Nudge marketing is all the rage these days. Nutritionists report that Nudge is the best way to induce a behaviour change; environmentalists are very keen on it, and it is a clear favourite among policy makers. In fact the Niti-Aayog (Indian planning commission) is now looking to hire Behavioural Economists for its Nudge unit set up to create more effective health and education programmes. So, what is Nudge and what is the big idea that resides within this seemingly innocuous concept and why is it getting so much attention now?
Nudge as an idea, rose into prominence, when Nobel Laureate Richard Thaler & his colleague Cass Sunstien published a book by the same name in 2008. Both professors at the University of Chicago, were presenting a case against the rationality assumption that most of economics theory rests on. They were offering a framework to analyse and understand behaviour in a world populated by flawed, complex humans. Entities who did not match up to the ideals of homo economicus, the rational, self-interest driven beings who inhabit Microeconomics textbooks. To those not familiar with economic theories, it may come as a surprise that an assumption as sweeping as this, sustained for so long, unchallenged.
Richard Thaler points out: “Whether or not they have ever studied economics, many people seem at least implicitly committed to the idea of homo economicus, or economic man: the notion that each of us thinks and chooses unfailingly well…. But real people have trouble with long division if they don’t have a calculator, sometimes forget their spouse’s birthday, and have a hangover on New Year’s Day. They are not homo economicus; they are homo sapiens...”
In acknowledging the quirky homo sapiens that economic theories were in denial of, this was a clever and timely marriage of applied Psychology and Micro Economics. The idea of Nudge, builds up from the dual process theory of thinking brought into spotlight by the psychologist duo Daniel Kahneman (another Nobel laureate) and Amos Tversky. Kahneman & Tversky – the apostles of System-1 versus System-2 thinking, drew our attention to the notion that not all decision making is deliberate and considered (System-2). We also rely a lot on System 1 ¬– the instinctive, fast, unconscious way of thinking. This Homer Simpson vs Mr. Spock iconic duality of thinking, rapidly gained a lot of fan following. Nudge is a build-up – it leverages the biases originating from System -1 type of thinking –the Homer brain.
Building up from Dual Process Theory
System -1 thinking is critical when speed is of essence. It is believed to be light on cognitive resources. However, it is also prone to biases or systematic deviations from rationality. Given that it is known that humans will err in predictable ways, the idea was to use these biases to alter behaviour. Nudges are small, cost efficient changes in the environment that exploit these biases and goad you towards behaviour which is good for you. Some salient examples include placing the salad and fruit bar ahead of the dessert section to encourage healthy eating; or the now famous example of etching a fly in urinals to help improve aim and hygiene; others include setting default options to “good” alternatives. For instance, setting printer default to ‘print double sided’ to save paper and so on.
Nudge=unfair manipulation? Not quite
To some, this idea of manipulating the unconscious thinking process, seems morally tenuous. Thaler & Sunstien counter by pointing out that the idea is not to take away your choice and liberty but to make choosing the “right” option easy. By gently letting your biases carry you towards choices, which are good for you; a Nudge is thought to be a win-win strategy. This do-gooder-manipulation or libertarian paternalism is the crux of the Nudge approach. The justification for Nudge comes from the fact that any modern environment would need to be designed, so when it is done in a way that favours what is good for the individual, it can move everyone to a collectively optimal outcome.
Need for a measured response: Calling on Mr Spock
Nudges have a great draw as an efficient mechanism for delivering good behaviour and its irresistible core idea of liberal paternalism makes it vastly popular with policy makers. There are also well documented success stories, but it is obviously not a magic wand that can be deployed across all situations. In fact, there are many who are particularly critical of the indiscriminate application of Nudge. The academics are particularly sore about the myopic reduction of all Behavioural Economics to Nudge.
“Humans aren’t simply automata carrying out plans of action in response to external stimuli, based on biological ad neurological mechanisms. Humans are pro-active, not just reactive to the world around them.” - Dr Magda Osman, Queen Mary University of London.
When System -1 thinking was brought to spotlight, it had a sweeping effect on many allied disciplines and practices, including market research. Overnight many solutions moved the focus to measuring and influencing System -1 responses. And in the process, some even completely ignored the deliberate and reasoned thinking that does characterise consumer and shopper decisions. There is even a misguided belief that System -1 is the ‘true’ response that marketers need to work on. Nudge faces similar perils of fandom.
In designing interventions be it for marketing brands or for public policy, it is important to appreciate the wider spectrum of motivations and factors that influence behaviour. Nudge is obviously a powerful tool to be deployed in some contexts, but it is far from being the cure-all for all behavioural science problems. In a way, an indiscriminate deployment of nudge is actually a disservice to a theory that delivered a well-deserved sock in the jaw to homo economicus.
(The author is the executive director, global science India ambassador and social intelligence & analytics head, Ipsos India.)
Part two: How to make nudge marketing work for you.