The launch of the PlayStation 3 Slim has done wonders for Sony’s sales ahead of the all important holiday season. The question is whether Sony can keep up the momentum. To widen the appeal of the new console, Sony is offering the Slim in a variety of colors, configurations, and bundles. One of the more talked about configurations is the The Final Fantasy XIII Limited Edition console created specifically for the Japanese market.
Other configurations include Need for Speed: Shift and FIFA 10 bundles for the European market, and Infamous and Uncharted 2 bundles for the UK. X-Men Origins: Wolverine and Dark Knight bundles are just around the corner.
Microsoft, not to be outdone, is offering a slew of console configurations this holiday season. So far, the US market alone will receive at least three different Xbox 360 bundles: Pure / Lego Batman, Call of Duty Modern Warfare 2 and Forza Motorsport 3.
Meanwhile, Nintendo continues to offer its Wii console in a single configuration with the same five sports games originally offered when the console first launched, no high definition option, and relatively limited storage.
Building on concepts originally developed by Barry Schwartz, we argue that too much choice can cause customers to become confused and reluctant to make a purchase. Sunstein and Thaler (2003) of the University of Chicago note,
As a first approximation, it seems reasonable to say that people make better choices in contexts in which they have experience and good information (say, choosing ice cream flavors) than in contexts in which they are inexperienced and poorly informed (say, choosing among medical treatments or investment options).
Holiday console bundles are often purchased as gifts by well-meaning parents, spouses, and other close relations, who lack the knowledge to make well informed decisions. In such cases, Sunstein and Thaler found that “what they choose is a product of framing effects, starting points, and default rules, leaving the very meaning of the term ‘preferences’ unclear.” They use the example of a tourist traveling in a foreign country to explain how unfamiliarity with a product makes the process even more challenging.
When faced with a menu listing many unfamiliar foods in a foreign country, customers would be unlikely to benefit from being required to choose among them, and they might prefer a small list or ask the waiter for a default suggestion (for example, what do other tourists like?). In such settings, clever restaurants catering to tourists often offer a default “tourist menu.”
Amir and Lobel (2009) summarize the problem as follows,
Individuals have limited information, are limited in their capacity to process large quantities of data, and have limited attention spans, calculation capacities, and memory resources. Humans are also limited in their willpower and emotional capacities.
The preference to choose default options has been demonstrated in a number of settings. For well informed gamers, the ability to choose an appropriate console or console bundle may be a non-issue. For those with less experience, the decision process is made more difficult when the benefits of one choice over another are not immediately clear. Under these circumstances, the Nintendo Wii can be seen as the default option for those with limited gaming experience, particularly when the decision is based on what others choose.
During the holiday season, the percentage of console purchases made by inexperienced consumers rises substantially. It is during this time of the year, more than any other, that a “tourist menu” of simple and easy to understand options is needed to help consumers make informed choices. Instead, retailers are inundated with a holiday menu of special edition bundles that they must sell alongside existing consoles and bundles.
In Innovation and Marketing in the Video Game Industry, we predict that the console market will soon shift in Sony and Microsoft’s favor, helped by promising innovations like Project Natal. However, contrary to conventional wisdom, by offering customers too many options, Sony and Microsoft may end up prolonging Nintendo’s longstanding market lead by making the Wii the default choice for parents and casual gamers.
References
- Cass Sunstein and Richard Thaler, “Libertarian Paternalism is Not an Oxymoron”, University of Chicago Law Review, 70(4), Fall, 2003
- On Amir and Orly Lobel, Stumble, Predict, Nudge: How Behavioral Economics Informs Law and Policy, Legal Studies Research Paper Series No. 9-006, University of San Diego, 2009
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