The Ultimate Guide to Product Assortment Psychology in 2022Relevant topics Archive, Strategy, Conversion
If there’s one thing that retail psychologists have learned over the years, it’s that choice isn’t always good. Few people will be excited by facing 382 options of laundry detergent. Alternatively, 382 options of craft beer may be exactly what pulls the customer into the aisle (it works for me), sparking the promise of hoppy exploration.
While choice can be alluring and liberating in some purchase contexts, it can be downright paralyzing in others.
This explains why in many studies, both in the real world and the lab, decreasing choice has been found to be beneficial for the bottom-line sales. (don’t worry, I won’t be citing the infamous ‘jam study’, which adorns the opening paragraph of so many articles on product assortment) On the other hand, many other studies still show the adage ‘the more the merrier’ to be true on the store shelf as well.
Clearly, whether choice is good depends on moderating factors such as product category, type of store and the shopper itself. Fortunately, Sethuramana et al. (2022) conducted a large-scale meta-analysis, providing insight into how these factors operate and intertwine to influence shopping outcomes. The researchers analyzed an impressive number of 177 studies obtained from 95 academic papers published during 1970–2021.
In this blog, we’ll sum up their most essential findings and discuss important practical implications for retailers.
Choice: the good, the bad and the ugly
Large product assortments can have both positive and negative outcomes.
Positive consequences of choice
An increase in assortment size can lead to beneficial effects such as:
- assortment preference
- perceived choice satisfaction
- feelings of freedom
- increased conversion, sales, and profits
Negative consequences of choice
An increase in assortment size can lead to harmful effects such as:
- choice stress
- increased cognitive effort
- choice uncertainty (even when you buy, you feel less certain you picked a good option)
- choice difficulty
- choice avoidance
Next, we’ll turn to the factors that determine when positive and negative outcomes are most likely to occur.
More choice is generally good
The explosion of research interest in the negative consequences of choice may reinforce the impression that increasing choice generally results in negative outcomes. The meta-analysis shows that it would be erroneous to jump to this conclusion.
The data is strikingly clear on this: choice is generally good. When pooling all studies together, the numbers indicate that increasing choice more often benefits the sales numbers than harms them.
The average assortment size elasticity is .082. This simply means that increasing assortment size by 1% (imagine adding one additional craft beer next to the 100 alternatives currently on the shelf) results in increased net profit of 0.082%.
It should be noted that this relationship between assortment size and sales is nonlinear end tends to reach a plateau sooner or later. Up till a certain optimal number of stock-keeping units, adding new products will likely have little incremental benefit, and could even be harmful.
Large assortments have become more desirable in recent times
Interestingly, the assortment size elasticity factor appears to be on the rise. Assortment size elasticity during 2000-2020 is significantly higher than the period that went before. This means that the people shopping today react more favorably to additional choices than their counterparts from the 70s, 80s and 90s.
When large assortments work, and when they don’t
The researchers have identified several specific circumstances during which increased choice consistently leads to negative outcomes, as well as circumstances that appear to be particularly well-suited for larger assortments. We’ll explore the most important factors in the next section.
The brand matters
Adding a brand that either has brand loyalty, is an expensive national brand, or a high penetration brand, generally leads to good outcomes, whereas the addition of new or lesser-known brands may hurt category sales.
Some categories react particularly well to large assortments:
- Categories we buy for pleasure (e.g., soft drinks)
- Categories that involve risk (e.g., clothes, which may not fit)
- Niche products (HiFi audio)
- Stockpilable categories (e.g., meat, which can be frozen)
Increasing shelf space to accommodate new products added to the assortment can help increase its benefit on sales. Alternatively, maintaining shelf space during assortment deletion (instead of shrinking the category) can minimize harm.
Stores with a premium image, supermarkets, and mass merchandisers should carry larger assortments than low image and convenience stores. Also, stores where people tend to shop with a time constraint benefit from smaller assortments.
People are different, and some react more favorably to choice than others. Specifically, experts, rich and educated consumers tend to enjoy processing larger assortments, especially when they are making a planned, major shopping trip and do not have a favorable attitude towards the private label.
Moment of consumption
When we shop for immediate consumption, we prefer larger assortments than when we shop for future consumption.
Western cultures react more favorable to an increase in choice, with the USA taking the cake. The authors recommend maintaining a larger assortment in the USA than in Asian and African countries, with Europe and Australia falling in between.
Online and offline
Larger assortments are much more effective offline than they are online. This is likely the case because online shopping is facilitated by decision-making aids such as search and filter options, making large assortments easier to process.
Imagine you’re spending the night in your nearby cinema, viewing Hollywood latest blockbuster. What determines how much you’ll enjoy the movie?
You might think about factors such the film’s beautiful cinematography, the popcorn’s crisp bite or even the usherette’s cute smile. Surprisingly, brain scientists from Princeton University have now unearthed a much more subtle influence on our experience of pleasure: the freedom of choice you had prior to attending the movie. The pleasure generated from choosing between options – let’s say a romantic comedy and a sci-fi epic – spills over to the subsequent experience. This is called the Choice Premium Effect.
It’s one of the most intriguing questions in neuromarketing today: how can we predict people’s choices by having a peek into their brain activity?
Our brains are made up of many clusters of neurons, each devoted to specific – but often yet weakly understood – functions and processes. Scientists and marketers unite in pursuit of so-called ‘buying buttons’. These specific brain areas are particularly responsive towards alluring products, commercials or otherwise money-spinning marketing stimuli.