IN BIG BUILDER'S DECEMBER 2004 ISSUE, we reported that even after Pulte Homes scales back the product variations it offers home buyers, the number of choices for a home hunter still would hover in the stratospheric range of more than 1,000 plans. Unfortunately for many big builders, plan over-proliferation is not atypical—not even in this segment of the home construction business that most relies on economies of scale for profitability. The plenitude in choices is due, at least in part, to lots of builders being great at putting Americans' evolving dreams down on paper and then into reality on a building lot. For years, the term “mass customization” has been all the buzz, and it's no wonder builders have gone to every possible length to accommodate consumers' demands to “have it their way,” even at the expense of valuable time and focus, if not money.
As consumers' expectations change—the youngest adults often leading the charge to shape the features and benefits of products and services around their individual passions, interests, and tastes—the line between customization and options and upgrades that are profitable gets blurrier for builders. “This amount of customization just doesn't happen in other businesses,” says Warrenville, Ill.-based Neumann Homes' president Ken Neumann as he explains why his own firm sticks to a finite number of home plans with no exceptions. “If someone buying even the most expensive production car said they wanted it with pink leather interior, they'd get laughed out of the car dealership. We've taken ourselves out of the market for some home buyers because we're not set up to do custom plans,” he says. “We just decided we can't be everything to everyone.”
It would appear that Neumann's lack of give on the mass customization front might not be the disadvantage he imagines it to be. Consumers are largely overwhelmed when it comes to having to choose from so many options in the consumer goods and services world, and it seems that home buyers are no less afflicted.
To get at the issue of how American consumers are increasingly at wits' end over the mind-numbing number of choices they have to make as they carry out transactions large and small, we asked consumer market futurist Andrew Zolli to query Barry Schwartz—author of one of business publishing's hottest titles, The Paradox of Choice—on how his theory might apply to home buyers. What follows is an e-mail dialogue on how the over-abundance of choices often leaves consumers feeling less-than-elated, and suggestions on what builders might do to address that sentiment.
Andrew Zolli: You note in The Paradox of Choice that Americans are the wealthiest, the most choice-laden, and the saddest people in the world. How do these facts correlate?
Barry Schwartz: One of the factors leading to increased sadness in the face of increased wealth is that people are overwhelmed with choice. All this choice puts great pressure on us to figure out what to choose and increases our expectations about how good the results of our choices will be, so that we end up disappointed even with good choices. It also increases the chances that we will regret our choices and increases the chances that we will blame ourselves when choices disappoint. Choice overload can also lead to a kind of decision paralysis, where we have so much trouble deciding what to choose that we end up choosing ‘none of the above.' A striking example of this is the finding that as the number of 401(k) options offered to people by employers increases, the chances that people will choose any of them decreases, even though failure to choose often costs employees significant amounts of matched money from employers.
AZ: The constant proliferation of choice could be seen as an engine of innovation, ‘discovering' variations that wouldn't otherwise be found. In this sense, could choice abundance be bad for us individually and good for us collectively?
BS: Yes. And the reverse is also true. For those who can manage choice, and who accumulate enough material resources to take full advantage of it, more choice can be good. That is, for the ‘successful' individuals, the more choice the better, while for society as a whole, all this choice produces less and less life satisfaction.
AZ: Americans bought 1.6 million homes last year, and despite worries, the housing market continues to be strong. Is housing, like other consumer goods, subject to the paradox of choice? Or is housing—perhaps because of the level to which we can customize it, or because it is intrinsically a ‘long-term' good that we live with for years—somehow different?
BS: My sense is that the only thing that makes it possible for people ever to pull the trigger and buy a house is that financial constraints limit their options. In related terms, they are buying houses that are already built, so they can't remake everything. If people had the same kind of flexibility in buying a house that they do in buying jeans, everybody would still be renting.