Choice and oligopolies
I just read Barry Schwartz's book The Paradox of Choice (2004, Ecco/Harper Collins). The book makes a convincing case that the growing number of choices both in the market and life has made people, in general, less happy and may well be correlated with increases in depression in First World countries. While a growth in choices is empowering up to a point, people increasingly are tangled in issues of remorse, disappointment, empty status-seeking, and an ability to be content with good enough.
While Schwartz's book deals with bigger issues like career choices and picking a mate, the book discusses in some depth the choices involved in interacting with the modern consumer goods market.. His examples are based on the variety (often what we have called the pseudo-variety) of variations on basic products that make it harder, not easier, for the consumer.
Psychological studies have shown that, contrary to rational expectations, the ability to choose between scores of options makes people either avoid any choice or regret the choice they do make. "A large number of options may discourage customer because it forces an increase in the effort that goes into making a decision. So consumers decide not decide, and don't buy the product. Or if they do, the effort that the decision requires detracts form the enjoyment derived from the results."
Then why do companies persist in adding variations of the same product in such a way to make choices hard? Why does Danone offer so many flavors of yogurt, Nabisco (Altria) many types and sizes of cookies, Procter & Gamble so many variations of Crest toothpaste, Anheuser Busch so many equivalent beer varieties? If Schwartz is right, and I think he is, then these customers are making many of their customers more unhappy with the prospect of choosing their products and less content with the necessities they do buy.
Clearly these companies' marketing departments are not run by dummies. But there are, I think, several reasons why they are willing to risk trying the patience of their customers.
First, there is the issue of shelf space, which we have discussed. If Smucker's doesn't come out with a wide array of flavors, sizes, and approaches (low-sugar, no sugar, just fruit), they risk losing shelf space to a competitor who will offer boysenberry or black cherry preserves, even if the majority of buyers only want strawberry or raspberry. Defense of shelf space is a key motive.
Second, companies with well-established brands have a big advantage when shoppers are fatigued. That's when they are more likely to reach for something that looks familiar rather than shop carefully looking on price and specific qualities. Straying from the biggest brands (almost all owned by oligopolies) takes work.
Finally, the blanket coverage discourages new rivals. Suppose you're a local producer of apple juice who wants to break into the market. You (with luck) go to the buyer for a supermarket chain with your own sugar-free, organic apple juice, a great product The buyer tells you the following: "How can you compete against Mott's (a division of beverage powerhouse Cadbury-Schweppes), which has two varieties that you'll have to battle with: Mott's Natural and Mott's Plus Light. There's also Martinelli's, a mid-size, established privately-held cider maker, who sells its Unfiltered Apple Juice, Organic Apple Juice, and Organic Sparkling Cider brands. Finally, there's Earth's Best, a division of major food maker Heinz which also sells its own brand of organic Apple Juice aimed at children. That's three major vendors with some ability to promote their products. And that's not counting all the varieties of non-organic apple juice sold by well-established companies. I don't need or want you. My advice, forget about it."
The calculation is that the benefit from keeping out rivals, grabbing more space on the shelves, and getting the benefit of throw-up-the-hands default purchases far outweighs the distress and dissatisfaction to the customers.
4:19:14 PM 
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