Choice Overload

The contrast between last week’s readings was super interesting. It set up an interesting discussion about whether the massive choices we face as consumers of wine contributes to or actually inhibits our purchase of wine.

On the one hand, we had the article, “When Choice is Demotivating: Can One Desire Too Much of a Good Thing?”. Published in the Journal of Personality and Social Psychology, a premier psychology journal, it was a serious breakthrough when published. I had even read it in undergrad. The article challenges the notion that more choice is always better by providing empirical evidence that having more choices is intrinsically less motivating than having fewer. They show that when purchasing items, such as gourmet jams and chocolate, people buy more when confronted with fewer (e.g. 6) choices versus more (e.g. 24 or 30) choices. This article argues that “choice overload” makes it harder for people to make decisions when there are too many options at hand.

On the other hand, the article, “Drowning in the Wine Lake: Does Choice Overload Exist in Wine Retail?”, takes the opposite point of view with respect to wine. This isn’t initially surprising, given that it was written in the American Association of Wine Economists. But it makes some very compelling points that both attack the original research and also carve out wine retail as a fundamentally different category from jam or chocolate. They argue, for example, that wine has a large number of intrinsic versus extrinsic characteristics and that as wine consumers become more knowledgable, they desire a much broader range of choices. This is supported by empirical research showing that wine retail did not have the same “choice overload” problem as the JPSP article. 

Personally, I find the strongest argument to be that the way wine is organized in stores puts it in a fundamentally different category than chocolates or jams. With wine, it can be organized into a hierarchy (e.g. by country, region, and price) that actually breaks down the choices quite a bit and usually leaves you with fewer than ten choices in the specific category you are searching for. The paper also raises the point that in order for this to be true, there has to be alignment between the consumer’s hierarchy and the one that the store uses. If the consumer is simply looking for “red wine for dinner tonight”, the country/region categorization might not be as helpful. This reminds me of our discussion of websites that sell wine, and how difficult it can be for them to create a categorization that works for mass audiences. Perhaps this is why they – along with retailers – also lean on “Manager’s Pick” selections to give a smaller, more curated set of options for consumers that respond better to that.

Interestingly, this Stanford GSB research review adds more nuance to the discussion: https://www.gsb.stanford.edu/insights/when-customers-equate-choice-quality. In particular, it explains that with products such as wine, people perceive brands with more variety as having higher quality, and are therefore more likely to purchase products from that brand. In part, this is because they see these brands as having more expertise. This adds another layer of tension to what brands and retail managers need to consider.

This conversation is obviously relevant to wine brands and retail outlets. The key question for brands is whether they should focus the wines offered under the same brand, or create more choice for consumers by offering many types. For retailers, they need to decide how many different types of wine to carry, and how to balance the opposing forces of choice overload with the “expert effect” associated with having a larger offering. Getting it right in the right context could have big implications on whether brands are successful, even outside of the typical characteristics (price, quality) that are the primary focus.