TEDSalon NY2011
Sheena Iyengar: How to make choosing easier
Filmed:
Readability: 3.7
2,749,817 views
We all want customized experiences and products -- but when faced with 700 options, consumers freeze up. With fascinating new research, Sheena Iyengar demonstrates how businesses (and others) can improve the experience of choosing.
Sheena Iyengar - Psycho-economist
Sheena Iyengar studies how people choose (and what makes us think we're good at it). Full bio
Sheena Iyengar studies how people choose (and what makes us think we're good at it). Full bio
Double-click the English transcript below to play the video.
00:15
Do you know how many choices you make
0
0
2000
00:17
in a typical day?
1
2000
3000
00:20
Do you know how many choices you make
2
5000
2000
00:22
in typical week?
3
7000
2000
00:24
I recently did a survey
4
9000
2000
00:26
with over 2,000 Americans,
5
11000
2000
00:28
and the average number of choices
6
13000
2000
00:30
that the typical American reports making
7
15000
2000
00:32
is about 70 in a typical day.
8
17000
3000
00:35
There was also recently a study done with CEOs
9
20000
4000
00:39
in which they followed CEOs around for a whole week.
10
24000
3000
00:42
And these scientists simply documented all the various tasks
11
27000
3000
00:45
that these CEOs engaged in
12
30000
2000
00:47
and how much time they spent engaging
13
32000
2000
00:49
in making decisions related to these tasks.
14
34000
2000
00:51
And they found that the average CEO
15
36000
3000
00:54
engaged in about 139 tasks in a week.
16
39000
3000
00:57
Each task was made up of many, many, many sub-choices of course.
17
42000
4000
01:01
50 percent of their decisions
18
46000
2000
01:03
were made in nine minutes or less.
19
48000
3000
01:06
Only about 12 percent of the decisions
20
51000
3000
01:09
did they make an hour or more of their time.
21
54000
4000
01:13
Think about your own choices.
22
58000
2000
01:15
Do you know how many choices
23
60000
2000
01:17
make it into your nine minute category
24
62000
2000
01:19
versus your one hour category?
25
64000
2000
01:21
How well do you think you're doing
26
66000
2000
01:23
at managing those choices?
27
68000
3000
01:26
Today I want to talk
28
71000
2000
01:28
about one of the biggest modern day choosing problems that we have,
29
73000
3000
01:31
which is the choice overload problem.
30
76000
2000
01:33
I want to talk about the problem
31
78000
2000
01:35
and some potential solutions.
32
80000
2000
01:37
Now as I talk about this problem,
33
82000
2000
01:39
I'm going to have some questions for you
34
84000
2000
01:41
and I'm going to want to know your answers.
35
86000
3000
01:44
So when I ask you a question,
36
89000
2000
01:46
since I'm blind,
37
91000
2000
01:48
only raise your hand if you want to burn off some calories.
38
93000
3000
01:51
(Laughter)
39
96000
3000
01:54
Otherwise, when I ask you a question,
40
99000
2000
01:56
and if your answer is yes,
41
101000
2000
01:58
I'd like you to clap your hands.
42
103000
2000
02:00
So for my first question for you today:
43
105000
3000
02:03
Are you guys ready to hear about the choice overload problem?
44
108000
3000
02:06
(Applause)
45
111000
2000
02:08
Thank you.
46
113000
2000
02:11
So when I was a graduate student at Stanford University,
47
116000
2000
02:13
I used to go to this very, very upscale grocery store;
48
118000
3000
02:16
at least at that time it was truly upscale.
49
121000
2000
02:18
It was a store called Draeger's.
50
123000
3000
02:21
Now this store, it was almost like going to an amusement park.
51
126000
3000
02:24
They had 250 different kinds of mustards and vinegars
52
129000
3000
02:27
and over 500 different kinds
53
132000
2000
02:29
of fruits and vegetables
54
134000
2000
02:31
and more than two dozen different kinds of bottled water --
55
136000
3000
02:34
and this was during a time when we actually used to drink tap water.
56
139000
4000
02:38
I used to love going to this store,
57
143000
3000
02:41
but on one occasion I asked myself,
58
146000
2000
02:43
well how come you never buy anything?
