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April 16, 2008

Hard Choices Made Easy

Even when the options aren't so different, categorizing similar products can make choosing easier for undecided consumers.

Topics: Marketing

Professor Sheena Iyengar’s research has frequently considered the difficulties people face when they have too many choices, producing the insight that, sometimes, too many choices can lead to less, not more, happiness. It was an insight that naturally led Iyengar to wonder if there was a way to make choosing from many options less overwhelming.

Consider a person who visits the neighborhood bookstore to buy a book about lawn care. Such a customer has only the simple task of choosing one book from the store’s array of lawn care books. “If it’s just a preference matching task, the number of choices shouldn’t bother you in the least. It might take you a little longer but you can scan your options and see it, and you can stop,” Iyengar explains. A preference matcher is simply eliminating options that don’t measure up to the choice already in mind, so there’s little struggle about the decision at hand.

But when the same customer returns to this bookstore to find a good read for an upcoming vacation but without any specific book in mind, a more complicated task is at hand. As a preference constructor, the customer will need to narrow down a great number of possibilities to just one book.

In weighing the differences between preference matchers and preference constructors, Iyengar wondered if categorizing available options was one way to make choosing from many options more accessible. Research in linguistics and psychology has shown that putting any given thing into a category causes people to perceive differentiation. People tend to assume that an item placed in one category is different from an item placed in another category — for example, a bag of rice displayed in the ethnic foods aisle of a grocery store is presumed to be different from a bag of rice displayed in the grains and cereals aisle.

Iyengar also wanted to learn whether people would end up happier with the choices they made if choosing was made easier. Marketers have long understood that people infer meaning from information that is essentially meaningless. In a scene from the TV show Mad Men, an advertising firm pitches the idea of renaming a bank’s existing private account service “private executive accounts,” and its enthusiastic clients immediately understand that by tacking on the phrase “private executive” they could create a sense of innovation in an old product.

Based on that understanding, Iyengar proposed the mere categorization hypothesis: that nothing more than placing options in categories — even when the choices are in fact the same — might help consumers negotiate options and derive more satisfaction from the choices they make.

To test her hypothesis, Iyengar, working with research assistant Tamar Rudnick and PhD candidate Cassie Mogilner of Stanford University, first conducted an experiment using magazines. More than 100 different magazines were displayed in magazine racks, including titles both familiar and unfamiliar to the experiment’s subjects. At times the magazines were displayed and labeled in three broad categories, while at other times they were grouped into 18 categories. Iyengar simulated preference-matching behavior by asking some subjects to pick a magazine they read regularly; preference-constructing behavior was examined by asking subjects to pick a magazine they did not regularly read. Subjects then rated both how satisfied they were with their choices and how much variety they perceived. 

Preference constructors were much happier with their choices and perceived more variety when they chose from 18 categories than when they chose from only three categories. Preference matchers, though, did not experience the impressions of variety or satisfaction with their choices to the same degree.

This part of the study confirmed Iyengar’s hypothesis that categorization would lead to greater satisfaction on the part of the buyer, but it also suggested that choosing from more categories, rather than less, would make choosing easier and contribute to satisfaction.

Iyengar then verified another aspect of her hypothesis — that when identical products are assigned different labels, buyers’ satisfaction is related to what they think they are choosing based on its label, not the products’ actual contents. This second study simulated a coffee shop at which subjects were sometimes offered coffee menus with no categories but at other times were asked to select from coffee menus that featured informative categories (spicy, nutty or mild, for example), somewhat uninformative categories (using fictitious retailer names such as Coffee Time, The Living Room or The Gathering) or wholly uninformative categories (category A, B, C, etc.). As in the magazine study, to simulate preference matching and preference constructing, some subjects were instructed to choose a flavor familiar to them, and others were instructed to choose a flavor unfamiliar to them. Importantly, while all of the subjects believed that they were choosing from many different options, all were given the same flavor of coffee.

The study’s results seem to confirm that preference constructors do indeed require the kind of  “help” in decision making that categorization seems to provide and are more satisfied with their choices when they get that kind of help. Preference constructors were more satisfied with their coffee choices than preference matchers when the choices were categorized; they were less satisfied than preference matchers when they chose from menus without categories. The preference constructors also perceived more variety when choosing from any of the categorized menus, and far less variety when choosing from the menus without categories.

But if, as a growing body of work by Iyengar and others suggests, more choice is not always better, why is it important for consumers to feel that they have a greater variety of options than they really do? If customers — especially those who aren’t immediately sure of what they want — see a greater number of categories, they perceive a greater variety of choice, and typically a domino effect ensues: the greater the perceived variety of choice, the greater the feeling of self-determination; the greater the feeling of self-determination, the happier the customer.

“Categorization does not interfere with preference matchers, and it benefits the preference constructors,” Iyengar explains. “Since marketers don’t know which you are, they’re better off providing some sort of categorization scheme, leaving a larger subset of shoppers happier with their choices.”

Sheena Iyengar is professor of management at Columbia Business School.

Read the Research

Cassie Mogilner, Tamar Rudnick, Sheena Iyengar

"The Mere Categorization Effect: How the Presence of Categories Increases Choosers' Perceptions of Assortment Variety and Outcome Satisfaction"

View abstract/citation  Download PDF  

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