September 23, 2016
New Healthcare Consumers and The Paradox of Choice
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Barry Schwartz’s Ted Talk on the Paradox of Choice inspires us to consider how too much choice in the post healthcare reform market may unintentionally have adverse affects on consumers. Case in point: Barry’s citation of a study regarding how consumers respond to choice in selecting retirement funds. The results potentially foreshadow the eventual buying behavior of new healthcare consumers.
If you start watching at the 8:20 mark, Barry outlines the following story:
All of this choice has two effects, two negative effects on people. One effect, paradoxically, is that it produces paralysis, rather than liberation. With so many options to choose from, people find it very difficult to choose at all.
I’ll give you one very dramatic example of this: a study that was done of investments in voluntary retirement plans. A colleague of mine got access to investment records from Vanguard, the gigantic mutual fund company of about a million employees and about 2,000 different workplaces. And what she found is that for every 10 mutual funds the employer offered, rate of participation went down two percent. You offer 50 funds — 10 percent fewer employees participate than if you only offer five. Why? Because with 50 funds to choose from, it’s so damn hard to decide which fund to choose that you’ll just put it off until tomorrow. And then tomorrow, and then tomorrow, and tomorrow, and tomorrow, and of course tomorrow never comes.
Understand that not only does this mean that people are going to have to eat dog food when they retire because they don’t have enough money put away, it also means that making the decision is so hard that they pass up significant matching money from the employer. By not participating, they are passing up as much as 5,000 dollars a year from the employer, who would happily match their contribution. So paralysis is a consequence of having too many choices.
In every conference I attend and blog post I read, I keep hearing that the more choice the new healthcare consumer has the better off they will be. But is this really true? At what point will healthcare choice produce diminishing returns? For healthcare and ancillary benefit distributors, connecting through the chaos with consumers will ultimately be key to success in the post reform marketplace. And – given market conditions currently include unquantified consumer demand and an over-saturation of suppliers – learning how to do this will take time and experimentation.
That’s where my company Ancilyze comes in. Ancilyze specializes in conducting A/B testing and employing optimization techniques for healthcare distributors. By helping our clients make persona-based offers tailored to individual buying behaviors, Ancilyze helps minimize the effects of too much choice. To learn more, visit ancilyze.com.
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