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Perfect choice

Ubiquity, Volume 2001 Issue October, October 1 - October 31, 2001 | BY Richard T. Watson 


Full citation in the ACM Digital Library

Information age consumers are more interested in perfect choice than perfect competition. They want a wide product selection, choice in how they buy, and customization of products and services to fit their preferences.

The economists' goal for the industrial age was perfect competition. A large number of buyers and sellers acting in self-interest and with high quality information is assumed to be in the best interests of consumers. Stock exchanges and commodities markets, good examples of highly competitive settings, rely upon a high degree of standardization so that buyers and sellers can easily compare offerings.

Do consumers, however, always want standardized products? When consumers are affluent, they are more discerning and more sophisticated in purchasing decisions; they want variety not standardization. Information age consumers are more interested in perfect choice than perfect competition. They want a wide product selection, choice in how they buy, and customization of products and services to fit their preferences as closely as possible.

Product Choice

When buying a product or service, consumers like the widest possible choice. The online book and music stores exemplify the tremendous choice that consumers have in the information age. These online stores, usually offering every book or CD that is currently in stock somewhere, boast millions of titles. It is not only the range of titles that is impressive, but the range of reviews that prospective buyers can read prior to the purchase. The opinions of other readers are often key factors in deciding whether the particular book is the right one for you. Consequently for some products, the combination of complete access to all available with informed opinion presents almost perfect choice to the consumer.

Online clothing stores offer consumers a wide range of products in a range of colors and sizes that traditional clothes stores cannot match. Now, in line with the push to perfect choice, some retailers (e.g., offer virtual models that can be used to "try-on" outfits. The virtual model can be tailored to the Web site visitor's height, weight, body shape and coloring, and stored for use on subsequent visits. Other tools suggest combinations of clothes that meet the customer's expressed color preferences.

Channel Choice

Consumers want to choose how they purchase (e.g., a regular retail outlet, outlet mall, mail-order catalog or Web site). Some retailers, particularly in the clothing market, offer such a variety of channel choices. Thus, those in a hurry might elect to buy online while bargain hunters will take the time to travel to a local outlet mall. Consumers will switch between channels depending on the circumstances. Sometimes shopping is recreational (e.g., the outlet mall visit) and other times it might be driven by urgency (e.g., overnight delivery via an online retailer). The key issue is that consumers now expect a wide choice in how they buy.

Component Choice

The online build-to-order model, pioneered by Dell Computer, is an excellent example of how consumers are able to configure a product to match their needs. Build-to-order can be extended to a wide range of consumer durable products and to electronic services. For example, cars, bicycles, motorcycles, stereo systems and other high-end consumer durables could be manufactured on a build-to-order basis. Customers are increasingly expecting customization. They prefer to decide the component combination that best meets their needs.

Electronic products and services provide the greatest opportunity for component choice. For example, a news service, such as CNN, can easily be chopped into news stories so that consumers have almost perfect choice with regard to the news that they receive via their customized Web site. allows customers to mix their own CDs. No longer do you have to accept the record company's grouping of songs on a CD; you can cut a CD customized to your needs. Part of the appeal of Napster, besides the free songs, is that it allows consumers to get exactly what they want, when they want it.

Implications for Business

A positive side of perfect choice is that it moves customers away from focusing on price because customized products are not standardized, and thus alternatives are not so readily comparable. Furthermore, customers are often willing to pay for customization, and thus it can be a more profitable business strategy than staying in price competitive market.

Product range can often be extended through virtual inventories. Car dealers, for example, can take advantage of Manheim Online's CyberLot to offer customers a wide range of cars without extending the acreage of the lot. Virtual inventory increases product choice with little additional cost. The Internet makes wide product choice an option for many businesses. Brick and mortar businesses can offer customers increased channel choice by opening a Web site. Alternately, some Web-based firms (e.g., Gateway) have learned that some customers are attracted to retail outlets.

Firms need to explore how they can break their products and services into components that customers can recombine as they see fit. Is your business making aggregation decisions that your customers would prefer to make? In such a case, shift the choice to where it belongs, to the person who really knows what the customer wants -- the customer.

Richard T. Watson is the J. Rex Fuqua Distinguished Chair for Internet Strategy and Director of the Center for Information Systems Leadership in the Terry College of Business at the University of Georgia.


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