Nudge

In 2008, two American scholars, Richard Thaler and Cass Sunstein, wrote a book called Nudge: Improving Decisions About Health, Wealth, And Happiness. Their big idea is that the best way to change people's behaviour is to make things easy for them.

The concept of nudge is one of behavioural economics. It is based on the principle that decisions are made either automatically and quickly (System 1 decisions) or more logically and slowly after considerable thought (System 2 decisions). When concepts are hard to grasp, people may resort to System 1 processing and make quick decisions which may be sub optimal.

Governments have become interested in nudge theory but they don’t always use it. In an interview in the Financial Times in August 2019, Richard Thaler commented on how nudging could have been used in the 2016 United Kingdom European Union membership referendum (but wasn’t). The referendum was a complex decision for the voting population and yet there were only two options from which to choose and they were branded "remain" and "leave". In the FT interview Thaler made the point "One thing for sure is "remain" is a horrible name. It's weak. Whereas "leave" is strong." A simple thing like changing the word "remain" to "join" could have changed the vote because it is a positive and strong word whereas remain is passive and weak.

A much quoted example of the nudge concept influencing behaviour is using a house fly painted onto the ceramic of urinals in men's public toilets. Its purpose is to improve men’s aim and reduce splash and cleaning tasks. Similarly, placing healthy snacks close to the checkout in a supermarket makes decision-making easy and could be an inexpensive way of improving nutrition.

Nudges are small changes that are easy to implement. People often act quickly and without much thought and so a default option is usually the most frequent choice. When a company has a number of programs to offer its customers it can help decision making by highlighting one as “the most popular”. People will be induced to choose the default, guided by the belief that others have been through the consideration process and done the analysis of which is the best choice.

The nudge concept is not without its critics. It is argued that nudging may work in certain small and inconsequential situations but there are things that need a big push or shove. Indeed some changes of behaviour may also require regulations. Would people wear safety belts in cars without legislation, even if they were installed and easy to use?

Businesses can leverage nudge theory to encourage desired behaviours among customers, employees, and stakeholders. Here are some ways businesses can use nudge theory:

Choice Architecture: Design the environment in a way that encourages desired behaviours. This can include how products are displayed, how information is presented, or how options are framed. For example, placing healthier snacks at eye level in a store or presenting default options that align with the desired outcome.

Default Options: Set default options that guide individuals toward a preferred choice. Defaults have a powerful influence on decision-making. Businesses can leverage defaults in areas such as subscription renewals, online forms, or product configurations.

Feedback and Social Norms: Provide feedback to individuals about their behaviour and highlight social norms. Showing customers how their energy usage compares to that of their neighbours or displaying the popularity of certain products can influence choices by appealing to social norms.

Incentives and Rewards: Implement positive reinforcement through incentives and rewards. Businesses can use rewards, discounts, or loyalty programs to nudge customers toward repeat purchases or certain behaviours.

Simplification and Guidance: Simplify decision-making processes and provide guidance. Businesses can break down complex choices into smaller, more manageable steps, making it easier for individuals to make decisions aligned with the desired outcome.

Reminders and Prompts: Use reminders and prompts to encourage specific actions. Whether it's reminding customers about abandoned shopping carts or prompting employees to save energy, gentle reminders can have a significant impact on behaviour.

Choice Editing: Limit choices to avoid decision paralysis. By presenting a curated selection of options, businesses can make decision-making more straightforward and guide individuals toward preferred choices.

Framing and Messaging: Frame messages in a way that emphasises positive outcomes. Businesses can use language and communication strategies that highlight the benefits of a particular behaviour, making it more appealing to the target audience.

Gamification: Incorporate elements of gamification to make activities more engaging. Turning desired behaviours into a game, with rewards and recognition, can motivate individuals to participate and stay committed.

Feedback Loops: Establish feedback loops that provide information on progress and encourage continuous improvement. This can be applied to employee performance, customer engagement, or any area where ongoing improvement is desired.

Environmental Cues: Utilize environmental cues to trigger specific behaviours. For instance, placing signs or cues in strategic locations can prompt individuals to engage in desired actions.

Personalisation: Leverage data and technology to personalise nudges. Tailoring nudges based on individual preferences, history, or behaviours can enhance their effectiveness.

Some things to think about:

• Who are your targets for nudging? Are they customers, employees, neighbours or stakeholders?

• In what direction do you want to nudge these targets? For example, do you want to turn potential customers into actual customers or to persuade existing customers to buy more?

• Of all the different ways you can nudge people, which do you think will be most effective with your target audience?

• How will you track the effectiveness of your nudge campaign?