TEXT OF INTERVIEW
Tess Vigeland: We heard a story on our sister show Marketplace a couple of weeks ago that perked up our Money antennae. It was about how stores are paring their inventory to give customers less choice. Not for budget reasons, but because of how we behave when we have our choice of 10 oatmeals, 15 toothbrushes and 20 flavored waters. Retailers like Wal-Mart and Best Buy have traditionally attracted a lot of customers that way.
Customers like Jennifer Nieves of Las Vegas.
"Well, I definitely go where I know that they're going to have what I want," Nieves explained. "And if the choice is limited, then it's probably not going to be there. So if I know that there's a lot of choice, and that influences where I go. You know, it's like if you know a certain place carries what you want, it doesn't really matter if they carry a bunch of other stuff. But if they do, it's good, because then you can find new stuff that you didn't know about before. It seems to me better the more choice there is."
But apparently, the pointy heads have discovered that's simply not true. Which prompts us to ask, "What were you thinking?"
"What Were You Thinking?," our series on why we do what we do with our money. Turns out there really can be too much of a good thing. Frank Murtha, managing director and consumer psychologist for Marketpsych, laid it out for us.
Frank Murtha: The reason why people want more choice is because people are constantly wanting to make sure they're making the right decision, the best decision. And when you know you're going to have more options available, it increases your sense that you're going to make the best possible decision. So people will gravitate towards environments in which they feel they have more choices.
Vigeland: What exactly happens in our brains when we're faced with so much choice?
Murtha: Did you ever see the "Three Stooges" try and walk through a door at the same time? That's what happens in our brain, OK? It's simply too much information to be processed and the system shuts down. Essentially, that's what it boils down to. We need to be able to grasp and process the information efficiently. And that means there's really almost an optimal number of choices. Too many, and it becomes a discouraging task. Too few -- and once again, we feel like we haven't been exposed to enough things and won't be in a position to make the best choice. So there's a, I think they call it a "Goldilocks" effect. There's a middle range that makes it much more likely that we can make a good choice and feel good about making it.
Vigeland: When you say we're less likely to choose, what does that mean? Does that mean we're going to walk out of the store?
Murtha: Yeah, we might be more likely to delay a decision at all. In other cases, it may mean that we choose fewer things or perhaps that we just leave less satisfied with our choices.
Vigeland: And could you just give us one or two examples of this?
Murtha: There is a landmark study in which a researcher named Sheena Iyengar set up shop at a Trader Joe's-type establishment, and offered people a choice of, I believe it was 26 jams or jellies from which to choose from. And they even got free tastings and samples. When people were presented with all of those choices, they thought it was wonderful. In fact, it attracted a lot more attention and more people came to the table to sample things. But in the end, fewer people ended up purchasing anything.
They offered a second option, in which there were only six jellies and jams on a table. Now this attracted much fewer people, because there wasn't as much hoopla, but in the end, more people ended up purchasing, by a significant amount. So, it really goes to show that finding the optimal number -- not too much, not too low -- goes to an awful long way towards increasing people's comfort with making a decision.
Vigeland: So how do we take this knowledge about our brains on choice and make ourselves, better, wiser consumers?
Murtha: I think that it begins with recognizing situations in which we may be tempted or pushed to go a direction that is sub-optimal for us. Recognize that although we believe we are valuing things inherently, in fact, a huge part of how we are valuing things is the context versus other choices, other options. So if you arm yourself with that knowledge, do your research ahead of time and come in, you are much less likely to get pushed towards making a purchase you would regret later -- "buyer's remorse" I think they call it.
Vigeland: Frank Murtha is the managing director of MarketPsych, a firm that analyzes the intersection of mind and money. Thanks for analyzing our mind and money today.
Murtha: My pleasure.