How much choice is too much?
As consumers in today’s marketplace, we can easily customize virtually every aspect of our lives—defining selections down to the most micro of details. And product manufacturers—hoping to stay relevant to choosy consumers—have embraced this ideal, seemingly offering infinite iterations, combinations, and configurations to capture mind and wallet share.
But overwhelming choice has a flip side—it can lead to cognitive overload for consumers who, all too often, will block out the overly complex and rely on what they know. Professor and Author Barry Schwartz noted in his influential book, The Paradox of Choice: Why More Is Less, “…as the number of choices keeps growing, negative aspects of having a multitude of options begin to appear. As the number of choices grows further, the negatives escalate until we become overloaded. At this point, choice no longer liberates, but debilitates.”
Customization comes at a cost, particularly in the automotive universe where the average option-laden vehicle has increased by an inflation-adjusted $5,000 to a $37,000 MSRP in 2019, according to the US Bureau of Economic Analysis.
In a recent interview with Automotive News, Ford Motor Company CEO Jim Hackett lamented increasing base prices and promoted a concept at Ford he calls “reductive design”—removing neglected or the least-desired options in cars (such as garage door openers and CD players, according to Hackett) to help nudge down prices.
This does not just apply to big ticket items, either. Choice and complexity were examined in a study of jams, and researchers noted “consumers were more likely to buy when offered 6 jams (40%) instead of 24 jams (3%). Consumers also reported greater buying satisfaction.”
Escalent has partnered with auto manufacturers to manage complexity, simplify combinations, and optimize offerings to maximize consumer satisfaction for 25 years. We developed a proprietary methodology—Strategic Optimization of Complex Offerings (SOCOTM)—over two decades ago to reduce complexity in the automotive industry. Since then, we have applied this unique approach with clients across various industries, including automotive and mobility, consumer goods and retail, health, and technology.
Decades of research with mountains of economic and behavioral data around manufacturing and buying trends have verified two action steps that better align with clients’ need to protect market share, while focusing on consumer needs:
What does this type of complexity management look like, exactly?
Let’s look at Japanese manufacturers. Toyota has been extremely successful with a limited series line-up. Hyundai, Kia and Honda also have succeeded with a similar emphasis. On the other hand, some OEMs have offered five kinds of power seating on a single vehicle line—everything from two-way to 20-way adjustments. Product teams are hard pressed to articulate the advantages of each seating adjustment. Consumers, however, tend to focus on the main points of differentiation, such as whether the seating adjustment is manual or automatic.
Does the consumer want blind spot monitoring, a blind spot information system, or blind spot cameras that pop up on a screen in the dashboard? It’s little wonder why consumers can be overwhelmed—and sometimes frustrated—by the complexity of options and unclear value propositions. And when consumers don’t understand what makes these features different from one another, they tend to overlook them and only see the “basic” one and the “best” one.
Manufacturers resist adopting a less complex profile of product offerings for a variety of reasons, starting with—you guessed it—competition. As long as other companies offer options that are bigger, better, and more adjustable, an OEM feels like they must follow suit— too often, without even understanding whether consumers want the items at all.
Sometimes, auto manufacturers have to offer new technology to remain in compliance with industry regulations but consumers might not understand why the technology was added or the value it provides. As such, it is all the more critical for OEMs to clearly communicate about features. This is especially important when new features have to be offered but are intimidating to consumers, such as mandated driving safety technology.
Automakers often focus on reducing the number of free-standing options by bundling similar features, such as in cold climate, off-road or luxury packages. The goal is to provide consumers with all the features they want, none that they don’t want, and all this at an affordable price. Bundling makes it easier for consumers to evaluate which packages or level of trim will best meet their needs while enhancing their driving experience. However, bundling doesn’t replace the need for automakers to be able to clearly explain to consumers how features function and add value to the driving experience.
As we have learned and other research has clearly shown, consumers can be more satisfied by having less choice. Manufacturers will be more successful if they offer product choices with clearly differentiated and easily explainable features for consumers to quickly understand which options provide them with the benefits they are seeking. Furthermore, we recommend manufacturers train new car buyers on how to use their vehicle’s features, which will help ensure consumers intimately understand their value.
More features are not necessarily more desirable, nor more profitable. Building the right amount of complexity allows manufacturers to develop more efficient and compelling products. Proper research design can help de-content and optimize features for the benefit of both manufacturers and consumers.
In the automotive industry, a vehicle can have billions of potential feature combinations. We use SOCO™ to guide the strategy to reduce this to the most optimal combinations, which can easily save millions of dollars. Furthermore, US consumers overwhelmingly buy vehicles off dealership lots. With our complexity management research, we guide our clients to ensure the right product is in the right place at the right time for the right buyer. Everyone wins!
The automotive industry is far from alone in grappling with complexity management. We can streamline the portfolio offering for nearly any type of product with a price tag. Leveraging a specialized analysis honed over the years, we provide our clients with actionable recommendations to optimize their offerings, pricing, and product profitability—thereby improving customer satisfaction and ensuring brand consistency.
If we can be of assistance to you in exploring the process of complexity management, please send us a note.