Choice.
Perhaps this excites you, for it insinuates that you will be given the exact product you want.
Perhaps this scares you, for it means that you will have to make a decision and don’t know, or care, what you get.
Choice, as an adjective, means “of very good quality.” Although this may lead one to believe that having a choice will allow them to get exactly they want, is this factual?
When price, quality, function, and speed are considered, does having a choice result in a better choice?
As a Schreyer Honors College Student, I am writing a thesis on this idea of choice. Through an in-depth analysis on the computing industry, I hope to determine if offering it is a competitive advantage and, on a larger level, if it is even desired by consumers.
In this article, I will explain the situation and give my prediction on the results of this study.
The Business Side
Businesses hate choice. If a company could succeed indefinitely by selling a single configuration of a single product, they would.
And think about it… if you could be happy buying the same product indefinitely, wouldn’t you?
The main reasoning for this attitude by the business sector is because of the supply chain complexity. If you were to purchase a Dell Laptop, for example, you would find a wide variety of options, from color of the chassis to CPU to GPU to RAM to HDD to SDD… the list continues with a seemingly infinite number of configurations.
Because of this, companies, such as Dell, use a Build-to-Order (BTO) manufacturing methodology rather than Build-to-Stock (BTS). This allows for massive customization for the consumer but, as a result, automation cannot be implemented in manufacturing.
Heavy reliance on human labor results in more options but at the expense of speed and cost of the final deliverable.
The Consumer Side
Initially, the clear response to this topic typically is
“Of course consumers care about choice!”
Is this true? Do consumers really care about choice?
Above, I outlined the reasons why choice make little business sense. Increased options, and subsequent lack of automation, lead to a more complicated and volatile supply chain. This means generally higher prices and longer lead times for the customer.
It is worth it?
Although extensive research will still be done, I believe that choice is not actually important to consumers. In general, I think that as long as consumers get what they want, or at least perceive they are, then there is no reason to offer vast choice.
Moreover, I believe that quality and price are much more important and, by offering less options for a given product (less choice), will be more easily achieved.
Research Method
Imagine you are looking to buy a laptop from Company A. They offer 6 laptops for 6 different prices, seen above, where each increase in number means increased performance (quality) and a subsequent increase in price.
Which would you choose?
Using a large sample size, we can predict the following sales distribution:
Much like Dell, imagine that Company A must BTO rather than BTS. This means that there is very little automation and both price and lead time are increased as a result.
Now suppose Company B enters the market. They offer half the amount of laptops as Company A but, as a result, can use automation via BTS. According to research conducted by Forbes in partnership with WorkMarket, automation can save manufactures nearly 33% on production.
So, Company B offers half as many options as Company A but can give you certain specs at a reduced price. Your options are now as follows:
Now what computer would you choose? Would substitution paths be this…
… or perhaps this…
… or perhaps you would still buy from Company A because you really want what laptop 1, 3, or 5 offers. This is, however, improbable.
Prediction
Does customization play a large role in today’s computer industry? If so, what value is associated with it and what is the cost of removing a pre-established norm of product customization?
As mentioned before, I predict that reduced options will result in greater profitability for companies through greater implementation of automation. Additionally, I predict increased customer satisfaction due to equal function at a reduced cost, reduced lead time, and reduced choice.