e-Sourcing Strategies: When Choice Is Demotivating

We are delighted to bring you this thought-provoking post from Alan Holland PhD, Founder and CEO of Keelvar which specialises in simplifying complexity via sourcing optimisation.

Did you know that giving customers too much choice is likely to reduce sales?

It is true and something I experienced personally when attempting to purchase a mobile phone recently. I was clear in my intention, I knew the make of phone I wanted and as a frequent international traveller I felt the choice of package would be straightforward. However, when presented with a bewildering array of tariff options and add-ons I left the shop without buying the phone and resolving that I needed to think about it. But I still haven’t bought a new phone and the shop would have been better served presenting me with fewer options.

Selling Jam: A Famous Study on Too Much Choice

There’s a well-known Psychology study that illustrated why too much choice harms sales with a beautifully simple experiment. On two consecutive weekends, tables with 24 and 6 flavours of jam, respectively, were offered to customers by scientists in the guise of store employees. When 24 flavours were presented on the table, 60% of people stopped to sample the jams, compared to 40% when only 6 flavours were offered. So more choice means more sales, right? No. Of the set of customers who sampled from the 24 flavours, only 3% purchased, but of the customers who sampled from the 6, 30% did the same. So knowledgeable salespeople understand this phenomenon and reduce choices for attendant customers.

How Does this Apply to e-Sourcing?

Most users of e-sourcing tools are likely to have experienced a bewildering array of options when running an event. This is akin to the customer standing at the table with 24 pots of jam.  The user would prefer to walk away at this point and not use the software because such the range of choice creates indecision and uncertainty. But because the user is compelled to make some choice, the user will seek the path of least resistance and use the same options for every exercise. So RFQs are used when e-auctions may have been appropriate or English Auctions are used when Dutch Auctions made more sense.

A better approach for e-sourcing software vendors to adopt is to sensibly limit choices based on some known parameters of preferences elicited early in a process. For example, at the outset of designing a new competition a user should be prompted for details on the urgency of timescales for selecting winning vendors. If the competition is not very time-sensitive, then it doesn’t make sense to offer a Dutch Auction upfront. Such an option should be hidden away because it only serves to clutter the user interface. Good software should be scrupulously efficient in dedicating any ‘real estate’ or screen space for additional options.

The days of monolithic software offerings continually expanding already bloated menus are nearing an end. This is because there is a dawning realisation that when the needs of an enterprise software user are prioritised in the software processes, then less is more.

 

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