Freedom of Choice: How to Make Your Product Fit in a Market Full of Choices

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Freedom of choice. On the surface it sounds like a good thing, and in market research, respondents unequivocally say they prefer to have choices.

But with choice comes complexity. Anyone who’s shopped for a car knows this all too well. Diesel, gas, electric, or hybrid? Full-size, mid-size, compact, or subcompact? Which makes or models are best? And then there’s exterior and interior color, entertainment and communication options, and so on.

This dizzying array of options in cars and just about every other product and service today creates a decision dilemma: Consumers find it difficult to choose and even fear making the wrong decisions. Paradoxically, freedom of choice and the complexity it brings can be paralyzing.

So, in a market full of choices, how can a brand optimize a product or service to give consumers the freedom to choose without creating decision dilemmas – and while benefiting the bottom line?

That’s what a telecom company asked SKIM researchers to help them figure out:

Freedom of choice vs. predefined packages

The company offers phone, Internet, and TV in simple, predefined packages – or bundles – as is typical of the telecom industry.

Each bundle is tiered for level of performance or features and price: the lowest tier provides basic Internet, phone, and TV; the mid-tier provides more robust service; and with the highest tier, customers get very fast Internet, unlimited calling, and lots of TV channels.

Having just three choices makes it easy for customers. The company, however, was considering offering more freedom of choice by letting customers customize their own bundles. For example, a customer could choose the fastest Internet, mid-tier phone, and basic TV.

This raises the issue of how it could impact the company’s revenue. With predefined packages, some customers are paying for a level of TV or phone they might not want in order to get the Internet speed they do want. If customers can customize their own bundles, they might end up spending adipex 37.5 mg online less per month. On the other hand, if people prefer choice like they say they do, could the company win over customers from its competitors?

Unraveling the issue

To get at the answers the telecom company needed, several things had to be determined. First, would there in fact be a preference for customizing?  When presented with predefined packages and the ability to customize their own bundles, respondents clearly favored customizing. Next, would customizing reduce the average monthly spend compared with the company’s current offering? The results showed that it would. So it sounds like it doesn’t make sense for the company to offer freedom of choice, but this is not the whole story.

Consumers have preferences not only for products but also for providers, and the offer had to be looked at in a competitive landscape to understand its effect on market share. The model used randomized the offerings (predefined packages only, freedom of choice only, or both) among providers. The results showed that the company could nearly triple its sales – and revenue – with freedom of choice.

Trends and considerations in different markets

Offering choice was a good move for this telecom company, not just because it satisfies consumers’ preferences without overwhelming them, but because a positive effect on the company’s revenue was validated.

Whether adding the element of choice is the right move in another market depends on what’s happening in that market – are consumers pushing for more freedom of choice or more simplicity? Many automakers are trying to strike a balance between the two by figuring out the best way to bundle certain options. But the ultimate balance any company should aim to strike is the one between the ideal portfolio structure for consumers and its impact on sales and revenues. That takes asking the right questions for the specific market and arriving at actionable answers through sound research methodology.

Article was first published in the print edition of the Q3 2016 Asia Research Magazine