Getting Multi-Channel Distribution Right

CHAPTER 13Using the Product Line to Manage Multiple Channels

13.1 INTRODUCTION

None of us likes having too few choices, but research documents that too much choice is not a good thing either. An overload of options can cause fatigue and unhappiness, and induce us to make poorer and less confident decisions—or forego a decision altogether. These findings, as you might guess, are highly relevant to consumer purchase behavior. The Paradox of Choice, by psychology professor Barry Schwartz, is a particularly well-known book on the topic. It argues that decreasing the number of consumer choices can relieve shopper anxiety. The book has had its share of critics, but there is plenty of research to support the idea that reducing the number of options on the shelf, if done right, can increase the odds that someone will actually make a purchase. Other costs of too many choices include the wasted development and marketing costs to suppliers, and the high opportunity cost to channel members of investing scarce shelf space and sales effort on products that turn out to be duds. Yet product proliferation continues unabated on retail shelves. The number of individual items carried by the typical U.S. grocery store, for example, has grown from about 9,000 in 1974 to 45,000, with larger grocery stores approaching 60,000 SKUs on the shelf.ⁱ So what gives? Are suppliers, channel members, and consumers all just wasting time and money, and would everyone be better off with drastic reductions in the ...