What We Can Learn From ‘Nudge Units’
Nicola Wattson 04 May, 2017 at 01:05
Brands have been applying behavioural economics for years. What lessons can we learn from Government ‘nudge units’ on how being more systematic in your approach adds significant value?
Human behaviour and decision-making is irrational, systematically biased, and frighteningly habitual. Governments and brands, in their approach to this knowledge, share at least one thing in common. They both use insights from behavioural science to encourage people to make better choices, for themselves and society in the case of governments, and for shareholders in the case of brands!
Leaders and governments have always sought to influence our behaviour. For the most part, public policy making is designed to change our behaviour, whether that is stopping ‘bad’ behaviours such as crime or bullying, or encouraging ‘good’ behaviours such as recycling or voting. How far this intervention is appropriate, and whether or not the government has the right or even duty to interfere, depends on your own personal ethos.
We don’t make choices in a vacuum. Every decision we make is shaped by our environment. Subtle changes have dramatic results. Even decisions that we have spent time mulling over can be impacted by signals that we may not have noticed or consciously absorbed. These include social norms, default options, incentives, framing or feedback.
‘Choice architecture’ is the phrase scientists use to describe the way our environment influences our decisions. Choice architecture interventions that push people toward a certain outcome are referred to as ‘nudging’. We are all ‘choice architects’ in one way or another; marketers determining a sales strategy, doctors describing available treatments, and parents explaining the ‘birds and the bees’. Rather than trying to change people’s minds per se, we are changing the context or ‘choice architecture’ in which they then make a decision.
A recent report published by the OECD surveyed 60 public bodies in 23 OECD and partner countries, and concluded that the application of behavioural economics had become mainstream in public policy making.
The UK Behavioural Insight team (BIT), or media-coined ‘nudge unit,’ were set up in 2010. They are widely credited as the first government-sponsored organisation exploring how behavioural science can be applied to policy decision-making, and encourage better decision-making by citizens. In particular ‘nudge theory,’ the idea that making small changes in how choices are presented has a disproportionate impact on actual behaviour.
Simple changes have seen massive differences. Reminder tax letters in the UK including a statement outlining how many people in the local area have already paid their taxes, saw repayment rates increase by 15% and an estimated additional £210 million in revenue collected. Prompts about organ donation at the end of car tax payment bills added 96,000 new donors to the organ donation register. Sending online tax payers directly to a form, rather than a webpage that contains the form, increased response rates from 19% to 23%. Automatic enrolment into company pension schemes saw participation rise from 61% (opt in) to 83% (opt out) with an additional 5.4 million savers in the first three years. Reminders about unpaid fines letters; 5% paid up, text messages; paid up, personalised text and bailiff warning; 33% paid up! Just think what you could do!
Tools that change behaviour by ‘changing minds’ are notoriously difficult to implement, as they tend to appeal to our rational selves — which even on a good day is not necessarily something we give much credence to. But understanding what influences our behaviour and then using ‘nudges’ to change that behaviour can bring significant changes at relatively low cost.
BIT has identified nine behaviour change principles, recognising that people are often irrational and inconsistent in their choices, frequently because they are influenced by environmental factors. This simple set of tools equally applies to brands as it does to policy making, and comes as an easy to remember mnemonic: MINDSPACE.
Messenger – we’re heavily influenced by who communicates information.
Incentives – our response to incentives is shaped by predictable mental shortcuts.
Norms – we’re strongly influenced by what others do especially our peers.
Defaults – we’re lazy and tend to accept pre-set options.
Salience – our attention is drawn to the new and novel and what seems relevant to us.
Priming – our response is swayed by sub-conscious environmental and linguistic cues.
Affect – our emotional associations strongly shape our actions.
Commitment – we seek to be consistent with our public promises and reciprocate acts.
Ego – we seek to act in ways that make us feel better about ourselves.
MINDSPACE shifts the focus of attention away from facts, data and information, and towards altering the context in which people act. It becomes a checklist for changing behaviour without changing minds.
BIT have developed the EAST framework, as a tool to be used in applying behavioural insights to the design of the solution to ‘nudge’ the desired behaviour.
1) Make it Easy – reduce the hassle factor, simplify messages and use defaults.
2) Make it Attractive – attract attention, design rewards or penalties for maximum effect, and make it fun.
3) Make it Social – harness social norms, encourage shared commitments, and utilise social networks.
4) Make it Timely – prompt when people are most receptive and structure or phase benefits to make them more immediate and help people plan their response.
The key to successful application is to define your outcome, understand the context based on observational insights, and design your intervention then to test, learn, adapt and test again! To further assist, the Behavioral Science & Policy Association (BPSA), a global community of private and public practitioners, provides pragmatic but practical advice on developing and implementing successful ‘nudging’ testing.
What about brands? Arguably, the most famous example is Google. People rarely change the default options on technology. Google in 2002 made a $50 million deal with AOL to be the default search engine. The rest, as they say, is history.
AIM, the European Brands Association, represents over 1800 brand manufacturers in 21 European countries on key issues that impact their ability to design, distribute and market their brands. trade. Together with European policy makers, AIM has a specific focus on encouraging consumers to make healthier and more sustainable choices. ‘AIM – Nudge’ is a specific initiative to discover and then share which approaches work best in inspiring sustainable and healthier consumer behaviour, whilst promoting ‘good nudging’ amongst its members. Their website contains numerous case studies of how leading brands have successfully navigated this minefield!
In 2010, McKinsey outlined four practical behavioural techniques for marketers to apply – all of which are equally applicable today. Are you applying them in a systematic way?
1) Make paying for a product less painful, e.g. delayed payment.
2) The power of the default option – always the most popular choice!
3) Don’t overwhelm customers with choice – less options generate increased decision making and greater satisfaction.
4) Careful positioning of your preferred option, e.g. pricing level, imbues quality and results in displays that reflect how people shop!