Assortment

Research into how customers evaluate products may impact how you cross-sell

Conventional wisdom has long held that more choice is better for the customer.

So much so that Daniel Kahneman—perhaps the most revered behavioral economist—submitted variety is preferred because customers protect against their future options. His study, in 1999, found customers will choose a less-enjoyable option to avoid the conflict of reducing future choice: “I’ll pick this one now, so I can worry about picking a better one later.”

In other words, they’ll punt the conflict down the road.

Look around and you’d probably agree. We live in a world of incredible assortment.

Except one marketer—Andrew Chernev—caught a discrepancy. And what he found about consumer behavior in a 2006 study is highly instructive for DTC brands.

Chernev noted that Kahneman’s study (and other similar studies) ran counter to other studies that have found larger assortments can lead to cognitive overload and confuse customers.

In his 2006 study to address the tension between those findings, Chernev found that both may be true—it just depends on where in the decision-making process a customer is

While customers do, largely, prefer greater variety, they are more likely to accept a smaller assortment of choices when they are more focused on selecting a specific product than when they are focused on building a consideration set (i.e., deciding which products to weigh against each other).

For customers in a product evaluation stage, Chernev found, a larger assortment can be more challenging.

What struck us in this study is how it relates to how products end up paired together. In retail, that may be via slotting and merchandising displays. In DTC, that’s happening via product bundles, kits and samplers.

Regardless, though, those tactics near universally include a hero product to anchor the decision more in product selection than consideration. 

When viewed through Kahneman’s and Chernev’s research, this tactic becomes instructive.

Given that customers who are in a product selection phase are able to respond more positively to a larger assortment, how, then, do you leverage that knowledge to expand your relationship with a customer?

Assortment via bundles, kits and samplers is generally used to drive acquisition. But if larger assortment can make a decision easier, because it lowers the risk of future commitment, can you also use that in retention?

Catalogue expansion, of course, is a core thesis of the DTC playbook. 

What Kahneman’s and Chernev’s research may suggest, though, is that we’ve missed on how to achieve that expansion as efficiently as possible.

If Chernev’s research is to be believed, customers who are more focused on choosing a specific product (as opposed to building a list of potential products) are more willing to see a larger assortment of choices. Reduce that enough out the gate, and you can improve acquisition. Expand it over time—as your customer is focused on reordering a specific product—and you may be able to increase product adoption.

The challenge, it seems, is how to do that in a world where we’ve obsessed with creating the shortest path to transaction.

If DTC is winning by bundling, then unbundling, to adjust the size of the assortment set and optimize the purchasing decision, perhaps the answer lies somewhere in rebundling over time.

After all, it seems the appearance of choice may be more important that the act of choice.