In July we celebrated Independence Day in the United States. This holiday serves as a birthday party of sorts for the country. Everywhere you look you will see red, white, and blue colors and the word freedom inserted into random places. In a recent blog post we talked about how we make 35,000 decisions each day. How are these related? The freedom of choice is an amazing gift that we often take for granted, but there is a point where it becomes too much of a good thing.
When the Model T was released, Henry Ford is famously quoted as saying, “You can get it in any color you like as long as it is black.” Today, you can order from an array of colors, however color options remain limited by make and model. Why the limits in a culture of too many choices?
Remember that 35,000? With that many decisions a day, automakers know that there is a limit to where freedom of choice will take you in terms of sales and customer satisfaction. There is a phenomenon known as the paradox of choice that essentially states that the more choices available to you the more likely you are to be dissatisfied with your choice because you are convinced that, among the multitude of options, a perfect choice exists.
Barry Schwartz shares in a TED talk from 2005 that he believes, “The Official Dogma of all western societies is to maximize individual freedoms. Western Culture has a deeply held belief that the best way to Maximize freedom is to maximize choice. More choice equals more freedom and more freedom equals more agency.” He proceeds to compare western societies with more repressive or lower GDP societies highlighting the differences in opportunities as represented by the choices/options available to them. In short: Having too few choices results in loss of agency. Having too many choices leads to dissatisfaction. Having moderate choice options leads to agency and higher satisfaction. Which brings us back to the color of cars.
Automakers use this knowledge about choice and satisfaction to their advantage. Rather than have a lot of unhappy customers and a bunch of pea green, puce, and lavender used cars on their lots, the manufacturers limit color options by make and model based on satisfaction survey data. To some extent, they are still embracing the spirit of Ford’s famous quote. They are not alone. Marketers for all types of products understand this paradox and take different steps to use it to their advantage.
How many brands of any one item are available to you while shopping? Three? Seven? 27? Ever find yourself just standing in the aisle staring at the options? Companies rely on brand loyalty and price to drive your purchase. In the face of too many options people are more likely to suffer from decision remorse (See earlier blog post) and default to preprogramming. This means they buy a familiar brand or whatever is cheaper at that moment. Automatic decision shortcuts kick in. This phenomenon is low stakes when it comes to groceries, but also comes into play during large scale high stress professional situations. How should we allocate our budget for the next 5 years? What strategies should we pursue to grow our company? While these may seem like different decisions, the mechanics of choice remain the same regardless of scale. The difference is that the impact is greater. The key is to be comfortable with your default settings for small day-to-day decisions, and to embrace tools and resources that allow you to really focus on the decisions that matter.
In other words, it’s OK to have “the usual” when you go out for lunch but do not stick with “what you have always done” when it comes to your strategic plan, capital allocations, or any other significant operational processes.