Why Having Fewer Options Leads to Better Service

Sheena Iyenger and Mark Lepper set up an experiment in 2000. They wanted to see how adding more choices affected consumer behavior.

Their experiment was conducted in an upscale grocery store called Draeger's Supermarket in Menlo Park, California. The store was known for having a large assortment of products such as 250 varieties of mustard.

Iyenger and Lepper experimented with an in-store sampling booth with two variations. One variation offered 6 different varieties of jam. The other offered 24.

The display with 24 varieties of jam attracted more customers with 60 percent of passers-by stopping at the display compared to only 40 percent of people stopping at the display with just 6 varieties.

Surprisingly, people who encountered the display with just 6 varieties of jam were five times more likely to make a purchase than people who encountered 24 varieties.

It turns out that offering fewer choices can be good for business. Here's how. 

Fewer Options = More Sales

A recent furniture shopping trip revealed how easy or complex a buying decision can be. 

My wife and I found two furniture stores that offered sofas we liked. One was Living Spaces. They really did service the right way and we ended up buying a sofa and a love seat from them. (A recent blog post described other ways that Living Spaces does service right.)

One of the biggest differentiators between the two stores was the number of options available.

Living Spaces had a much larger selection of sofas. However, their helpful salesperson narrowed it down to just a few choices once we described what we were looking for. Each choice had a simple one-page sales sheet that visually depicted the various size and configuration options. Making a choice was easy.

The other furniture store overwhelmed us with choices. One sofa that looked promising had a complex code book full of possible configurations. Even the salesperson struggled to decipher it all. There were six different options for the arms alone. It was too much.

Like the jam experiment, limiting options helps Living Spaces sell more.

Fewer Options = Lower Costs

Costco is famous for keeping its costs low and passing on those savings to its members. One of the ways it does this is by offering fewer options than its competitors.

The graph below shows the approximate number of individual items sold at Costo and its two major rivals, Sam's Club and BJ's.

Data Source: iStockAnalyst

Notice that Costco has 24 percent fewer items than Sam's and 46 percent fewer items than BJ's. Having fewer items allows Costco to rely on fewer employees to maintain inventory in it's stores. It also enables the chain to negotiate better deals from its vendors and offer lower prices to its customers.

Fewer choices haven't hurt Costco's service. The chain leads the American Customer Satisfaction Index for specialty retailers with an 84 percent rating.

Fewer Options = Better Operations

Last year, I wrote a post called Why McDonald's Customer Service Sucks in Three Charts. 

One of those charts depicted the proliferation of menu items at the chain. The menu had grown 365 percent since 1980.

Data Source: Fortune

The staggering number of menu items causes a lot of operational problems as employees struggle to keep up with so many options. One study found that 12 percent of McDonald's drive-through orders contained an error.

Compare this to fast food champ In-N-Out. They're consistently rated extremely high in both customer service and food quality. One big difference? The In-N-Out menu contains just six items.

Solutions

One of my favorite customer service books is Uncommon Service. It describes the need for trade-offs. A business can only be really, really good at something if it's willing to be not so good at a few other things.

This book provides a great lesson in simplicity.

If you want to delight your customers, offer great prices, and make your operations run like a well-oiled machine, you need to sacrifice selection. 

Your customers, and your employees, will appreciate it in the long run.

Why McDonald's Customer Service Sucks in Three Charts

Customer service at McDonald’s sucks.

They’ve held the bottom spot on the American Customer Satisfaction Index for five straight years. Nearly everyone has a bad customer service story from McDonald’s. 

McDonald’s itself even admitted that it’s “service is broken” on a 2013 webcast for franchise owners. 

Here are three charts that explain how things got so bad.

Control Issues

McDonald’s has leveraged franchising to grow from a single restaurant in San Bernardino, California to a company with more than $28 billion in revenue. Growth through franchising comes at the expense of control. 

Chances are, the person serving up your Big Mac isn’t a McDonald’s employee. They’re more likely employed by a franchise operator.

Source: Entrepreneur.com

In my book, Service Failure, I related a story of a McDonald's cashier who told me he hated me because I didn't have a nickel when my order came to $4.05. It's hard to pin that incident on McDonald's, but I could easily blame the employee's supervisor.

Who hired and trained that supervisor? A McDonald's franchise operator. The reality for McDonald's is a large part of their customer service reputation rests in the hands of their franchisees. 

McDonald’s still impacts service at franchise locations, albeit indirectly. They establish the procedures and operating standards that franchisees must follow.

It’s in this area that McDonald’s has created a problem for itself by making operations more complex.

Complexity Issues

McDonald’s has suffered a large dose of menu creep in their never-ending quest to be all things to all people.

