The Non-Paradox of Choice
Decision theory has an interesting idea, an observation really: too much choice may cause paralysis by analysis. This same idea has also been recently popularized as 'The Paradox of Choice' by Berry Schwartz. I think it's an unfortunate name, it makes for a great eye-grabber at the store, but it is also highly misleading. Mike Reining's article 'Stop Offering Your Customers Too Many Choices' caught my eye, it fell into the 'paradox' trap:
More choice = less sales. When I'm asked to provide critiques of people's sites one of the biggest crimes I see is the presence of too many options for a product that is unknown. When a customer is first being introduced to your product - don't give them 10 flippin' options to choose from. Don't even give them 2 options! Point them in ONE direction.
'Paradox' is too strong
I disagree with Mike. The paradox of choice does not imply that having more choice makes us unhappy, but rather, that at some point, too much choice makes us less happy about our decisions. Notice that this does not imply that choice is inherently bad, it's a far weaker statement, but it does carry some important implications. I think the root of the problem lies in the fact that nobody wants to be sold. We don't like being tricked, and we are always skeptical about an over-enthusiastic salesperson. What we want, is to feel in control; we want to be sure that our decisions are optimal - we want the 'best' deal.
Having said that, if there is only one option for a product, then we have a monopoly. Is that the best choice? Well, probably not. Lack of competition rarely fosters creation of 'best' products. Now imagine we have two products. Great, now we can weigh our options and choose what suits us best; we're better of at this point. Same trend continues for having 3, 4, 5,..., 10 choices. However, at some point, when the number of options becomes too large, there is an inflection point, and later the dreaded state of paralysis by analysis (diagram above). The sheer number of different products makes it impossible for us to weigh every option in a reasonable amount of time - you can no longer be sure that you're getting the best possible deal. A pessimist might say:
Choice is good
We might have been happier if there was less choice, but the reverse does not follow. Having none or very little choice does not make us happy. Let's make this concrete: You are looking for a digital camera, a DSLR to be exact, how does this affect you? Well, if there was only one choice, then it would be only a question of money. Given two choices you could find a review and compare the cameras feature by feature. In the end you will choose what suits you best. Same goes for 3, 4, 5 options. Only one problem, assume that we have about a 100 different options - do you really have the time or the patience to find the absolute best one in that haystack? Probably not, you'll become a satisficer, you'll settle for the optimal solution you found, but it may not be the absolute best decision in itself. Here is another way to illustrate this problem:
Imagine that all possible cameras and their 'utility', or the value for the money, is shown in this 3D-Plane. You want the best choice - that's the camera at the top of the biggest peak. However, because there are so many different choices, and features, you might actually settle for a 'local optima'. This could happen for a number of reasons, one of which is time. Time is valuable, and sometimes we simply cannot afford to spend much of it to make our decisions. And that's the 'paradox', or the problem with too much choice - when we can't measure it all, we are always left with a feeling that we might have missed something big, something better. End result: we feel worse. Solution: experts, magazines, friends - anything or anyone that can provide a shortcut in our decision making process.
Barry Schwartz argues that we need to become satisficers, or settle for 'local optima' more often than not because if you always try to get the absolute best, you'll simply exhaust yourself. After all, you might do extensive research before you buy your DSLR, but you might not care if you get the absolute best pair of shoes. There is nothing wrong with that, and in fact, that is exactly how most people go about their daily life. So is this really a paradox?
Building new products
Does paralysis by analysis imply that companies should avoid adding options into new products? I don't think so. This is a completely unrelated issue - it has far more to do with design aesthetics and product strategy, which depends on the market niche, than with consumer psychology. We all love to express ourselves through choices we make: the way we dress, the gadgets we use, etc. Scion was the first company to offer customized cars from the factory and they have been very successful. Don't be scared of choice; embrace it, because we love it, and we need it. Just be aware that swamping the user with too much, especially all at once, might cause a decrease in satisfaction.
Information designers, I hope you are paying attention.