By Heidi Dietzsch
You’re standing in the line at the supermarket’s check-out counter with all the groceries you need in your trolley. Out of the corner of your eye you notice your favourite chocolate bar and casually add it to your shopping. Or you are ordering a take-away hamburger and milkshake. The server asks if you also want chips and without blinking, you answer yes.
We don’t often think about these influences on our behaviour, but they are in fact some of the many small contextual cues or “nudges” that businesses use to make us buy more of their products. Nudging is a concept in behavioural science, psychology and economics which proposes positive reinforcement and indirect suggestions as ways to influence behaviour and decision making.
Behavioural psychology, often incorporating nudge theory, is regularly used in market research and advertising. The way words are used is powerful and has the capacity to change people’s minds and the actions they take. In other words, researchers and advertisers can guide people to engage in specific behaviour based on how messages are framed.
The manner in which questions are phrased and the wording that are used to entice respondents to participate in surveys can have a great influence on data quality and response rates. For instance, respondents are more likely to participate in a survey if they believe their involvement will enhance their public status or make them feel more in control of their own lives.
Behavioural psychology also has great implications for qualitative research. For instance, on decision making questions, quick rather than considered responses should be taken into account. Quick, automatic responses reveal the respondents’ core motivations and beliefs and are easier for respondents to give than responses that require deliberative thinking. Research must also aim to simulate the key features and context of the environment in which respondents make real decisions in their daily lives. Environmental factors can make a big impact on the choices consumers make and are difficult to detect. Behavioural science also provides lessons for how moderator bias can be removed.
In advertising, behavioural psychology shows that marketers use emotion in the right way to create a bias towards their brands, and then use rational appeals can then be used to reinforce this bias.
Nudge theory has become a widely accepted idea after Richard Thaler, who is considered the father of nudge theory, was awarded the 2017 Nobel Prize in economy for his work on behavioural economics. His was the third Nobel prize to recognise behavioural economics after Daniel Kahneman won in 2002 and Herbert Simon won in 1978. Simon is often considered the pioneer of behavioural economics having shown how often consumers act in ways in conflict with the expectations of economic theory. Kahneman and collaborator Amos Tversky developed “prospect theory” which shows how consumers have biases in exposing themselves to risk, going to great lengths to avoid losses relative to the probability of gains.
Thaler has helped making behavioural science much more popular with his 2008 book “Nudge: Improving Decisions About Health, Wealth and Happiness”, the bestselling book on behavioural economics Thaler co-wrote with legal scholar and former White House adviser Cass Sunstein.
Thaler is a proponent of using nudges to help people make better life choices and not merely to encourage them to part with their money, a philosophy he calls “libertarian paternalism”. “By knowing how people think, we can make it easier for them to choose what is best for them, their families and society,” Thaler wrote in the 2008 publication. He believes that proper nudging should be guided by three principles: transparency, the choice to opt out and the improvement of people’s welfare.
Nudge theory is based on indirect encouragement and enablement, and steers clear of direct instruction, enforcement and punishment. It also recognises that people have certain attitudes, knowledge and capabilities and it take these factors into account whereas autocratic methods tend to ignore them. The theory considers the reality of situations and human tendencies.
For instance, we all know how difficult it is for smokers to quit. So instead of always demonising smokers and threatening them with draconian laws, why not introduce something similar that is considered less harmful? The behavioural insights team of the UK Department of Health, in considering the regulatory framework for e-cigarettes, viewed the devices as potentially beneficial in helping smokers to quit traditional cigarettes permanently. It advised the government that instead of eliminating complex and entrenched behaviours, it is much easier to substitute them with similar behaviours. Millions of people around the world have now switched from smoking to vaping.
Various institutions and businesses with good intentions can clearly use behavioural psychology or economics that incorporate nudge theory. SA retailer Woolworths, for example, removed sweets and chips from their check-out aisles and replaced them with healthier options such as nuts and dried fruit, so that when consumers make spontaneous decisions, it is more likely to be something healthy.
When nudges are used well, it can have an impact on people’s general wellbeing and improve spheres such as health, wealth, education and work lives. However, there are also “dark nudges”, pushing people towards behaviour that may not be in their best interests.
These are often used in gambling such as when British bookmakers aggressively advertise complex bets to gamblers. Bets on whether a certain player will score first are marketed much more widely than bets for which team will win a match, for instance. The complicated bets earn higher profit margins for bookmakers than simple bets, and by marketing them heavily, they’re preying on a behavioural tic, postdoctoral researcher Philip Newhall of Technical University Munich found in a recent study. Newhall says this is an area that deserves more study. He sees dark nudges in “highly-complex and often poor value-for-money” products sold to consumers, such as subprime mortgages with ballooning interest rates or complex mobile phone contracts.
Consumer financial product providers have also picked up on these ways of manipulating consumers using instruments like binary options and currency futures which make consumers believe they are obtaining a special advantage it the market, but are just building the margins of product suppliers. Financial regulators around the world are becoming increasingly concerned over the dark use of behavioural psychology by such product providers
Thaler’s philosophy is to “nudge for good”, but unfortunately not everyone follows this advice.