A recent article in Fortune magazine illustrated how the number of menu items at McDonald’s has increased significantly since 1980.

Source: Fortune

All these options don’t make it any easier on franchise operators. A 2013 QSR study found that the average drive-through wait time was three minutes and ten seconds. (For comparison, Wendy’s is more than a minute faster.)

The same study found that nearly 12 percent of McDonald’s drive-through orders contain an error. 

Simply put, having 121 items on the menu (not counting different sizes), makes it tough on the operation. Their recently announced “build your own burger” initiative will only make things worse.

Having a slew of options and long wait times wouldn’t be so bad if their food was delicious. It isn’t.

Taste Issues

Food quality at McDonald’s is consistently ranked at or near the bottom when compared to their competition. 

A 2014 Consumer Reports taste test ranked McDonald’s dead last among burger chains. 

Source: Consumer Reports

Poor quality food can lead to a host of other problems.

• Customers become more price-sensitive.
• Longer wait times are less tolerable.
• Employees get worn down from fielding more complaints.

By comparison, look at In-N-Out. They share a remarkable amount of history with McDonald’s, yet enjoy a stellar reputation for customer service. 

Outstanding food quality isn't the only reason for this, but it is definitely a part of the equation. Due in part to some of the tastiest burgers around:

• Customers are less price-sensitive.
• Customers willingly endure long wait times.
• Employees receive few complaints.

McDonald’s executives are grasping at straws while same-store sales are slumping. Adding menu items, new technology, or rolling out a dubious Lovin’ > Hatin’ ad campaign won't fix things.

Improving their miserable service by addressing some of the underlying causes just might. 

How In-N-Out Almost Became McDonald's

Note: The following is an excerpt from Service Failure: The Real Reasons Employees Struggle with Customer Service and What You Can Do About It.

I go to In-N-Out Burger a lot.

The law of averages suggests I should have had a bad experience at least once by now. Some visits have been better than others, but I’ve never had a bad experience. Not one.

I’m not alone in my admiration of In-N-Out. They’re consistently ranked among the top fast food chains in customer satisfaction. The chain only has locations in a handful of states, but people all over the country and even outside the United States have become fans, with some devoted followers even planning a business trip or vacation itinerary around a visit to an In-N-Out. 

What’s the secret to In-N-Out’s success? It may be easier to understand if you compare them to a similar restaurant that struggles with customer service: McDonald's. 

The two have a lot in common. While McDonald's has a more diverse menu, both are fundamentally fast-food burger joints. Both were founded in Southern California in 1948. Many fast-food service concepts in use today originated at either In-N-Out or McDonald's. The two companies even use the same three words as a foundation of their operating principles: quality, service, and cleanliness.

So why is the customer service experience at these two restaurants so different? In a word, culture. Culture defines everything these organizations do when it comes to customer service. 

In-N-Out founder Harry Snyder made sure the principles of “Quality, Cleanliness, and Service” were more than just platitudes. He instilled them in everything the company did – and these principles are still present in everything In-N-Out does today. Their food is fresh, not frozen. Their stores are clean, even during busy times. Their employees are friendly and well-trained. In-N-Out has maintained their remarkable consistency by steadfastly refusing to franchise their stores and resisting the urge to expand too quickly.

Culture also shapes many of their business practices, such as hiring employees. In-N-Out’s management believes a high-caliber employee is necessary to provide the service and quality they know their customers expect. They offer better wages and working conditions than their competitors which contributes to one of the lowest employee turnover rates in the fast food industry.

When Ray Kroc purchased the McDonald's concept from the McDonald brothers, he focused on rapidly expanding the business. The words quality, service, and cleanliness were clearly less important than a growth strategy based on volume, cost control, and franchising. For example, their frozen burger patties are cooked in approximately 42 seconds using a special clam-shell grill that cooks both sides of the patty at the same time. This is a remarkably fast and inexpensive way to cook burgers, but it may also be why McDonald's finished last in the 2010 Consumer Reports fast food burger rankings. (Yes, In-N-Out was rated #1.) 

While franchising allowed McDonald's to grow into a global giant, it also made it difficult for the company to control the quality of service delivered at its restaurants. Today, approximately 80 percent of their restaurants are run by franchisees and only 20 percent are run are by McDonald's, Which means the service customers receive from most of its establishments is determined by the management skills and customer service philosophy of an independent franchise owner rather than by the McDonald's organization. 

Of course, there are exceptions to every rule. Culture isn’t exclusively defined by an entire organization. Even at McDonald's, stores with managers who are good at engaging employees and motivating them to deliver outstanding service typically bring in 10 percent more revenue per year than the average.

Learning Point:

Values alone don’t define your culture. It’s what you do that counts. For another terrific example, read how Phone.com is operationalizing their values to turn them into action.