59
148000
2000
02:45
Here's their olive oil aisle.
60
150000
2000
02:47
They had over 75 different kinds of olive oil,
61
152000
2000
02:49
including those that were in a locked case
62
154000
2000
02:51
that came from thousand-year-old olive trees.
63
156000
4000
02:55
So I one day decided to pay a visit to the manager,
64
160000
2000
02:57
and I asked the manager,
65
162000
2000
02:59
"Is this model of offering people all this choice really working?"
66
164000
3000
03:02
And he pointed to the busloads of tourists
67
167000
2000
03:04
that would show up everyday,
68
169000
2000
03:06
with cameras ready usually.
69
171000
2000
03:08
We decided to do a little experiment,
70
173000
3000
03:11
and we picked jam for our experiment.
71
176000
2000
03:13
Here's their jam aisle.
72
178000
2000
03:15
They had 348 different kinds of jam.
73
180000
2000
03:17
We set up a little tasting booth
74
182000
2000
03:19
right near the entrance of the store.
75
184000
2000
03:21
We there put out six different flavors of jam
76
186000
2000
03:23
or 24 different flavors of jam,
77
188000
3000
03:26
and we looked at two things:
78
191000
2000
03:28
First, in which case
79
193000
2000
03:30
were people more likely to stop, sample some jam?
80
195000
3000
03:33
More people stopped when there were 24, about 60 percent,
81
198000
3000
03:36
than when there were six,
82
201000
2000
03:38
about 40 percent.
83
203000
2000
03:40
The next thing we looked at
84
205000
2000
03:42
is in which case were people more likely
85
207000
2000
03:44
to buy a jar of jam.
86
209000
2000
03:46
Now we see the opposite effect.
87
211000
2000
03:48
Of the people who stopped when there were 24,
88
213000
2000
03:50
only three percent of them actually bought a jar of jam.
89
215000
3000
03:53
Of the people who stopped when there were six,
90
218000
3000
03:56
well now we saw that 30 percent of them
91
221000
2000
03:58
actually bought a jar of jam.
92
223000
2000
04:00
Now if you do the math,
93
225000
2000
04:02
people were at least six times more likely to buy a jar of jam
94
227000
3000
04:05
if they encountered six
95
230000
2000
04:07
than if they encountered 24.
96
232000
2000
04:09
Now choosing not to buy a jar of jam
97
234000
2000
04:11
is probably good for us --
98
236000
2000
04:13
at least it's good for our waistlines --
99
238000
2000
04:15
but it turns out that this choice overload problem affects us
100
240000
3000
04:18
even in very consequential decisions.
101
243000
3000
04:21
We choose not to choose,
102
246000
2000
04:23
even when it goes against our best self-interests.
103
248000
3000
04:26
So now for the topic of today: financial savings.
104
251000
3000
04:29
Now I'm going to describe to you a study I did
105
254000
4000
04:33
with Gur Huberman, Emir Kamenica, Wei Jang
106
258000
3000
04:36
where we looked at the retirement savings decisions
107
261000
4000
04:40
of nearly a million Americans
108
265000
3000
04:43
from about 650 plans
109
268000
3000
04:46
all in the U.S.
110
271000
2000
04:48
And what we looked at
111
273000
2000
04:50
was whether the number of fund offerings
112
275000
2000
04:52
available in a retirement savings plan,
113
277000
2000
04:54
the 401(k) plan,
114
279000
2000
04:56
does that affect people's likelihood
115
281000
2000
04:58
to save more for tomorrow.
116
283000
2000
05:00
And what we found
117
285000
2000
05:02
was that indeed there was a correlation.
118
287000
3000
05:05
So in these plans, we had about 657 plans
119
290000
3000
05:08
that ranged from offering people
120
293000
2000
05:10
anywhere from two to 59 different fund offerings.
121
295000
3000
05:13
And what we found was that,
122
298000
2000
05:15
the more funds offered,
123
300000
2000
05:17
indeed, there was less participation rate.
124
302000
3000
05:20
So if you look at the extremes,
125
305000
2000
05:22
those plans that offered you two funds,
126
307000
2000
05:24
participation rates were around in the mid-70s --
127
309000
3000
05:27
still not as high as we want it to be.
