Nudge theory: How brands can empower customers through behavioral science

Nudge theory: How brands can empower customers through behavioral science

September 27, 2018

As the fathers of nudge theory, Richard Thaler and Cass Sunstein have seen their ideas applied elegantly in business, health care, and government. But one of their favorite illustrations of nudging comes not from the lofty domains of corporate or public policy. Rather, it begins in a men’s restroom in Amsterdam’s Schiphol Airport – inside the urinals, in fact.

Thaler, a Nobel Prize-winning economist, and Sunstein, a Harvard Law School professor, are intimately familiar with the problem of misfired urine. “As all women who have ever shared a toilet with a man can attest, men can be especially spacey when it comes to their, er, aim,” the pair noted in a 2008 article. “In a busy airport restroom used by throngs of travelers each day, the unpleasant effects of bad aim can add up rather quickly.”

Confronted with the problem of urine-soaked floors, an economist employed by the airport suggested a novel solution. Within the urinals’ bright white bowls, he proposed, Schiphol’s leadership should print the black silhouette of a fly. Men would be inclined, he reasoned, to target the fly with their stream, thereby keeping their urine where it belonged.

The success of his experiment surpassed all expectations: Once the flies were etched upon the urinals, “spillage” declined 80 percent. When presented with a target, men seemed compelled to aim at it.

While Thaler and Sunstein value this example’s humor, they are entirely earnest about the model for behavioral change that the urinal fly exemplifies. They view interventions of this kind as alterations of “choice architecture,” the environmental contexts in which human actions and decisions occur.

“Because seemingly tiny changes in the environment can influence behavior, choice architects wield immense power,” Thaler and Sunstein explain. “Theirs is a gentle power, since they merely nudge rather than coerce.”

Nudging is a gentle power

Nudging Customers: An Ethical Opportunity

Nudge theory celebrates the substantial impacts of seemingly small changes: With minor adaptations to the structure of our experiences, human behavior can change dramatically. Alter a single aspect of the environment or context in which a choice is made, and outcomes may differ radically.

This view explicitly refutes purely rational models of human decision-making. The discipline of economics, for example, has traditionally regarded individuals as logical, self-interested actors, responding to tangible incentives. According to this account of human choice, tiny changes in the environment should have no influence at all upon the way we act.

Conversely, Thaler and Sunstein explored a more nuanced set of dynamics in their magnum opus, “Nudge: Improving Decisions About Health, Wealth, and Happiness.” However much we value critical thinking, they assert, our choices are frequently determined by nudges as small as a fly printed on urinal porcelain.  

Unlike mandates or bans, nudges utilize psychological and behavioral insights to guide human behavior toward the desired outcome. Individuals retain the power to choose among alternatives, but the structure of their choice favors one particular outcome in particular. Sunstein has called nudges “liberty-preserving approaches that steer people in particular directions, but that also allow them to go their own way.”

In the context of public health challenges, nudges represent exciting tools to encourage beneficial behaviors: When a behavioral design is employed to reduce smoking or induce healthy eating, few people object. When companies begin to nudge customers, however, ethical concerns often arise.

Although Thaler and Sunstein encourage their readers to “nudge for the good,” some critics suggest their findings are ripe for misuse. If our choices depend so thoroughly on contextual influences, could unscrupulous companies deploy nudges to manipulate consumers?

These concerns are worthy of consideration, and bad actors certainly use every tool of influence at their disposal. But our experience suggests that brands can and must embrace behavioral science to connect with customers – rather than deceive them. With over nearly two decades of helping brands understand the human truth of their customers, we know that any sustainable strategy will be rooted in shared values.

Modern consumers are increasingly interested in the principles that brands embrace. Beyond transactional concerns like price, customers invest in companies that align with their personal convictions and aspirations. This alignment is the basis of brand promise: The most powerful brands in the world help customers realize some aspect of their own potential.

But if a brand aspires to help its customers progress toward common goals, it must respect their reality. That means abandoning the purely rational view of human behavior and embracing nudges as a means to encourage and support consumers’ positive choices.

At its best, therefore, a behavioral design is superb service, rather than mere manipulation. When brands nudge for the good, they honor the human truth at the heart of customer experience. That’s what building a trusted brand is all about.

As Sunstein explains, “The beauty of nudges is that when they are well-chosen, they make people’s lives better while maintaining freedom of choice.”

Well-chosen nudges improve peoples lives while maintaining the freedom of choice

In this post, we’ll borrow from Thaler and Sunstein’s work to illustrate three types of nudges your brand can implement to empower customers. By altering the choice architecture of your customer experience in these simple yet powerful ways, you can truly fulfill your brand promise.

Nudge Theory: Three Applications to Empower Customers

Defaults Drive Action

Opt-in vs. Opt-out Defaults

When people select from among several options, we assume that their choices reflect the intrinsic merits of each alternative. Therefore, the inclusion of a default selection shouldn’t alter outcomes significantly, right?

Thaler and Sunstein have consistently proven otherwise. The inclusion of a default option can shape the way individuals make decisions, even if the possible choices remain entirely unchanged. When a particular option is designated as the default selection, the choice architecture shifts powerfully in its direction.

Two European nations provide a striking illustration of this principle. Spain far surpasses any other country in the world in rates of organ donation; as a result, thousands of lives are saved or extended each year. In the U.K., however, per-capita organ donation amounts to less than half of Spain’s rate.

