Analysis Paralysis

I spent some time talking to my friend Rich Grote, a local entrepreneur, at TechCocktail in Boulder last night.  He mentioned that they’re struggling with pricing options, something that all entrepreneurs struggle with at some point in their lives.  He started throwing out a bunch of ideas and my head began to swim.  I thought WHOA… too many options!

I always struggle with options.  Give me 3-4 options, but definitely no more than 5 or 6, and I’m happy.  Any more than that and I get analysis paralysis and immediately move on to something else.  My brain has a visceral reaction against too many options, it shuts down.  Call it toddler + new baby + full time job + social life + extended family life brain cram and there just isn’t room in my head to be thinking critically about your product.

Having coffee today with Seth Levine reminded me he has some thoughts on this topic, so I went searching his blog and found this post on pricing tiers which warns of too many pricing tiers.  I did a little more research and learned that there is some science behind this.  Turns out that if you offer a a ton of options, you’ll get a lot of people’s attention, but very few will convert into customers.  If you offer fewer options, (4-6 actually), you’ll get less attention but tons more conversion into paying customers.  In fact, more than 10 TIMES the amount of customers than with too many options.  Melikes, less work for more money.

Interestingly, the magic number is somewhere between 4-6 options.  I vaguely remember something from my psych class in college that says when given a random string of numbers or letters, the brain can only remember about 5 -+ 2 items – somewhere between 3 to 7 items easily.  Which is why you can probably remember the new pin code of your ATM card easier than you can remember your new friend’s phone number (not that you would have to remember that anyway these days).  I wonder if that has anything to do with it.

So, I guess the old adage still holds, true.  Keep it simple, stupid so I can avoid analysis paralysis and actually buy something from you instead of moving on to your competition.

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