Newton-Themes-AbundanceWe believe our abundance theme is set to be a major trend this year and beyond, challenging companies’ ability to maintain their pricing power and competitive advantage.

But what does abundance mean for consumers? A much easier life, or a baffling array of options?

While the pricing pressure resulting from a world of abundance is a positive for the users of the goods and services concerned, the huge range of products on offer can be overwhelming.

The findings from an interesting academic study using gourmet jelly could help address the issue.

In 2000, psychologists Sheena Iyengar and Mark Lepper conducted a now well-known trial that challenged the traditional idea that you can never have too much choice.[1]

In the first part of the experiment, shoppers at a high-end grocery store were presented with 24 varieties of luxury jelly to sample, and in return they would receive a coupon for $1 off any jelly. In the second part, just 6 varieties of jelly were on offer.

The display with the highest number of jelly flavors attracted more interest than the one with fewer varieties, with 60% of customers stopping at the booth versus 40% for the smaller selection. However, when it came to purchasing, just 3% of people who saw the large display bought a product, versus 30% for the more limited range.

The conclusions were striking; contrary to the common assumption of ‘the more choice the better’, excessive choice could produce ‘choice paralysis’ in consumers. While, at first, an extensive array of options might appear desirable to the customer, it may sometimes undermine their motivation to purchase a product.

In other similar studies (this time involving types of chocolate and essay assignment options for students), Iyengar and Lepper also found that while choosers faced with an extensive choice might at first enjoy the choice-making process more, at the same time they also feel more pressure to make the correct choice – this can often result in frustration with the final choice-making process and dissatisfaction with their ultimate selection.

The dangers of what the two academics describe as ‘choice overload’ are obvious in the consumer goods industry. A simple search for air freshener on the website of one supermarket offers a baffling 215 choices, while typing oven gloves into a large online retailer’s search bar reveals an even more perplexing 14,112 potential options.

So what can companies do to adjust to this landscape? I’ll give you a brief rundown of some of the more innovative examples I’ve come across recently:

  • Brand companies experimenting with direct-to-consumer selling:
    Tobacco companies whose products might traditionally be purchased in far less glamorous locations are opening stylish, upmarket stores to sell new generation products straight to the consumer.
  • Offering additional services
    Retail firms are trying to tempt consumers off their computers and into stores with in-store coffee shops and manicures.
  • Authenticity
    Companies are emphasizing what their brand stands for and the unique features which differentiate them from the crowd. This could be quality and craftsmanship in apparel, heritage and luxury in high-end goods, or natural and organic in cosmetics.
  • Digital and social media
    Harnessing new media is helping retailers engage directly with consumers and stand out in a crowded space. Advertising campaigns are changing. It is no longer enough to just show off a product, and in some cases campaigns are becoming short, thought-provoking films. Meanwhile, some fashion retailers have launched their own social media platforms, on which customers can upload pictures of their purchases and show how they have ‘styled’ the clothes.
  • M&A
    With funding costs so low, for those multinationals concerned they are missing out on a key trend it is often cheaper and less risky to buy a young, successful brand than develop one internally.
  • Personalization
    Brand owners are empowering consumers to customize their product by mixing and matching features, styles and colors, or by printing names, messages and photos on packaging.

 

[1] Source: Iyengar, Sheena and Lepper, Mark. When Choice is Demotivating: Can One Desire Too Much of a Good Thing? Journal of Personality and Social Psychology, 2000. https://faculty.washington.edu/jdb/345/345%20Articles/Iyengar%20%26%20Lepper%20(2000).pdf

 

This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell this security, country or sector. Please note that strategy holdings and positioning are subject to change without notice.

Important information

This is a financial promotion. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only.

‘Newton’ and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited and Newton Investment Management (North America) Limited (NIMNA Ltd). In the UK, NIMNA Ltd is authorized and regulated by the Financial Conduct Authority in the conduct of investment business and is a wholly owned subsidiary of The Bank of New York Mellon Corporation. Registered in England no. 2675952. NIMNA Ltd is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. NIMNA Ltd’s investment business is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request.

Personnel of certain of our BNY Mellon affiliates may act as: (i) registered representatives of BNY Mellon Securities Corporation (in its capacity as a registered broker-dealer) to offer securities, (ii) officers of the Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds, and (iii) Associated Persons of BNY Mellon Securities Corporation (in its capacity as a registered investment adviser) to offer separately managed accounts managed by BNY Mellon Investment Management firms, including NIMNA Ltd.

Certain information contained herein is based on outside sources believed to be reliable, but their accuracy is not guaranteed. Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York or any of its affiliates. The Bank of New York assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith. © 2006 The Bank of New York Company, Inc. All rights reserved.

Share