128
312000
2000
05:29
In those plans that offered nearly 60 funds,
129
314000
3000
05:32
participation rates have now dropped
130
317000
3000
05:35
to about the 60th percentile.
131
320000
3000
05:38
Now it turns out
132
323000
2000
05:40
that even if you do choose to participate
133
325000
3000
05:43
when there are more choices present,
134
328000
2000
05:45
even then, it has negative consequences.
135
330000
3000
05:48
So for those people who did choose to participate,
136
333000
3000
05:51
the more choices available,
137
336000
2000
05:53
the more likely people were
138
338000
2000
05:55
to completely avoid stocks or equity funds.
139
340000
3000
05:58
The more choices available,
140
343000
2000
06:00
the more likely they were
141
345000
2000
06:02
to put all their money in pure money market accounts.
142
347000
2000
06:04
Now neither of these extreme decisions
143
349000
2000
06:06
are the kinds of decisions
144
351000
2000
06:08
that any of us would recommend for people
145
353000
2000
06:10
when you're considering their future financial well-being.
146
355000
3000
06:13
Well, over the past decade,
147
358000
2000
06:15
we have observed three main negative consequences
148
360000
3000
06:18
to offering people more and more choices.
149
363000
3000
06:21
They're more likely to delay choosing --
150
366000
2000
06:23
procrastinate even when it goes against their best self-interest.
151
368000
3000
06:26
They're more likely to make worse choices --
152
371000
2000
06:28
worse financial choices, medical choices.
153
373000
3000
06:31
They're more likely to choose things that make them less satisfied,
154
376000
3000
06:34
even when they do objectively better.
155
379000
3000
06:37
The main reason for this
156
382000
2000
06:39
is because, we might enjoy gazing at those giant walls
157
384000
4000
06:43
of mayonnaises, mustards, vinegars, jams,
158
388000
2000
06:45
but we can't actually do the math of comparing and contrasting
159
390000
3000
06:48
and actually picking from that stunning display.
160
393000
4000
06:52
So what I want to propose to you today
161
397000
2000
06:54
are four simple techniques --
162
399000
3000
06:57
techniques that we have tested in one way or another
163
402000
3000
07:00
in different research venues --
164
405000
2000
07:02
that you can easily apply
165
407000
2000
07:04
in your businesses.
166
409000
2000
07:06
The first: Cut.
167
411000
2000
07:08
You've heard it said before,
168
413000
2000
07:10
but it's never been more true than today,
169
415000
2000
07:12
that less is more.
170
417000
2000
07:14
People are always upset when I say, "Cut."
171
419000
3000
07:17
They're always worried they're going to lose shelf space.
172
422000
2000
07:19
But in fact, what we're seeing more and more
173
424000
3000
07:22
is that if you are willing to cut,
174
427000
2000
07:24
get rid of those extraneous redundant options,
175
429000
2000
07:26
well there's an increase in sales,
176
431000
2000
07:28
there's a lowering of costs,
177
433000
2000
07:30
there is an improvement of the choosing experience.
178
435000
4000
07:34
When Proctor & Gamble
179
439000
2000
07:36
went from 26 different kinds of Head & Shoulders to 15,
180
441000
2000
07:38
they saw an increase in sales by 10 percent.
181
443000
3000
07:41
When the Golden Cat Corporation
182
446000
2000
07:43
got rid of their 10 worst-selling cat litter products,
183
448000
2000
07:45
they saw an increase in profits
184
450000
2000
07:47
by 87 percent --
185
452000
2000
07:49
a function of both increase in sales
186
454000
2000
07:51
and lowering of costs.
187
456000
2000
07:53
You know, the average grocery store today
188
458000
2000
07:55
offers you 45,000 products.
189
460000
2000
07:57
The typical Walmart today offers you 100,000 products.
190
462000
3000
08:00
But the ninth largest retailer,
191
465000
5000
08:05
the ninth biggest retailer in the world today
192
470000
2000
08:07
is Aldi,
193
472000
2000
08:09
and it offers you only 1,400 products --
194
474000
3000
08:12
one kind of canned tomato sauce.
