A632.2.3.RB_LloydPayneDamien

We all want customized experiences and products -- but when faced with 700 options, consumers freeze up. With fascinating new research, Sheena Lyengar demonstrates how businesses (and others) can improve the experience of choosing. Identify four of the methodologies Sheena Lyengar suggests as methods of helping us improve our experience in choosing. Discuss the implications of two of these methods in terms of your own decision-making as an individual and a member of an organization. How else can you improve your ability to decide?

In the video there are four methodologies to help us improve our experience in choosing:

1) Cut the choices.  The key phrase here is that less is more.  By cutting down the number of choices available to customers you will actually increase sales and decrease costs.  Actual examples of lowering product types were given (cat litter and shampoo) where an increase in sales resulted from cutting the product line.  The key here is how to choose which of the products to cut - this comes from identifying the difference between the products.  If,  as the seller you cannot identify the distinguishing difference then neither can the purchaser - so that product should be cut.

2) Concrete the choice.  The reason we spend 15% more at the checkout when we use a credit card rather than cash is that credit does not feel like real money.  If we can understand the consequences exactly of each choice we make, we tend to make better choices.  A good example is in retirement funds.  A quick description of your material wealth at the end of more aggressive 401K plan should promote a better uptake by people of that plan, because they have concreted into their minds what retirement will be like for them with that plan.

3) Categorization.  We can cope with far more categories than we can with individual items.  600 magazines categorized into 10 categories will allow us to narrow down the choices both visually and mentally almost instantly, and still leave us with the feeling we are being offered a great deal of choice.  The category must say something to the chooser to be effective.

4) Condition for Complexity.  We can in fact handle lots of choice, we just have to learn gradually how to make more and more complex choices.  If you start consumers with choosing between very few choices and then build them up ultimately to the area when there are many choices, the customer will make better choices.  This process also serves to build anticipation and excitement in the product.

Concreting choices for retirement at Merck would be very useful.  There are so many choices it is very hard to decide - particularly when retirement seems so far away.  Essentially I did hit the default button - choosing a plan that was called "retire in 2036" - a plan that automatically takes less risk as you get closer to that date, and gives a fair if not reasonable return.  The plethora of other choices may well fair better - but all these plans require you to consistently monitor performance and change choices if necessary.   Not only is this impractical for me currently, but it also assumes that I know what I am doing when I choose who to invest in!  I hold the belief that the saying "only a fool represents himself" can just as easily be transposed to the stock market.  I wouldn't let a stockbroker climb untested into my cockpit and attempt to take off - why then would I think myself able to pick the correct stocks over the long term? I am not entirely convinced either that the company wants the choices to be smaller and the uptake rate to be close to 100%.  Because they match whatever I put in, surely a 60% uptake rate makes a much better financial report annually than 100% of staff being matched in their 401K?  Another question one has to ask is - "Does the company really care what happens to me after I retire?" I'm pretty sure the answer is no.  If I retire with a good lump sum from my 401K or nothing at all - I'm pretty sure the company wouldn't even try to find out.  401K's are there to compete for the best people - not to ensure that each one is well off in retirement.  So are companies deliberately keeping the number of choices high to encourage low take up rates?

Cutting choices also makes the most sense.  I guess for any given company you have to be able to see why you should cut -  then cut the correct product lines.  If it were true every single time that cutting choice increases sales and lowers costs, surely every manufacturer would have done this already?  I'm thinking of low margin/high volume items like screws.  There are currently a minimum 15 different types of screw head design ranging from the common slotted head to the not-often-seen "snake eyes".  Each screw head pro-ports to have an advantage over another type. There are at least 7 different materials you can make them from, three thread standards, an infinite amount of colors and sizes, self threading or not - and then there are nails and bolts too. How on earth on any given trip to Lowes do we ever make a choice? Is it not surprising that every household in the civilized world has a jar of mixed screws lurking somewhere in their shed or garage?  I can never understand why manufacturers have at least not narrowed down some of the choices.  Can we not agree on one head type for all screws?  Is it so important to have a one way screw head so that people with their own screwdriver do not steal our bathroom stall doors?  I clearly cannot fathom the complexity that is the screw market.  I can only surmise one of two things - either none of the manufacturers have heard of Sheena Lyengar and her studies or that margins are so high on each screw and competition between manufacturers so great that by not offering the hundreds of choices you would be left out of the game.  Equally - there are no real guides that help you at Lowes to choose the right screw. One poster that categorized and simplified the choices slowly as Sheena described in her car choices example on the video would also at least help - but these seem to be rarer than staff are at Lowes on a holiday weekend!
The implications to me and to the organization I belong (men who DIY) would be huge. Imagine if manufacturers decided that if a galvanized screw is good enough for outdoors, why would it not be good enough for indoors too? And then eliminated non galvanized screws.  Do I really care if my 200 screws just cost me $3 more because they plated them with stainless steel?  As a customer, I definitely don't want to be searching for a new screwdriver head every time I come across something else in the house.  In an age where little is dovetail jointed anymore and most furniture is veneered plywood, the screw is probably the only thing that will outlast the item it's employed to hold together. I have a hard time figuring the right size and length of the screw - without a million other choices, so until Sheena gets a hold of the screw industry, I'll continue to use my jar of screws in the garage.

