I've been thinking a lot about choice lately, and this morning I awoke with this graph in my head.
We are often overwhelmed by choice, because we live in a wealthy society. And as your willingness to spend increases, so does the range of choice you have. But then something strange happens -- when your expenditure gets large enough, the role of advisors starts to come into play. And the advisors can reduce complexity and choice.
This is easier to see using some examples. Let's start with the most obvious: investing money.
Those who don't have much to invest we actually call savers. And the options for savers are really fairly limited. If you have less than $500 to invest, you are limited mainly to savings accounts, and savings bonds. With a little more money, your options spike dramatically, becuase you can now afford mutual funds. With still more, you can invest in a huge range of securities: bonds, equities and other financial instruments. With still more, you could consider things like real estate, or direct ownership of a company. One can imagine that the investment options available to Oprah Winfrey, Donald Trump or Bill Gates are virtually limitless.
Something interesting happens along the way, however. Most people pick up some kind of financial advisor.
In the beginning, this individual can actually make things worse, by telling you about choices you didn't know you had -- like thousands of mutual funds. But as the money you are spending, on both the investment and the advisor, increases -- the role of advice is to radically reduce the number of choices that need to be made. The advisor weeds out all the poor choices for you, and only asks you to choose among good options.
This scenario plays out in many kinds of services.
I had to shop for new drapes recently, and was expecting it to be a daunting task. I deliberately chose to start with a single store that carried a wide range of goods, BB Bargoons. My plan was not to overwhelm myself with decisions, and try to find a workable solution in this one store if possible.
While I was there, a woman came in with her decorator. They had already been to at least one other store, judging by the swatches of fabric. Together they reviewed a lot of fabrics. The decorator kept coming up with new ideas and suggestions. I could see the client becoming overwhelmed with the choices, until I actually heard her say "I don't really know what I want anymore".
Many people who hire interior decorators leave the majority of the choices to the decorator. They outsource all of the choice-making.
The same dimensions appear to be part of the eating out experience too, although they manifest themselves differently.
At the low end, there are many possibilities, but little real variety: McDonald's, Wendy's, Burger King, and their competitors. As you go up the quality/cost dimension, you have many more choices. There are still chains, like Swiss Chalet and Pizza Hut, But there are also independent bistros. By the time you get to a Kelsey's, East Side Mario's or Shopsy's type of operation, the menu may have 80 or more items on it.
But then you pass through that level, and something changes.
When you get to fine dining, there are likely not quite as many choices, because the chef is making some of those choices for you. The menu changes daily, as the availability of prime ingredients changes. The serving staff can also assist you in making choices.
The number of items on the menu shrinks. Although the wine list may be overwhelming, there is now a sommelier who can choose for you, if you wish and you are prepared to pay the cost.
And a select group of high-end dining experiences offer virtually no choice at all, with the chef and their staff taking as their mission giving you a memorable dining experience.
What Does it all Mean?
The preponderance of choices facing us every day actually makes more room for the role of trusted advisors in many forms.
An automated advisor doesn't actually add much to the cost. Consider how Amazon shows you other books you might like. It is cross-selling, of course, but it is also a kind of advice.
Part of the role of brands is clearly to help thin out the choice-making. You can get any kind of computer you want from Dell, so why confuse yourself with other suppliers?
If you are offering more choices to your customers, you need to also help them make wise choices, and reduce the tension and stress that accompanies too much choice.