The Hindu Business Line : Less in more

The need for innovation and differentiation in today’s competitive world results in the consumer being provided with more choice and options. This arises from the belief that each consumer is unique and needs to be treated like one. What does t his do? It creates a situation for the marketer to provide more choices and as a result companies end up creating more complexity, increasing costs and even confusing consumers.

This also happens when the business does not grow as planned and marketers look for solutions without understanding the core issue of low growth. They bring in more choices hoping that business will grow, without understanding the company’s capability to deliver. The need for growth increases the demand on the entire organisation. Sales people always like to have new products to sell as they are able to gain short-term volumes; but most of this comes without any support and does not do well as the introduction of the product was done based on the internal need for growth and not the basic consumer need. This results in increased costs for the company — from inventory carrying cost to cost of rejection by the consumers.

A simple category like deodorant has a choice of over 65 brands; some brands have more than 10 variants excluding the sizes. Whether it is a deo, toothpaste or a soap, consumers are provided with a wide choice. A consumer today buys a variant of deo and builds a preference for it. But the next time she looks for that particular variant, it is not available as the shop is stocking other variants of the brand. The consumer is then forced to try other variants, and in many cases, other brands.

We also have a choice of outlets — a typical neighbourhood kirana that will carry 3000 SKUs (stock keeping units) or a large hypermarket which stocks over 50,000 SKUs. And every month new products or SKUs are launched. This causes stress on space in the outlet and therefore it becomes even more critical to look at simpler options to meet the need of consumers.

In earlier days, we had no choice but one phone and that was from the Government. But today there are phones, mobiles, mobiles with camera and mobiles with VAS and you can choose whatever you want. Even within FMCG, 1,500 new brands have been introduced in just the last three years. And in the same period, there have been 1,400 line extensions of existing brands. To put this in perspective, even in saturated and mass categories such as detergent powder and toothpaste, the number of brands has increased by 126 per cent and 79 per cent respectively!

Many choices create confusion. People find it difficult to choose when provided with too many choices. Today, a consumer who wants to invest in mutual funds will have over 25 choices of institutions, and each mutual fund institution offers a choice of more than 10 plans. Then there are more options based on SIP (Systematic Investment Plan), one-time investments and this excludes the investments that can be made through ULIP (Unit Linked Insurance Plan) provided by insurance companies. It is difficult for a consumer to decide on a single option.

People have difficulty in staying focused when they are given a multitude of choices. Everybody feels that providing choices means better options and therefore more satisfaction. But the truth is that excessive choice forces consumers to develop high expectations which, in reality, may not be realised. In contrast to intuition, a larger assortment doesn’t necessarily lead to more consumer satisfaction.

Costco Wholesale Corporation operates a retail chain based on the concept of offering low prices on a small selection of nationally branded and select private label products in a range of merchandise and yet generates high sales. It is the fourth largest retailer of the US with a turnover of $65 billion and does not carry multiple brands and varieties. Costco used this knowledge of consumer willing to live with less choice, and the company built up the retail business based on limited assortment. Most companies search for ideas by starting with their current products. A biscuit company will introduce line extensions of biscuits with chocolate, white chocolate, dark chocolate. These extensions fill up the retail shelves and competitors also do the same. The consumer is not able to choose and as a result the new products sell less and the old one also starts losing volumes. Consumers do want a broad choice but today they are getting overwhelmed. Manufacturers need to rationalise their portfolios by providing relevant line extensions of existing brands or by launching new brands to retain their consumers.

So, is ‘choice’ a good thing? As marketers we need to understand that the company should maintain its focus and therefore should steer it to develop products or services that matter the most to the consumer and have a distinct competitive advantage. It is important to limit choices to a manageable number as giving too many choices may increase costs. In this day of cost increase, many companies are realising the importance of reducing complexity as it enables reducing cost.

To succeed today, one should give the consumer a limited but insight-based choice which is manageable. Otherwise too many ‘choices’ will not allow the consumer to “choose” but will make the consumer to move.

The writer is Vice-President (Marketing), Henkel India. The views expressed here are personal.

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