Knowledge Bank Blog, Pricing & Promotions, Range & Portfolio

Satisficing vs Maximising

What type of choice are you encouraging?

Consider this situation.  You are going for a weekend break to Barcelona.  You can book flights with 2 airlines.  Airline A offers extra legroom, pre allocated seats, complementary food and drink.  Airline B has less legroom, no pre allocated seats and you have to pay for food and drink.  So, the experience is likely to be better on Airline A.  However, Airline B is £50 per person cheaper for a return trip.  Which do you choose?

If you chose Airline A, you would have made what is described as a ‘maximising’ choice.  If you chose Airline B, you would have made what is described as a ‘satisficing’ choice.

Put simply, a satisficing choice is one where we are looking for something that is good enough.  Whereas, a maximising choice is one where we are trying to get the best available.

We are not always aware of it, but we are making these choices all the time.  From where to go on holiday, what to have for lunch, to what toilet paper we buy.  Whether you satisfice or maximise depends on a number of factors – e.g. how habitual you are, how much you have (or are prepared) to spend, how important the choice is to you, how much time and energy you have available.

Why are we talking about this?  Well, we think these two types of choices play a big role in our industry.  Whether that is which store a shopper goes to or which products they buy when they are in the store?  Prepared to pay a bit more for better quality?  You are maximising.  Pay a bit less for good enough quality?  You are satisficing.

Now, this is all nice and interesting for us, but the average shopper isn’t walking around the store thinking ‘shall I make a satisficing choice or a maximising choice this time?’  They are using some simple mental shortcuts that allow them to cut through and make these choices quickly.

So, what are some of these shortcuts?

PriceThe satisficing choice = low absolute price.  The maximising choice = the best value for money.  If you want the shopper to make a satisficing choice emphasise the actual price point – e.g. discounters going head to head with brands.  If you want the shopper to make the value for money choice, reframe the choice.  Yes, Tea A costs £1.60 more than Tea B.  But that is only 2p per cup of tea.  Would you pay £1.60 more for the box?  Probably not.  Would you pay 2p per cup more for 80 better cups of tea?  Yes, maybe.

Quality (or Performance). The satisficing choice = good enough is good enough.  The maximising choice = a clear quality or performance advantage.  If you want the shopper to satisfice, you want them thinking that all the products do pretty much the same job.  If you want them to maximise, you need to clearly demonstrate a competitive advantage.  Something you can deliver that competitors can’t.  That is worth paying a bit more for.

Presentation. The satisficing choice = they all look the same on shelf.  The maximising choice = it looks much better on shelf.  If everything is sold in the same way, looking very similar on shelf, you are suggesting the shopper makes a satisficing choice – they are much of a muchness.   If you want the maximising choice you need to have the right ‘body language’.  This could be primary packaging cues, the quality of the outer or shelf ready packaging, the quality and differentiation of the merchandising and display.  As we’ve said a few times before, presentation = perception.

Promotions. The satisficing choice = buy whatever is on deal this week.  The maximising choice = buy my preferred brand and if it’s on deal it’s a bonus.  The volume of promotions in most categories has directly encouraged satisficing choices.  Many maximising brands have now become satisficing ones.  You have to hold your nerve if you want to encourage a maximising choice.  For a brand that never takes it’s eye off the maximising ball, look at Peroni.  The typical promotional discount is around 6-10%.  And they still get secondary displays in most retailers!

Of course, to make all this work, you need to be clear what type of choice is good for what you are selling.

It all boils down to ‘why pay more’.  To drive a satisficing choice, you are prompting a question – ‘why pay more?’  You don’t need to.  To drive a maximising choice, you are providing an answer – ‘why pay more…’ Well, this is the reason to.

The same 3 words can lead to very different results.

On a separate note, our monthly article in The Grocer goes out in tomorrow’s edition .  There is a link to it on our website….

Feel free forwards.  Have a great weekend and speak to you next week.