195
477000
3000
08:15
Now in the financial savings world,
196
480000
2000
08:17
I think one of the best examples that has recently come out
197
482000
3000
08:20
on how to best manage the choice offerings
198
485000
3000
08:23
has actually been something that David Laibson was heavily involved in designing,
199
488000
3000
08:26
which was the program that they have at Harvard.
200
491000
2000
08:28
Every single Harvard employee
201
493000
2000
08:30
is now automatically enrolled
202
495000
2000
08:32
in a lifecycle fund.
203
497000
2000
08:34
For those people who actually want to choose,
204
499000
2000
08:36
they're given 20 funds,
205
501000
2000
08:38
not 300 or more funds.
206
503000
2000
08:40
You know, often, people say,
207
505000
2000
08:42
"I don't know how to cut.
208
507000
2000
08:44
They're all important choices."
209
509000
2000
08:46
And the first thing I do is I ask the employees,
210
511000
3000
08:49
"Tell me how these choices are different from one another.
211
514000
2000
08:51
And if your employees can't tell them apart,
212
516000
2000
08:53
neither can your consumers."
213
518000
3000
08:56
Now before we started our session this afternoon,
214
521000
3000
08:59
I had a chat with Gary.
215
524000
2000
09:01
And Gary said that he would be willing
216
526000
3000
09:04
to offer people in this audience
217
529000
2000
09:06
an all-expenses-paid free vacation
218
531000
3000
09:09
to the most beautiful road in the world.
219
534000
4000
09:13
Here's a description of the road.
220
538000
3000
09:16
And I'd like you to read it.
221
541000
2000
09:18
And now I'll give you a few seconds to read it
222
543000
2000
09:20
and then I want you to clap your hands
223
545000
2000
09:22
if you're ready to take Gary up on his offer.
224
547000
2000
09:24
(Light clapping)
225
549000
2000
09:26
Okay. Anybody who's ready to take him up on his offer.
226
551000
3000
09:29
Is that all?
227
554000
2000
09:31
All right, let me show you some more about this.
228
556000
3000
09:34
(Laughter)
229
559000
3000
09:37
You guys knew there was a trick, didn't you.
230
562000
3000
09:44
(Honk)
231
569000
2000
09:46
Now who's ready to go on this trip.
232
571000
3000
09:49
(Applause)
233
574000
2000
09:51
(Laughter)
234
576000
2000
09:53
I think I might have actually heard more hands.
235
578000
3000
09:56
All right.
236
581000
2000
09:58
Now in fact,
237
583000
2000
10:00
you had objectively more information
238
585000
2000
10:02
the first time around than the second time around,
239
587000
2000
10:04
but I would venture to guess
240
589000
2000
10:06
that you felt that it was more real the second time around.
241
591000
4000
10:10
Because the pictures made it feel
242
595000
2000
10:12
more real to you.
243
597000
2000
10:14
Which brings me to the second technique
244
599000
2000
10:16
for handling the choice overload problem,
245
601000
2000
10:18
which is concretization.
246
603000
2000
10:20
That in order for people to understand
247
605000
2000
10:22
the differences between the choices,
248
607000
2000
10:24
they have to be able to understand
249
609000
2000
10:26
the consequences associated with each choice,
250
611000
3000
10:29
and that the consequences need to be felt
251
614000
3000
10:32
in a vivid sort of way, in a very concrete way.
252
617000
4000
10:36
Why do people spend an average of 15 to 30 percent more
253
621000
3000
10:39
when they use an ATM card or a credit card
254
624000
2000
10:41
as opposed to cash?
255
626000
2000
10:43
Because it doesn't feel like real money.
256
628000
2000
10:45
And it turns out
257
630000
2000
10:47
that making it feel more concrete
258
632000
2000
10:49
can actually be a very positive tool
259
634000
2000
10:51
to use in getting people to save more.
260
636000
2000
10:53
So a study that I did with Shlomo Benartzi
261
638000
2000
10:55
and Alessandro Previtero,
262
640000
2000
10:57
we did a study with people at ING --
263
642000
4000
11:01
employees that are all working at ING --
264
646000
3000
11:04
and now these people were all in a session
265
649000
2000
11:06
where they're doing enrollment for their 401(k) plan.
