Areily and economist Jiwoong Shin tested students at MIT with a simple computer game involving three doors. Students could only maximize their score by allowing options (doors) to fade away. You can play the game to fully understand the mechanics of it. They learned that players sacrificed high scores to maintain options. But, on further review of the players’ motivations, they found:
Apparently they did not care so much about maintaining flexibility in the future. What really motivated them was the desire to avoid the immediate pain of watching a door close.
“Closing a door on an option is experienced as a loss, and people are willing to pay a price to avoid the emotion of loss,” Dr. Ariely says. In the experiment, the price was easy to measure in lost cash. In life, the costs are less obvious — wasted time, missed opportunities. If you are afraid to drop any project at the office, you pay for it at home.
Ariely explores this and more in his book “Predictably Irrational.”
For a simple example of how maintaining too many options can hurt your business, let’s look at the dozens of ways eBay offers to enhance your listings: subtitles, extra pictures, themes, pricing options, highlights, enhanced gallery pictures, etc.
Last year, I experimented with a few options I didn’t normally use in eBay. Previously, I used a small number of auctions and a large number of “Buy It Now” listings. Around May, I switched the majority of my listings to having both an auction price and a higher “Buy It Now” price. Having both options costs an extra $0.05 to $0.25 per listing. There are a few situations where having both can save in total fees, but that’s a subject for another day.
After experimenting with this for a few months, my conclusion was that it didn’t benefit the business. The extra fees cost us $100 to $200 a month, but didn’t impact our overall sales volume. However, it took seven months before I finally went back to my old model. Once I was used to adding options to my listings, it was hard to break that habit (which I’m sure eBay loves).
I don’t think most sellers should use any of eBay’s extra options. If you need the subtitle to describe your item, you’re not using your title well enough. Embed extra pictures in your listings by hosting them for free somewhere else (a little HTML knowledge goes a long way). All the bold, border, enhanced, gift and highlight options just line eBay’s pockets and take money out of yours. Never, ever, ever list in two categories (it doubles your fees). The only fees you need to pay eBay are the ones that aren’t optional: the list and final value fees.
Of course, business options extend well beyond eBay fees, those were just easy examples. Think about the organizations you join, relationships you maintain, software you use and the equipment you buy. Everything in your business has options associated with it. I’m a gadget freak. If I need some technological gizmo, I’m likely to buy one with all the bells and whistles, regardless of whether a lesser model might meet my needs. You know, because we all need a 1200W toaster with built in LCD screen.
We’ve been thinking about picking up a Wacom tablet recently for the ladytheorist to do some custom graphics. While I know a lower end model is well within our budget and would meet our needs, I keep leaning towards an Intuos3. This is probably a situation where I should limit my options.
And no, I don’t really own that toaster.
I’m waiting for one with a bigger LCD that has Tetris installed, so I can play while I toast.
I will call it the Big Texas Toast Tetris Toaster. B4T, baby.