Choice has driven the growth of the consumer goods market for decades. Offering a seemingly never-ending array of products has for a long time seemed to be the best way of boosting profits.
However, this received wisdom has recently been turned on its head. Overwhelming your customers with too much choice actually has a negative impact on sales. In other words: the more choices, the less choosing.
Left unchecked, choice can lead to dissatisfaction with the buying process, mainly the lack of action at the point of purchase and post-choice regret.
The fact is, with a limited capacity for processing information, humans are not geared up to take in all of the choices we are offered. How many of us have stood, anxious, before the ice cream van, unable to choose from the multiple images on display while the queue grumbles behind us?
Choices can paralyse us. Often it is easier not to make a choice than to spend ages choosing, and then worrying that you have made the wrong one.
Facebook’s Mark Zuckerberg knows this well. He is said to limit his exposure to choice in his everyday routine, allowing him to concentrate on what he considers are more important things. For example, he has two shades of t-shirt in his wardrobe, eats virtually the same food for lunch every day and follows the same routine each time he exercises.
Statistical studies reveal the same truths. In one experiment, academics at Columbia University, New York, set up a jam stall outside a supermarket. On two consecutive weekends, they offered samples of either six or 24 flavours to passers-by.
When 24 flavours were offered, 60 per cent of people stopped to sample the jams, compared to 40 per cent when only six flavours were offered. However: of the customers who sampled 24 flavours, only three per cent purchased; but of the customers who sampled just six, 30 per cent bought jam. UK grocers have realised the same thing. Tesco was among the first to slash lines, in a bid to help “baffled shoppers.” Aldi and Lidl have also made cuts. All this before the virus struck.
In a similar way, is it possible for a consumer to have too much advertising choice? In a fragmented media landscape, one touchpoint is clearly not enough. Yet with hundreds of touchpoints ranging from social media platforms to display ads, to traditional above and below-the-line media, there are hundreds of options for brands. So how many is too many, and can the real effect of each be measured?
Using the theory of diminishing returns coupled with attribution modelling, it is possible to optimise the number of touchpoints a brand needs to maximise sales.
For each channel, there is a maximum of how much can be spent on advertising a particular product before any extra budget allocation would have no further impact on sales. Increasing channel spend has a positive response until the point of diminishing returns. When you add extra spend after this point – however effective the touchpoint seems to be – it becomes ineffective and wasteful. The budget could be used elsewhere to attain greater net performance.
To make helpful calculations, analysts use width and depth vectors. A width vector looks at the number of touchpoints being used by a brand, while depth vectors investigate the spend on each individual touchpoint. In this way, you can determine the optimum number of touchpoints to use as well as the optimum spend in each.
This is a great way to tackle the issue of diminishing returns. It can help you reduce the number of touchpoints and optimise spend for each channel so that no budget is wasted on inefficiency.
Without touchpoint analysis, your organisation faces the risk of tarnishing its brand by not considering the finer details of your marketing and sales strategy. If a consumer is hit by communication in the wrong type of channel for them, they may be put off a brand.
Take a private members’ club in central London; the organisation is unlikely to place its brand ads in the Sun: it faces getting a negative reaction from specific potential customers by appealing to the masses.
This fundamental rule can be applied throughout marketing campaigns. A channel may be reacting positively on the surface, but without diving deeper into the aspects of multichannel dynamics, you simply cannot identify the true effects it is having on other channels.
So for smart brands, there’s a need to optimise spend, increase efficiency, reach the consumer through their preferred touchpoint, and boost your bottom line. Surely that’s a choice worth making.
Austin Winton is a data analyst at Marketing Metrix.