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The Power of Choice

There is a relatively new science called behavioural economics that should become prescribed studying for anyone doing business with people. It’s about explaining, or trying to explain, the irrationality behind the decisions we make – particularly when it comes to saving or spending money, honesty and numerous other everyday choices that we might take for granted.

One of the major issues potential buyers in the housing market face today is choice: there’s too much of it. So, in an attempt to get prospective homeowners to buy from us, we may fail to understand the impact of choice on decision-making.

In a controlled experiment (by psychologists Sheena Iyengar and Mark Lepper), shoppers walked past a display of six jams and another of 24 jams. While 40% of shoppers stopped at the small display and 60% at the larger one, their purchasing behaviour differed remarkably. A mere 3% of shoppers purchased jams from the 24-jar display, despite being offered a discount. But 30% of people purchased jam from the smaller display.


You see, offering a lot of choice is great for attracting attention. But it’s not great for getting people to buy.

Generally, people don’t like making choices so when there’s too much to choose from they end up abdicating the choice and taking no action at all. Choice paralysis often results as people tend to become confused by all the options.


An often-ignored effect of too much choice is regret or satisfaction once a choice has been made.

People hate losing. Therefore they often reflect on the choices they’ve made post-purchase or after the fact. This is what led to the inclusion of “cooling off” clauses in many purchasing contracts for bigger purchases such as houses and cars. Findings show that when people have too much choice, and feel that they were pressured in any way to make a choice, they tend to experience more regret than at times when they were given fewer choices.

I saw this happen with my wife when we were looking at purchasing a new home a few years ago. We decided on the area, the price range and then – knowing what I do from my line of work – I narrowed our search to four homes. At every potential home, she told me what she liked about it but then did her own online search. Then we looked at several other homes and made the inevitable comparisons afterwards.

“I like the kitchen in house one, but not the bathrooms. I prefer the bathrooms in house three,” she’d say. We ended up spending entire days being chauffeured around by estate agents who showed us far too many houses. Eventually I called off the search and we stopped looking for a few months. There was simply too much choice.


Behavioural research suggests that the best way to nudge people towards making a decision is by carefully managing their available choices.

When people have two choices, say, between medium and large, they’ll choose medium (the smaller or cheaper option) the majority of the time. How can we get them to buy the larger, more expensive option? Simple: give them a third option – an even bigger, more expensive choice.

What happens now is that people start weighing up the decision in terms of what they can gain or lose by taking each one of the three. People hate losing more than they like winning, thus the choice becomes fairly straightforward. They tend to go for the middle one as it represents the “best” in terms of this bias. They don’t feel they’re losing by choosing the smallest one; at the same time they feel they are gaining by not buying the “expensive” one. By managing our clients’ choices, through understanding these three principles, we make it easier for them to make decisions they feel happier about once they’ve made the choice.


PP-Sept-Oct-2015-Motivation-Update-Erik-Vermeulen-570x570Erik Vermeulen is a behavioural economics strategist who helps companies better understand the behaviour of their customers and employees, in order to be more effective and profitable.

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Words: Erik Vermeulen


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