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.