266
651000
3000
11:09
And during that session,
267
654000
2000
11:11
we kept the session exactly the way it used to be,
268
656000
2000
11:13
but we added one little thing.
269
658000
3000
11:16
The one little thing we added
270
661000
3000
11:19
was we asked people
271
664000
2000
11:21
to just think about all the positive things that would happen in your life
272
666000
3000
11:24
if you saved more.
273
669000
2000
11:26
By doing that simple thing,
274
671000
3000
11:29
there was an increase in enrollment by 20 percent
275
674000
3000
11:32
and there was an increase in the amount of people willing to save
276
677000
3000
11:35
or the amount that they were willing to put down into their savings account
277
680000
3000
11:38
by four percent.
278
683000
2000
11:40
The third technique: Categorization.
279
685000
3000
11:43
We can handle more categories
280
688000
3000
11:46
than we can handle choices.
281
691000
2000
11:48
So for example,
282
693000
2000
11:50
here's a study we did in a magazine aisle.
283
695000
2000
11:52
It turns out that in Wegmans grocery stores
284
697000
2000
11:54
up and down the northeast corridor,
285
699000
2000
11:56
the magazine aisles range anywhere
286
701000
2000
11:58
from 331 different kinds of magazines
287
703000
2000
12:00
all the way up to 664.
288
705000
3000
12:03
But you know what?
289
708000
2000
12:05
If I show you 600 magazines
290
710000
2000
12:07
and I divide them up into 10 categories,
291
712000
3000
12:10
versus I show you 400 magazines
292
715000
2000
12:12
and divide them up into 20 categories,
293
717000
3000
12:15
you believe that I have given you
294
720000
2000
12:17
more choice and a better choosing experience
295
722000
2000
12:19
if I gave you the 400
296
724000
2000
12:21
than if I gave you the 600.
297
726000
2000
12:23
Because the categories tell me how to tell them apart.
298
728000
3000
12:28
Here are two different jewelry displays.
299
733000
3000
12:31
One is called "Jazz" and the other one is called "Swing."
300
736000
3000
12:34
If you think the display on the left is Swing
301
739000
3000
12:37
and the display on the right is Jazz,
302
742000
3000
12:40
clap your hands.
303
745000
2000
12:42
(Light Clapping)
304
747000
2000
12:44
Okay, there's some.
305
749000
2000
12:46
If you think the one on the left is Jazz and the one on the right is Swing,
306
751000
2000
12:48
clap your hands.
307
753000
2000
12:50
Okay, a bit more.
308
755000
2000
12:52
Now it turns out you're right.
309
757000
2000
12:54
The one on the left is Jazz and the one on the right is Swing,
310
759000
2000
12:56
but you know what?
311
761000
2000
12:58
This is a highly useless categorization scheme.
312
763000
3000
13:01
(Laughter)
313
766000
2000
13:03
The categories need to say something
314
768000
3000
13:06
to the chooser, not the choice-maker.
315
771000
3000
13:09
And you often see that problem
316
774000
2000
13:11
when it comes down to those long lists of all these funds.
317
776000
3000
13:14
Who are they actually supposed to be informing?
318
779000
4000
13:18
My fourth technique: Condition for complexity.
319
783000
3000
13:21
It turns out we can actually
320
786000
2000
13:23
handle a lot more information than we think we can,
321
788000
2000
13:25
we've just got to take it a little easier.
322
790000
2000
13:27
We have to gradually increase the complexity.
323
792000
3000
13:30
I'm going to show you one example of what I'm talking about.
324
795000
3000
13:33
Let's take a very, very complicated decision:
325
798000
2000
13:35
buying a car.
326
800000
2000
13:37
Here's a German car manufacturer
327
802000
2000
13:39
that gives you the opportunity to completely custom make your car.
328
804000
3000
13:42
You've got to make 60 different decisions,
329
807000
2000
13:44
completely make up your car.
330
809000
2000
13:46
Now these decisions vary
331
811000
2000
13:48
in the number of choices that they offer per decision.
332
813000
3000
13:51
Car colors, exterior car colors --
333
816000
2000
13:53
I've got 56 choices.
334
818000
2000
13:55
Engines, gearshift -- four choices.
