People are terrible at comparing the price and value of complex products, and often, products in general.
That’s according to an innovative experiment by the ESRI, which sought to find out at what point do products become too complex for consumers to choose accurately between the good ones and the bad ones?
To explore this, the team created experimental ‘hyper products’ and asked people to assess the relative benefits of particular attributes such as size or material used, and then determine whether their price represented better or worse value. After each experiment, further complexity was added to the products, where people were asked to consider one, two, three, then four additional characteristics.
The experiment found that people in general are not very good at comparing the value of products in general. The results showed that once consumers had to take into account more than two or three factors at the same time, they struggled to spot good deals and often made mistakes.
The study highlighted that we are prone to systematic biases in the choices we all tend to make as consumers. In the experiment, consumers tended to think that deals priced at the top of the product range were good value while deals closer to the bottom were bad, even though the high-end hyper products they created were expensive for what they were and the low-end products were good value at the price listed.
The ESRI team concluded that the simpler the product descriptions and product ranges, the better for shoppers because they are less prone to make mistakes, which they may regret in future.
In markets with typically complex products like mobile phones, insurance, utilities, even waste disposal, consumers struggle. This can be to a business’s advantage, but consumers easily tire, which can result in lost sales, or consumer resentment over signing up to a bad deal.
The growth in popularity of independent price comparison websites, such as uswitch.ie or Carphone Warehouse, are playing a positive role in helping consumers integrate and compare information or by drawing attention to the most important features.
If we look at new products and services emerging, particularly in the digital space, we see a trend towards much greater simplification of features and pricing options as a way to guide consumers’ choices towards certain products and to reduce any obstacle to conversion.
As we look forward, and given what we know about consumer psychology, eliminating unneccesary complexity will be essential in winning the battle for consumer’s attention and wallet.
Simplicity can be an enormous strategic advantage.
We need look no further than Apple. Shopping for a MacBook or iPad is simple because people are given only three or four options, which are easily comparable, and this set-up also tends to nudge most prospective purchasers to choose the product in the middle – the goldilocks option: not too much, not too little, but just right.
Restaurants have known this for years. Isn’t this why we never order the cheapest bottle on the wine list?