When businesses opt to compete with better established brands or larger competitors they often think in terms of expanding their product offerings. A recent study by management school professors John Gourville (Harvard) and Dilip Soman (University of Toronto) suggest that too many choices can be as bad if not worse than too few. When choosing to expand product offerings it is as important to recognize the parameters of competition where variety is an advantage and when it merely overwhelms the consumer. As Gourville points out in this HBS Working Knowledge piece - When Product Variety Backfires:
Assortment type refers to the types of tradeoffs an assortment demands of a consumer. An alignable assortment is one where products vary along a single dimension—such as size or speed or capacity. Therefore, the tradeoffs are "within attribute" tradeoffs—do I want more or less of this dimension? This type of assortment tends to be good. For instance, when you go shopping for Levi's 501 jeans, the fact that there are hundreds of combinations of length and waist sizes allows a person to find the one that fits best.
The second type of assortment, non-alignable, involves tradeoffs across dimensions. An example would be laptop computers that vary in configuration, with one having a CD-ROM and another having a wireless modem. Entrees in a restaurant would be another example. In these cases, choosing one alternative provides you with some features, but forces you to forego other features. This type of variety tends to be bad. You can think of this as the cold-medicine problem. You have a cold, go to the store, and are faced with twenty different types of cold tablets from a single manufacturer: one for a cold plus sore throat, another for a cold plus nasal congestion, another to be taken only at night, another to be taken during the day. You are suffering and you just want to feel better, but you have to pick and choose what symptoms you have and don't have. We call this "overchoice."
And while the business has to be careful with eliminating products the effects can be pronounced. In one example the professors noted a reduction in variety led to increasing revenues by 11%. And by assisting the consumer with finding what they need from among the alternatives, it helps the bottom line by reducing production, marketing, inventory carrying and distribution costs while bringing into sharper focus those attributes that really matter. The professors also note that innovative products that are closer to existing alternatives are adopted faster when the consumer doesn't need to go through a steep learning curve to appreciate the benefits and value proposition. A good brief read on why less can often be more.