335
820000
3000
13:58
So now what I'm going to do
336
823000
2000
14:00
is I'm going to vary the order in which these decisions appear.
337
825000
3000
14:03
So half of the customers
338
828000
2000
14:05
are going to go from high choice, 56 car colors,
339
830000
2000
14:07
to low choice, four gearshifts.
340
832000
3000
14:10
The other half of the customers
341
835000
2000
14:12
are going to go from low choice, four gearshifts,
342
837000
2000
14:14
to 56 car colors, high choice.
343
839000
3000
14:17
What am I going to look at?
344
842000
2000
14:19
How engaged you are.
345
844000
2000
14:21
If you keep hitting the default button per decision,
346
846000
3000
14:24
that means you're getting overwhelmed,
347
849000
2000
14:26
that means I'm losing you.
348
851000
2000
14:28
What you find
349
853000
2000
14:30
is the people who go from high choice to low choice,
350
855000
2000
14:32
they're hitting that default button over and over and over again.
351
857000
3000
14:35
We're losing them.
352
860000
2000
14:37
They go from low choice to high choice,
353
862000
2000
14:39
they're hanging in there.
354
864000
2000
14:41
It's the same information. It's the same number of choices.
355
866000
3000
14:44
The only thing that I have done
356
869000
2000
14:46
is I have varied the order
357
871000
2000
14:48
in which that information is presented.
358
873000
2000
14:50
If I start you off easy,
359
875000
2000
14:52
I learn how to choose.
360
877000
2000
14:54
Even though choosing gearshift
361
879000
3000
14:57
doesn't tell me anything about my preferences for interior decor,
362
882000
3000
15:00
it still prepares me for how to choose.
363
885000
3000
15:03
It also gets me excited about this big product that I'm putting together,
364
888000
3000
15:06
so I'm more willing to be motivated
365
891000
2000
15:08
to be engaged.
366
893000
2000
15:10
So let me recap.
367
895000
2000
15:12
I have talked about four techniques
368
897000
3000
15:15
for mitigating the problem of choice overload --
369
900000
3000
15:18
cut -- get rid of the extraneous alternatives;
370
903000
3000
15:21
concretize -- make it real;
371
906000
3000
15:24
categorize -- we can handle more categories, less choices;
372
909000
4000
15:28
condition for complexity.
373
913000
3000
15:31
All of these techniques that I'm describing to you today
374
916000
3000
15:34
are designed to help you manage your choices --
375
919000
3000
15:37
better for you, you can use them on yourself,
376
922000
3000
15:40
better for the people that you are serving.
377
925000
2000
15:42
Because I believe that the key
378
927000
2000
15:44
to getting the most from choice
379
929000
2000
15:46
is to be choosy about choosing.
380
931000
3000
15:49
And the more we're able to be choosy about choosing
381
934000
2000
15:51
the better we will be able
382
936000
2000
15:53
to practice the art of choosing.
383
938000
2000
15:55
Thank you very much.
384
940000
2000
15:57
(Applause)
385
942000
2000
ABOUT THE SPEAKER
Sheena Iyengar - Psycho-economistSheena Iyengar studies how people choose (and what makes us think we're good at it).
Why you should listen
We all think we're good at making choices; many of us even enjoy making them. Sheena Iyengar looks deeply at choosing and has discovered many surprising things about it. For instance, her famous "jam study," done while she was a grad student, quantified a counterintuitive truth about decisionmaking -- that when we're presented with too many choices, like 24 varieties of jam, we tend not to choose anything at all. (This and subsequent, equally ingenious experiments have provided rich material for Malcolm Gladwell and other pop chroniclers of business and the human psyche.)
Iyengar's research has been informing business and consumer-goods marketing since the 1990s. But she and her team at the Columbia Business School throw a much broader net. Her analysis touches, for example, on the medical decisionmaking that might lead up to choosing physician-assisted suicide, on the drawbacks of providing too many choices and options in social-welfare programs, and on the cultural and geographical underpinning of choice. Her book The Art of Choosing shares her research in an accessible and charming story that draws examples from her own life.
Watch a Facebook-exclusive short video from Sheena Iyengar: "Ballet Slippers" >>
Sheena Iyengar | Speaker | TED.com