You may have heard people talk about nudge theory lately. It’s actually been gaining popularity for some years now, but the recent award of the Nobel Prize in Economics to Richard Thaler, one of its biggest proponents, has helped to create a real buzz about it.
So, what’s nudge theory all about? And how can sales and marketing professionals apply it to improve their results? Here’s a brief guide.
What is nudge theory?
Essentially, nudge theory is the idea that small interventions or incentives can encourage people to make better decisions. It’s about making it easier for them to do something that’s in their best interests.
To quote Thaler and his co-author Cass Sunstein in their book Nudge, published in 2008: “By knowing how people think, we can make it easier for them to choose what is best for them, their families and society.”
Does it work?
It certainly appears to. In the UK, for instance, requiring people to opt out of auto-enrolment pensions (rather than opt-in), has led to a big increase in membership of company pension schemes. Spain and France, meanwhile, have addressed a shortage of organ donors by adopting a similar approach.
Why is it so effective?
Dan Ariely, an expert in psychology and behavioral at Duke University, explains it like this: “Usually when people approach solving problems, they think, ‘Let’s just give people some information and then they’ll make the right decision. (But) change comes not from the inside, but the outside. If you want people to lose weight, give them a smaller plate. You have to change the environment.”
Robert Cialdini puts it another way. In his book Influence, he describes two types of decision making. The first he calls controlled responding, a “thorough analysis of all of the information.” The second he calls "judgmental heuristics,” "mental shortcuts" or "triggers" that allow for "simplified thinking”. We might prefer to think of ourselves as controlled responders, but most of us are actually more likely to be influenced by the latter.
What can marketers and salespeople learn from it?
Anyone works in sales or marketing will tell you that indecisiveness is a huge barrier to conversion. That’s why big brands and marketing agencies have been applying the principles of nudge theory for some time.
Common examples of nudge marketing include:
What part can video play?
Studies have shown that video is a very effective way to nudge people into doing something. In 2016, for example, three US academics conducted an experiment to see how best to encourage low- and-moderate-income households to save more. Working with VITA, the Volunteer Income Tax Assistance Program, they assigned individuals at random to four separate treatment groups. The group that responded best — i.e. that was persuaded to put the most money into savings — was the group that was given a series of coaching videos to watch, explaining why they should have more.
Finally — a word of warning
Yes, nudge marketing can be very effective, but it can also misfire if not done properly. Jason Sasso from the digital marketing agency Swell gives four important pieces of advice:
— Guide, don’t manipulate. Nudge in little steps. Don’t be too pushy.
— Don’t condescend. Find what motivates your audience and appeal to that.
— Add a motivation. Use motivational psychology instead of just asking your audience to do something.
— Bad nudges are worse than none at all. Get it wrong and you come across as condescending.