, rather than the best, possible decision (satisfice don't maximise).

But we've developed another way to help deal with this problem, at least at the supermarket: brands.

We spend a lot of time thinking about what brands are and how they work - I started to wonder what they were for.

Brands are good for companies - they increase frequency of purchase, allow you to charge a price premium, drive loyalty, are a defensible competitive advantage and contribute massively to the intangible asset value of a company.

But what's the function for consumers? What value do they offer to individuals that leads to the non-rational behaviour that drives shareholder value?

The function of brands has evolved as the economy does. In early capitalist economies, economies of scale create large corporations that distribute across massive areas. Brands function as trustmarks, ensuring that you get what you expect.

But in hypercapitalist economies, we achieve functional product parity, which means that every minor purchase decision becomes difficult - there is no clear, obviously better option - which makes a supermarket a very uncomfortable prospect.

Brands come to the rescue: they function like heuristics - the take away the need to make decisions, take away the pressure of pretending to ourselves that we are rational economic agents, prevent us from breaking down every time we want some jam, by providing us with a simple rule of thumb: go with what you know.

Even if you don't choose the market leading brand in the category (although you usually will, by definition) you can anchor the category to it, allowing you to make a decision in relation to it.

So, as emotions are the lubricants of reason, brands are the lubricants of commerce.

Comments

[Karl Turley]

I really do think that this choice paralysis, as you say particularly rife in the U.S is one of the most interesting phenomena to occur in the modern consumer society, as it provides a paradoxical conundrum with our core principles. As you say brands can help to counteract this providing a standpoint within the market place enabling an easy decision to be made, however with marketing communications becoming ever more prominent we risk brand choice paralysis.
I also think that the emergence of knowledge communities is an interesting movement coming together to share views, opinions, knowledge and follow that herd instinct aiding consumer choice and along with brands helping to counter choice paralysis.

[John]

I'd suggest that the choice in New York supermarkets is actually smaller than in the rest of the country given the land values and transportation issues so the parlaysis is exacerbated elsewhere.

But I won't let you get away with the idea that you usually choose the market leading brand by definition - to qualify as usual behaviour depends on how dominant that brand is in its particular category. If it has less then 50% share, you usually won't choose it.

[Faris]

Word my man Karl - yeah i dig that - I guess there are two classes of consumer goods - those you research, which increasingly respond to knowledge communities and consumer reviews and that - and stuff you don't really ever think about.

One of the interesting things to try to understand is the role of search / websites - for FMCG.

John - very true - I once went to a Walmart outside San Francisco on the way to burning man. We were lost in there for 6 hours.

And sure, you may be technically right, but I've never been one to let facts get in the way of a good turn of phrase ;)

[John]

I never let a good turn of phrase get in the way of my pedantry ;)

[David]

Having moved to Toronto from London, and being faced with a barrage of unfamiliar brands, I can relate to the supermarket 'brand blindness'! I find it interesting that whenever Mr G Ramsay goes into a failing restaurant, he will usually chop the menu down drastically. Maybe that demonstrates our underlying inability to deal well with more than a limited choice when brands aren't around (or is 'fish and chips' a brand?)...

[John]

It's also down to the fact that he doesn't know how to cook very many dishes.

[Amelia]

I remember when I moved to NY and trying to do grocery shopping for the first time and literally staring at the shelves in confusion. All of these brands that I had never heard of before - suddenly the packaging and the design became so much more important. Those were my only cues as to whether this product was any good! Someone once told me that "TM" originally stood for Trust Mark, not Trade Mark. It's true - when you are new in a country you are really looking for brands that you can trust.

[Mikej]

I had the same thing when I moved from Aus to London. The first time I ever walked into an asda (UK walmart) I said 'no freakin way' turned around and walked straight out. I think the change has also made me more susceptible to advertising and brands. I no longer have a high percentage of brand choice that was not from rational or emotional choice but from habit. I started to think about all the brands in my life that were habit and had no thinking at all. From growing up and my mum and dad buying them, or something that I just knew and always bought. Something I might have just copied from a friend because I didnt really want to waste my time thinking about toilet paper brands.
I am going to leave it to everyones favourite. Borat..... I use this video to talk about product parity and too much choice in presentations
http://www.youtube.com/watch?v=5tvhFeipnjc
there is a longer version but I cant find it