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12 Jan

Deepa Bhargava

Search Consultant

This post originally appeared on Deluxe by Joe Swatek


What do pizzas, jars of jam, and burgers have to do with your checking account marketing? A possible paradox. Let me explain.

AdvertisingAge published a story about Pizza Hut’s menu changes. The chain added 20 new crusts (I didn’t know there were that many), six new sauces, and 11 new specialty pizzas. Now you need a computer, not a menu, when you visit the restaurant. Pizza Hut story reminded me of a marketing test one of my blogging colleagues, Steve Topper, often talked about and used as a prime example of the Paradox of Choice. Steve often advised financial services marketers to offer only a few quality checking accounts rather than a wild array of choices. In one blog post, Steve compared checking account choices to the menus at burger joints.

So what does the paradox mean?

Studies show that rather than being happy with a wide variety of choices, the average consumer prefers fewer choices. With less to choose, the process is much easier. The big selection results in confusing, complicated choices that may prevent a choice or could leave doubts in the consumer’s mind. Did he or she make the right decision?

The jars of jam example illustrates the paradox. A psychology grad student set up a table at a popular supermarket. Shoppers were offered tastes of jams and allowed to buy jars of the flavors they liked best.

During part of the test, there were six flavor choices. Other times, 24 flavors were available.

While you might think the more flavors the better, sales were lower when 24 flavors were offered and highest when there were only six choices. It’s counterintuitive. (See a more detailed description of the test here.)

This test seems to repeat the same results when applied to other products.

What does that mean for banks and credit unions?

So how many checking accounts does your financial institution offer? Seven? Eight? Ten?

For years, my colleagues and I have recommended a core five personal checking accounts…

   -    Free checking
   -    Interest-earning checking with a low minimum balance
   -    Interest-earning checking tied to direct deposit or another service
   -    Age 50+ free checking with perks
   -    Premium checking that includes tiered interest and other incentives

These five core checking accounts will satisfy all or nearly all of your customers, members, and prospects. Each account gives a differentiating and distinct set of features and benefits, so consumers find it much easier to make a choice. The number of choices isn’t overwhelming, which would cause an individual to give up and move on.

Now imagine going to a Pizza Hut location and deciding which of the dozens of possible combinations of pizzas, new and old, you can order and how confusing it could be for you. You don’t want to confuse your own potential account holders with a similar situation.

The acronym KISS has been around for a long time (since about 1960) and it’s still good advice today. Keep your checking account lineup, as well as your other accounts and services, simple. If you confuse consumers, they’ll find a financial institution where the choices are easier.



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