The subtle art of the nudge
Hands up if you’ve ever handed over 5p for a plastic carrier bag. You can probably afford 5p, but didn’t it make you think a bit about why you are being asked to pay? What about all those used supermarket bags washing up in the Antarctic? Hmmm. Maybe you’re in the habit of taking your own bags now.
More recently, Waitrose has taken the battle against plastic a step further with a trial scheme for bringing your own refillable containers for certain goods. As a Greenpeace spokesperson said: “This kind of innovation could spark a refill culture.”
Note the word culture, for these two schemes are all about changing behaviour. Not with penalties, bribes or nannyish tickings-off, but by persuading people that it could be a good idea. They are just two examples of Nudge Theory, a branch of behavioural science based on the evidence that our brains operate two systems. We have fast automatic reflex responses and slower but more rational conscious thought processes, but the first often overrules the second. Nudge theory acknowledges that it’s possible to influence the decision-making process by manipulating the context in which the decisions are made, helping us to make informed, rather than just reactive decisions.
You’ll have encountered examples of nudges in many areas of life, probably without even noticing – which is the whole idea really. In high street betting shop windows you might have seen the slogan “When the fun stops, stop.” No one is saying, don’t gamble. Instead, it invites gamblers to think rationally about the possible long term consequences.
The Santander commercial starring Ant and Dec ends with an almost throwaway message that the bank offers ways to help you reduce your mortgage term. It engages you with humour (and it is very funny) but ends with the more serious proposition that you can make changes that could affect your financial future.
In the supermarkets, fresh fruit placed at eye level has been proven to encourage healthier choices. (Hope you remembered your bag). Google applied the same methods in its staff canteen, making the healthy options much easier to see on the counter than the sugary drinks and snacks, resulting in a 7% decrease in calorie intake (according to People Management).
Nudge Theory was mooted about 12 years ago by Nobel Prize-winning economist Richard Thaler, whose ideas in his book Nudge: Improving Decisions About Health, Wealth and Happiness, have permeated throughout the public and commercial spheres. In 2010 the UK Government even started a Behavioural Insights Team, nicknamed ‘the nudge unit’. It’s now a social purpose limited company and Richard Thaler is on its panel of experts. Nudge theory is everywhere, including commerce, public policy, healthcare, and charitable giving.
The pensions world, something we have extensive experience in at Ferrier Pearce, has adopted nudge theory with great success. In 2012 the Government decreed that employers should set up automatic enrolment into their pension schemes. The theory was that people did at heart really want to do this, but were put off because it seemed too complicated. So instead of having to choose to opt in to the enrolment schemes, employees now have to make the decision to opt out. And it’s worked: the latest figures show that 10 million people have auto-enrolled into company pension schemes, and only 10% have chosen to opt out.
For HSBC, we put together a proposal showing the different nudges and triggers that would apply to a new joiner of their pension scheme. We felt that delivering these messages would be most effective if they contained personalised content relevant to the new employee’s circumstances. We devised a series of messages, delivered by SMS and email, to be sent over a period of several months and triggered by events; the most relevant being the closure of the ‘opt-out’ option after two months’ employment.
Nuffield, another pensions client, was concerned that many members weren’t making choices relating to their pension benefits due to a lack of understanding. To nudge them into making decisions, we created an online modeller that allowed members to view their projected benefits, and the difference it would make if they changed their contributions.
Similarly, in the sphere of organ donation, the opt-out system has proved much more effective in countries that use it, compared to those which use opt-in. Again, it’s something that many of us feel we ought to do, but making the decision isn’t easy, when you effectively have to contemplate your own death. Spain uses opt-out, and is the world’s leading country for organ donation.
In the broader marketing world, behavioural science and nudge theory can be effectively applied to campaigns. It can enable marketers to understand people’s behaviour and to define what they are trying to change. The science can also help marketers to evaluate the impact of the campaign, to measure change and refine it in the future.
E-marketing in particular offers opportunities to personalise messages with a verbal nudge, or to persuade customers to make a choice by telling them it’s the ‘most popular.’ Booking.com is a great user of nudge theory (in fact it’s been criticised for it) by telling customers that the hotel they are looking at is ‘in high demand’ or that ‘XX other people are also looking at it’.
It’s debatable whether this is nudge theory or just a bit of clever sales technique. After all, Booking.com isn’t trying to change someone’s behaviour or thought processes, just trying to get them to book a room.