The Art of Choosing

I just viewed this 25 minute, rather persuasive and informative video, and just had to write about it. It’s a talk by Sheena Iyengar (Columbia University, see embedded video) on the topic of what influences the choices people make in their everyday lives. I strongly recommend that you watch it, especially if you are in marketing or product management worlds. Iyengar talks about how strong of a role a person’s culture and upbringing can play when it comes to perceiving whether choices are good or bad.

We are presented with choices every day, from the grocery store that has 25 choices of breads with whole grain ingredients to the Victoria’s Secret store which has a ton of underwear choices (color, texture, sleaze, etc. – depends on your mood). The other day I walked into the Starbuck’s close to my office and had to take a couple of minutes to figure out what I was going to order. You see, I do not frequent the Seattle pride that often and hence it’s only human for me to take time to consume the sheer variety of the menu that takes up the entire top half of the back wall of the store! Maybe I am not their target customer. Maybe they could be more helpful and “wizard” me through the maze of choices. Maybe I should be going to McDonalds which offers fewer and cheaper choices.

In my experiences from the world of operations, I have learnt the pros and cons of standardization versus customization. I’ve also experienced what is known as “mass customization”, which is a hybrid of the two aforementioned concepts. After listening to the video, my mind started thinking of how the psychology of choices interacts with the world of operations. Of course operations, which typically comprises of the middle and back office, has multiple components – sales, logistics, manufacturing, service, etc. Classic operations strategy always strives to reduce variety and variability, because those things have $ signs written all over them. With variety (or choices) comes more machines, more people, more training, more processes, more inventory – in other words, more operational challenges. Yes there are some who have mastered the art of managing thousands of SKUs, like our friendly, omnipresent Walmart. A more recent example that comes to mind is Amazon. But these are two of the very few examples out there that are good at what they do. They run an extremely tight shop, squeeze the hell out of their suppliers/vendors, and use technology to its fullest potential.

Operations are often at odds with the marketing and product management folks because of obvious reasons. We are trying to reduce the choices while they are trying to increase the choices. We, at the supply side of the house, see choices as a risk to our ability to meet/beat our SLAs while they, at the demand side of the house, see choices favorably to their mission of getting more and more customers. Of course, we all are reasonable people, so one can argue that all we need to do is sit down and come to an agreement on how different and how many of each should we plan for.

As the world gets flatter and flatter, I believe we will see a trend towards convergence of choices. I say that because I think the cultural varieties of our world will get seamlessly interwoven with each other over the long run (say over the next 50-75 yrs). Example - The Indian masses who have long been die-hard fans of tea (w/ milk and sugar) are starting to open up to Western flavored coffee – just see the growth of branded coffee stores in India and the mega partnerships being signed between Indian/Western coffee houses. Coffee is just one example – clothes, entertainment, education, electronics, cars, etc. – Global firms are taking successful brands from one market to the next. These mega brands typically have a tendency to upstage the local brands and that will further put a downward pressure on choices.

However, I do believe that there is a happy middle ground that we must strive to find and preserve. Simplicity in choices is good but let’s not over-simplify. Product choices define a firm's strategy and help maximize their share of consumer surplus. The idea is to optimally balance the demand-supply equation so that the customers keep coming back and the firm continues to grow profitably. If you liked what you just read, Share It (link below). Thanks!