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Decisions, decisions … the more (options) the merrier…


Decisions, decisions … the more (options) the merrier…

By Krishna Savani and Shankha Basu

Imagine you are looking for a medical insurance plan. You can visit the webpage of NTUC Income, Prudential, GE, and Aviva, and pick the plan that seems the best overall. Or you can go to the Ministry of Health website which provides a comparison table of each major company’s insurance policies all on one page.

Both types of decision-making architecture are common in everyday life. HR managers interview applicants one by one; a traveler checks Trivago for the best hotel deal. Which brings about a better decision?

For marketeers, the decision whether to present options sequentially or simultaneously affects consumer’s choice.

We conducted seven experiments in which people had to choose one of multiple options that were presented in one of two different ways: sequentially (options were presented one at a time), or simultaneously (all the options were presented at the same time). In each experiment, we ensured that one option was the dominant option, that is, all its attributes were superior to all other options’ attributes.

In our first experiment, we asked people to choose among six electronic products (e.g. a laptop) with five attributes (e.g. processor speed, RAM, hard disk capacity). Results showed that people were more likely to choose the dominating option when they viewed all the options simultaneously than when they saw the options one at a time.

In another experiment involving buying supplies for a restaurant, people were more likely to pick the supplier offering the lowest price per unit quantity when the options were presented simultaneously. In another more complex experiment in which people had to choose among five lotteries with different winning amounts and risks, people shown simultaneous options were also more likely to pick the best lottery.

Our results show that for both simple and complex decisions, people shown all options simultaneously acquired a better understanding of the relative advantages and disadvantages of each option. This more comprehensive and in-depth understanding helped them to identify the optimal option. By contrast, when options were presented sequentially, the decision maker was not able to as readily identify the salient differences, reducing her ability to identify the optimal option.

This result was backed by up a cognitive processing test - those who viewed the options simultaneously were more likely to use words that indicated deep thinking, such as “considering that”, “I think”, and “because”.

Early research found similar results in a real corporate boardroom setting. Gemünden and Hauschildt (1985) obtained detailed minutes of 83 decisions that the executive board of a mid-size German company made over an 18-month period. Eight years later, when asked to evaluate the quality of each of those decisions, strikingly, executives rated the initial decision as being ‘‘very good” 43% of the time when it involved two options, but only 6% of the time when it involved a single option.

Our research has implications beyond the boardroom.

Marketers need to take heed. The decision whether to present options sequentially or simultaneously is a key element of choice architecture for today’s consumers. Websites like Zuji (for flights) and Moneysmart (for money matters) have clued in on this need.

Indeed, previous research by Cassie Mogilner and colleagues has found that consumers who chose one of multiple options presented simultaneously were happier with their choice compared to those who were presented with the options one at a time. They were also less likely to question or change their choice. This is because consumers who make decisions based on sequential options worry that they might become dissatisfied with their initial decision if they encounter a better option later. However, when the options are presented simultaneously, the question of hoping for a better option does not even arise. This is very important in today’s age of trigger-happy consumers. To ensure the consumer is truly satisfied with her choice, marketers can present all options at the same time whenever possible.

Before making a purchase or walking into a restaurant or applying for a job, tech-savvy people often go online to compare prices or check for reviews. Companies who are not afraid to compare their products or services with their competitors might be more likely to attract such people. In the absence of comparison features on the websites of individual companies, it is no surprise that third party comparison websites like GSMArena (for phones) and GadgetsNow (for electronics) are becoming more common and popular.

Our research also has numerous managerial implications. Recruiters might reconsider the conventional approach of interviewing candidates one at a time. Would not assessing multiple candidates simultaneously offer a real-time comparison of their capabilities and possible contribution to the company? Likewise, journal editors might make better decisions looking at several research papers simultaneously rather than reading them one at a time.

Additionally, our findings suggest that for decisions in which there is a ‘‘right answer” from a policy perspective, policy makers should present all the options simultaneously rather than sequentially. For example, consumers choosing an energy-efficient washing machine in a store typically looks at one model at a time. Retail policy could require that energy labels also include the rating of comparative models, to increase the consumer ability to pick the best model for their needs.

The data from one of our studies found that in nearly half of their everyday choices, people consider options sequentially. Thus, if considering options simultaneously helps people make better decisions, then switching from viewing options one at a time to viewing all options together can increase the quality of nearly half of the decisions that people make.

About the authors

Krishna Savani is Co-Director of the Cultural Science Institute, and an Associate Professor of Strategy, Management, and Organisation at Nanyang Business School, NTU Singapore.

Shankha Basu is an Assistant Professor of Marketing at Leeds University Business School, the UK.

This commentary was published in The Straits Times on 27 November 2017​​​ and Transfin on 27 December 2017.

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