It’s almost the week­end and so my thoughts are turn­ing to what to watch this evening to relax. Any­one who knows me will know my love for films and with two young chil­dren at the moment the cin­e­ma isn’t as easy at it used to be so I have found solace in Net­flix. Unfor­tu­nate­ly, I think Net­flix has an issue (apart from the fact that some of it’s recent films have been ter­ri­ble). Too much choice.

How often do you open up Net­flix (or Ama­zon for that mat­ter) and you spend half an hour (or longer!) decid­ing what you are going to watch. Some­times I want to watch a film but then spend so long decid­ing / try­ing to find a film that I even­tu­al­ly give up and just watch a TV show instead.

What if your cus­tomers are doing that with you? If you offer a cus­tomer too much choice it can be over­whelm­ing and actu­al­ly result in less sales. In 2000, psy­chol­o­gists Sheena Iyen­gar and Mark Lep­per pub­lished a study regard­ing jam. At a food mar­ket they set up a dis­play table of gourmet jam. The first day they had 24 vari­eties and the sec­ond day they only had 6. The results are fas­ci­nat­ing.

24 vari­eties — results:

• 242 cus­tomers passed and 145 peo­ple stopped — 60%
• Aver­age num­ber of jams sam­pled — 1.50
• Only 4 of the 145 peo­ple who stopped actu­al­ly bought a jam. Just 3%!

Com­pare this to the results of the 6 vari­eties exper­i­ment:

• 260 cus­tomers passed and 104 peo­ple stopped — 40%
• Aver­age num­ber of jams sam­pled — 1.38
• 31 of the 104 peo­ple who stopped bought a jam — 30%

Whilst the larg­er sam­ple size drew a larg­er crowd (approx­i­mate­ly 20% more) they only con­vert­ed 3% of these peo­ple, com­pared to a 30% con­ver­sion rate for the small­er dis­play. If you look at the actu­al sales fun­nel then the larg­er dis­play only con­vert­ed 1.65% of the pop­u­la­tion it was mar­ket­ing to (4/242) whilst the small­er dis­play con­vert­ed 11.92% (31/260).

Not only does this high­light how impor­tant it is that you mar­ket your propo­si­tion effec­tive­ly and reduce the num­ber of choic­es for your cus­tomer, but it also shows how impor­tant it is to have a han­dle on these KPI’s and met­rics. If you did­n’t drill down in to this data then your gut feel­ing could be that the larg­er sam­ple size attracts more atten­tion, which you auto­mat­i­cal­ly think would there­fore result in more sales.

We work close­ly with our clients to ensure that they are track­ing the cor­rect num­bers and to show them that small changes can have a huge impact. Imag­ine if, as per the exper­i­ment above, you cut your cus­tomers choic­es by 75% and this result­ed in a 7x increase in your turnover! These are sim­ple changes that can trans­form your busi­ness.

As busi­ness­es start to mon­i­tor their his­tor­i­cal infor­ma­tion and pick out trends they can then use this infor­ma­tion to influ­ence their deci­sions going for­ward. The KPI’s shift from being Key Per­for­mance Indi­ca­tors to being Key Pre­dic­tive Indi­ca­tors. These focus on what you need to do to achieve the desired result rather than what you have done — i.e. in the exam­ple above if you know you need 30 sales a day to make a prof­it then you know you need to mar­ket to at least 260 peo­ple and you can then take the appro­pri­ate steps to make sure your sales fun­nel is full.

If you would like to know more about grow­ing your busi­ness and know­ing your num­bers so that you have finan­cial con­trol of your busi­ness, and can then work towards finan­cial free­dom, then please con­tact me about a free con­sul­ta­tion.

PS. Net­flix needs to allow you to curate your own lost a lot more eas­i­ly and remove films that you nev­er want to see from your data­base entire­ly. You should also be able to set up alerts for actors and direc­tors that you like. They also need to improve their AI as the algo­rithms that they use for sug­gest­ing films are way off the mark. Rant over!

PPS. If you are inter­est­ed in some fur­ther read­ing / infor­ma­tion on this then have a look at The Art of Choos­ing, by Sheena Iyen­gar who car­ried out the study above and also did a cou­ple of great TED talks on the sub­ject, and The Para­dox of Choice (author Bar­ry Schwartz also has a TED talk here).