Experts attribute this dramatic gap to the influence of defaults. Spain maintains a system of “presumed consent,” in which citizens must “opt out” of organ donation. In the U.K., individuals who wish to donate their organs must “opt in,” explicitly indicating that desire.

Clearly, what to do with one’s own organs is a deeply personal decision. And yet even though Spanish and British citizens are presented with identical options, the structure of the question shapes their responses with dramatic effect.

In discussing how defaults influence organ donation rates, celebrated behavioral economist Dan Ariely notes that we’re particularly drawn to the path of least resistance when confronted with unexpected complexity. As we mechanically proceed through D.M.V. forms, the organ donation question suddenly forces us to consider matters of life, death and the significance of our bodies.

“It’s not because we don’t care,” Ariely explains. “It’s actually the opposite. It’s because we care; it’s difficult and it’s complex. And it’s so complex that we don’t know what to do. And because we have no idea what to do, we just pick whatever was chosen for us.”

How might a default nudge allow your brand to better serve customers in moments of uncertainty or complexity? Suppose you’ve introduced an exciting new service at no additional cost to customers. Surprisingly, however, few new customers are opting for this benefit, even though it could dramatically improve their experience.

Could shifting to an opt-out structure in the sign-up process help your brand serve them better? Nudge theory suggests, yes.

Easy Is Effective

Nutritional nudge?

Are our choices dictated by our innate desires or the accessibility of various options? According to Thaler and Sunstein, our choices often reflect what is easiest, rather than what we want most. If brands hope to support their customers’ hopes and ambitions, they had better make their assistance convenient.

Consider an experiment conducted by Dutch researchers in train station convenience stores. In the control group, the researchers maintained the usual assortment of junk food one typically finds close to the register. But in the experimental group, the researchers placed healthy options, such as fruit, on the checkout counter instead. In yet a third group, researchers placed healthy options and an explanatory sign by the register, declaring that they hoped to help customers make healthier choices.

In stores in which the healthier items were nudged into view, customers’ purchasing patterns were significantly healthier. Moreover, letting people know about the nudge did not impede its efficacy. In fact, most customers surveyed later voiced appreciation for the experiment.

This finding suggests that nudges can support positive choices explicitly and still be effective. Through well-designed changes in choice architecture, brands can take pride in making it easier for customers to make good decisions. In turn, customers can then appreciate a brand for having their backs.

How could your brand help consumers to achieve their own goals by making good choices easier? Perhaps your customers need to dig through website menus before they can access options necessary to make the most of your services. Or maybe some of the advantages of your product or service are largely unknown, even to current customers.

Whatever the case may be, don’t bury your business’s proverbial fruit at the back of your store. Your customers will thank you for making things easy.

Other People Are Proof

The power of social proof

Human beings are social creatures, and our choices are frequently influenced by patterns of behavior we observe in others. The notion of social proof is especially relevant in the age of Instagram: When we see influencers and thousands of their followers embrace a given product, it’s hard to resist the conclusion that we should buy as well.

But the persuasive power of a crowd precedes social media. Nightclubs frequently stagger entry into their establishments, artificially creating a line outside – and the illusion of popularity. If a club is worth waiting for, we assume, other people must be on to something.

The nudge of social proof can empower our best instincts as well, however. Sometimes, conforming to the crowd means doing real good.

The Behavioral Insights Team of the British Cabinet Office conducted an experiment pertaining to charitable giving. Particularly, they examined which factors might encourage people to donate to charities directly from their pay each month, in a program called “Payroll Giving.”

Noting the dynamics of social proof, the researchers hypothesized that showing participants the names and pictures of colleagues who already enrolled might cause others to do the same. Relative to a control group, workers who received a message bearing the name and picture of a colleague were twice as likely to give.

How can your brand use social proof to encourage customers to make positive choices? Perhaps a large percentage of your customer base particularly enjoys one of your products or services or finds value by buying in large quantities. By making these facts known to your customers, you can nudge them toward selections they’re likely to appreciate.

From Knowledge to Nudge: Behavioral Science for Your Brand

As our discussion makes clear, effective nudges can vary dramatically in both form and function. But behind each one lies an earnest curiosity about the engines of human behavior, and the conviction that small changes can yield great dividends.

Conversely, many brands resist this mode of exploration: Reconsidering various aspects of the customer experience simply seems too daunting. Accordingly, they adhere to rigid patterns of performance, wary of calling the premises of their business into question. For companies guided primarily by precedent, behavioral science strategies like nudging can seem entirely too novel.

While we empathize with this perspective, we find the insights of behavioral science too important to ignore for the modern brand. To understand and serve customers at a distinguished level, companies must engage with the latest findings of the social sciences. Thankfully, they need not embark on this journey alone.

At Brandtrust, our team of scientists and researchers pools years of interdisciplinary experience to study the human truth at the heart of business challenges. Working with many of the world’s most admired companies, we’ve established evidence-based methodologies for analyzing the customer experience and recommending effective solutions.

Our processes pair open exploration with behavioral science expertise, revealing interventions that can transform the way your brand does business. Whether your challenges require an entirely new strategy or a simple nudge, our work will illuminate the way forward.

To learn more about our distinctive approach to helping brands access their untapped potential, explore our array of services here.

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