Offering people more choices doesn’t help them make better choices, Sheena Iyengar says.
Quite the opposite: An overabundance of options leads people to procrastinate, make poor selections, and be less satisfied with the choices they make.
“People say they want a lot of choice, but what they really want is to feel competent during the selection process and confident with their choice,” says Iyengar, a Columbia University Business School professor who wrote “The Art of Choosing.”
That finding meshes well with how credit unions differentiate themselves in the marketplace, says Iyengar, who delivered a keynote address Monday at the CUNA Lending Council Conference in Nashville.
That advantage is the trust factor credit unions own with current and prospective members thanks to a cooperative structure that rewards educating people how to make decisions that are in their best financial interests.
In an era of information overload—the average American is bombarded with the equivalent of 174 newspapers a day—Iyengar advises credit unions to follow her six "Cs" of choice:
1. Cut and curate. Get rid of irrelevant choices. Look to the model of discount grocer Aldi, which offers just 1,400 products, compared with more than 40,000 at large supermarkets.
Generally, businesses reap 80% of their profit from 20% of their offerings, Iyengar says, so every organization has fat to trim.
“Explain to [members] why you offer certain choices and not others,” she says.
2. Concretize. This matters in all fields, but especially when your business involves abstract concepts, such as money management. Make the consequences of the choice vivid.
“For me to understand whether I want it or not, I need to feel it,” iyengar says. For example, spell out for consumers the benefits of placing money with your credit union instead of a bank.
3. Categorize. Organize your information into meaningful categories. The fault line for straightforward consumer choice is seven, plus or minus two, says Iyengar, citing time-tested studies from the 1950s.
So, once you reach five choices, start to categorize those options under meaningful headings to allow for sequential choice.
4. Condition for complexity. Choice is fatiguing, to the point your immune system drops when you face too many choices too quickly, according to Iyengar.
Moving from decisions with fewer factors to decisions with many factors leaves people more satisfied. So, create tiers of choices that dive deeper into detail.
5. Consolidate. Consider the big picture. Explain to people the “why” of their decisions before you begin the decision-making process.
Focus on the most important attributes of the choice, not the details.
6. Create. Catalog your thoughts on better presenting products and services in an “idea bank” that you revisit periodically, junking the concepts that you know won’t pan out. Then, seek feedback for your ideas from people outside of your office and even industry, because they’ll provide fresh viewpoints.
Don’t wait for the “ideal” idea; look for two to four concepts that represent an improvement over the status quo, and decide which to implement. “Create the most meaningful choices that will change people’s lives,” she says.
To further her research on choice, Iyengar asks credit unions interested in participating in case studies to contact her at email@example.com.
►Read more conference coverage from CUNA News, and get live updates on Twitter via @CUNAJennifer, @AdamMertzCUNA, @cumagazine, @CUNACouncils, and by using the #LendingCouncil hashtag. Learn more about the CUNA Lending Council, a member-led professional society for credit union executives, by visiting cunacouncils.org.