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Nudge

Use this framework to influence choices made by customers or employees

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?

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