I can think of a few ways other ways to help me decide.  The first is obvious - don't give me a choice above yes or no.  One product - do you want it or not.  Choice suddenly became easy, and so long as the product on offer has a perceived value, this method can work well.  Take health care.  If a company offers just one plan - that covers you 100% for everything and is not cost prohibitive, the choice is easy - yes I'll take it, or no - I'm healthy I'll take my chances.  Offering choice if never going to be able to satisfy everyone - so one theory would be that it's better to have fewer people totally satisfied with the choice and thereby spreading the good news than a majority of people unsatisfied with a choice they made and spreading their negativity to all who would listen.  Taken to the extreme, how about not offering any choices.  Its an all-inclusive deal where we give you medical, dental, 401K and retirement. The only choice you have is weather you want to join the company or not to get the package. So long as the package is competitive then attracting staff shouldn't be an issue.
A second way I can improve my ability to decide is by knowing the goal or goals I want to reach.  The goals I choose are going to be influenced by the values that I perceive - or what is important to me.  Becoming more aware of my values and the priorities I place on them will help me see more clearly what is desired; and make the choice that much easier.

A632.1.4.RB_LloydPayneDamien

Chapter 3 of the Wharton text discusses the power of everyday reasoning in multistage decision-making.  The text discusses the way that researchers solve multistage problems through the application of formulas that provide the most significant chance of success. Critically think about your own decision-making process and reflect on the process you use compared to the process outlined in the article.  Would this improve your decision-making?  What would the impact be on forward planning?  How would you apply optimal dynamic decision analysis to predict future impact of today's decision?

There is only negative words to use about the way that I make decisions - at least in light of the Wharton's chapter that describes how researchers solve multistage problems using scientific formulas.  I guess I am (and probably most of are) a kind of 'seat of the pants' decision guy.

That's not to say that I don't give decisions much thought - because I do.  Indeed, I will carefully weight the options as I see them and even consider the consequences of each decision.  I have even been known to write out a list of all the Pros and all the Cons for those big life changing decisions.  But none of this is scientific.  I'm very sure that my list of Pros is influenced by me wanting to make that decision and hang the consequences, and the list of cons maybe isn't as well thought out as it should be.  So I make an adjustment to my decision making in most cases, to make sure that the decision is sound; I ask my wife.

Scientific? No.  But another perspective - particularly an unbiased one -  may well reduce the odds of coming to the wrong decision.  If it's a decision that will effect both of us then we will talk it over with some trusted friends and get their opinion and insight.  So far this process has done well for the majority.  What helps this process along is that both my wife and I are what society considers pretty intelligent.  I'm not bragging here, but we both went to University and we both have a wide and varied experience of the daily show we all partake in - life.  I'm going to go out on a limb here and say that this helps.  Neither of us have big biases either.  Because we can't vote (green card holders can't do that) we don't have a dog in that race and so we are not politically leaning one way or the other.  We are both quite pragmatic and conservative financially too - adverse to taking risks with money if it can be helped because we have kids that we must consider in the process too.  Once upon a time, all I could think about was climbing that corporate ladder to the very top.  All my decisions were about getting another rung up.  But switching careers has stemmed that - but it did show how just the smallest mindset can really start to skew a decision further away from the reasonable and more towards the wrong end of the scale.

And I guess that's why the scientific approach becomes so much more attractive.  Many more people in the US do not have the traits that I and my wife do.  Many are more political in their views, many may be less educated or perhaps never had to make any really huge life changing decisions.  A scientific formula then can really help.

As for the weather or not this approach will improve my decision making I'm going to say no.  And for good reason, but not one that is scientific.  My gut feeling.  In the end, any decision can come down to a gut feeling - and that is something you just can't put into a formula.  Think about the number of 'sure things' people have lost on.  Look now at Apple for example.  Analysts now say that the mother of all inventions is loosing their ability to compete.  The once sure thing of innovation is struggling to regain an identity.  Politics today also skews things so far you can not guarantee anything.  A war in Iraq? Really? In this century? But it happened - I believe because certain politicians needed it to happen regardless of the consequences. How can you make a decision scientific when the formulas only work in a known constant - and today we are no nearer a known constant in society than we are to celebrating Christmas in June. 
And so everything else about optimal dynamic decision analysis regarding forward planning and its ability to predict the future impact of today's decision must therefore also be just as flawed as making our own decisions based on knowledge and gut feeling.  It seems maybe that each method has it's place.  When you are talking about distributors as in the example is Wharton's chapter then perhaps the scientific method is good - here you are dealing with for all intensive purposes and level and unchanging playing field.   A decision to ban assault weapons though has politics, uncertain entities (there may be another attack), and emotion involved - so maybe here a gut feeling or a decision based on what is ethically or morally right may well be just as good.

A632.1.2.QZ_LloydPayneDamien

Is Your Decision-Making Style Holding You Back?

Group 3: Decision Mastery You are able to make decisions confidently, without agonizing over difficult choices or choosing impulsively just to "get the decision over with." Recognizing life's inherent ambiguity, you are skillful at researching the options, making a choice, and moving forward without getting stuck in an obsessive (and futile) need to know the outcome in advance. In general, you are able to embrace uncertainty, knowing that if things don't work out the way you’d expected, there is a reason, and the universe has plans for you that are much grander than those you'd conceived. If you do occasionally find yourself struggling with a decision, you can benefit from the suggestions below.

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