Page 130 - Hard Goals

Required 121

display. But that’s where having a lot of choices stopped being a
good thing. Out of all the customers that stopped at the 24-jam
tasting display, only 3 percent actually ended up buying a jam.
But when customers stopped at the 6-jam display, 30 percent
ended up buying a jam. That’s a 10 times better customer conver-
sion rate, and it comes from offering fewer choices, not more.
Sheena Iyengar has conducted similar research looking at
8
401(k) plan participation. Of course, companies think that peo-
ple want lots of choices, so when they offer a 401(k) plan, they
give employees lots of different investment choices to pick from.
But like the jam study, when a company offers more choices
of investment funds, employee participation in the 401(k) plan
decreases. For example, if a 401(k) plan only offered two funds
to invest in, employee participation rates could hit as high as 75
percent. But when a 401(k) plan offered 59 different funds to
choose from, employee participation rates dropped to about 60
percent. In fact, for every additional 10 investment fund choices
the company provided, employee participation rates would
decline as much as 2 percent.
Parenthetically, have you ever wondered why Amazon.com
makes “recommendations” for you? (If you buy enough stuff
from them, they’ll start looking at your past purchases and
using those to recommend other products that you’re statisti-
cally likely to enjoy.) Of course, Amazon wants to be helpful.
But more fundamentally, they’re trying to limit your choices
(albeit in a very nice and helpful way). They know that if you
see too many options on a page, you won’t end up buying any of
them. But if they can limit your choices to just a few recommen-
dations, you’re way more likely to actually buy one of them.
I should note that in studies, people initially said they wanted
more choices. But when they got more choices, they ended up