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Behavioral Economics 01-10-2018 4

Nudge Hunting

Manipulation is synonymous with deceit, extortion, lies and bad things in general but what if we could harness all that we know about manipulation and use it to improve the world around us?

We are all in the business of influencing people to achieve our desired outcomes, whether you are aware of it or not, it is something we do constantly. In business we are trying to get people to buy into us, our ideas and our products. At home we’re trying to get our kids to eat their vegetables and do their homework. The government is reminding us to file our tax returns and our employers are chasing profits by incentivizing us to do more and be better.

Now, I want to tell you about something that can be used to achieve improved results with all these scenarios- “nudging”.

Nudging is a behavioral theory based on the idea that instead of making a bold move or implementing a huge change to get people to act differently, you should make small, economically neutral changes instead. The concept was first popularized by Richard Thaler in his book Nudge, Improving Decisions About Health, Wealth and Happiness. He later won a Nobel Prize in economics for his research.

The concept is that small changes to one’s environment can have big influences on people’s behavior.

Imagine you’re a shop owner wanting to increase sales of your No-Name Brand cereal over the major brand—Toasted Oats instead of Kellogg’s Corn Flakes, for example. You could stop carrying Kellogg’s or bump up their price, neither of which is an economically neutral plan.

Instead, nudge theory would have you move the Corn Flakes to a lower shelf or put bright tape markers on the shelf holding the store brand. These are tiny, almost imperceptible changes that draw a consumer’s eye and change their behavior. This is called choice architecture.

I’m sure, coming to think of it, dozens of examples of nudge theory spring to mind now. Here are some more novel approaches to nudging that have yielded some incredible results-

In the early 1990s, the story goes, the cleaning manager at Amsterdam’s Schiphol Airport was trying to reduce “spillage” around urinals. He settled on etching small, photorealistic images of flies on the urinals, right near the drain. The idea was to give people something to aim at. Incredibly, this seemingly insignificant change reduced spillage by 80%.

In the UK, people in arrears with their taxes were sent reminders using social normative wording. The letter read “9 out of 10 people in your area are up to date with their taxes”. By making these late payers feel like outliers, tax payments from people who were sent these letters increased by 15% compared to the norm.

In school cafeterias, placing healthy foods first in the food line improved children’s food choices and resulted in an 18% increase in the sales of healthy foods.

The power of the humble nudge is that we can all implement it in our lives for almost no additional cost, all it takes is a bit of ingenuity. Through awareness and understanding of the human psyche we can start to implement these social cues in our own lives to achieve outcomes that benefit both ourselves and those around us.

Here are some quick wins that you can implement in your own businesses to nudge your customers and employees in the right direction.

Want to nudge your customers into taking action? Want to enhance your perceived value and make your services and products much stickier?

Have real conversations with your customers to understand their needs, wants and worries. Perhaps they want to save on toner costs within their business, reduce their tax bill or invest toward buying a new home. Once understood, it is your job to tailor a solution to their story using your products.

Here comes the nudge- track and report on their progress using an integrated communication platform. If they’re on track to meet their goals, great, let them know what an awesome job they are doing! If not, outline some actions to be taken that can get them back on track to achieving their goals.

Wanting to unlock your employee’s true potential? Sometimes it doesn’t take huge incentives or expensive training programs, but rather small changes to their environment.

The nudge- encourage collaboration amongst your employees by making their environment more conducive to communication. Break down the cubical walls, create a communal area for staff to socialize, schedule staff lunches in the office or hold walking meetings around your neighborhood rather than those boring old boardroom sessions. Project management tools and communication platforms are just as important. Drop us a mail for more info here, there are a host of free tools for us to share with you.

My last idea speaks to convenience- consumers are becoming more expectant of instant gratification. No matter your age (finally millennials aren’t the only culprits), immediacy is now the norm in business thanks to the likes of Uber, Netflix and internet banking. Our expectations these days are sky-high, and your business is no exception.

Now I’m not saying you should go and drop a ton of cash on a fully integrated App for your business. Baby steps! I’m saying communicate with your customers regularly so that they know you are a click or a call away. Pre-populate forms so your customers don’t have to.

A neat little value-add come tax season is for financial advisers or tax consultants to send their clients prepopulated additional contribution forms so that customers can capitalize on their tax allowances. It’s easy, it’s quick and it’s good for both you and the customer!

So, I urge you to go on a nudge hunt and find things that will help you, your friends, your family and your customers behave more rationally. Even the smallest change can breakdown a barrier that could be hindering someone’s propensity to act. I’d love to hear your ideas!

Did I mention that we can help you with a lot of the ideas I mentioned above? If you are interested in finding out more then get in touch, it’s that easy.

That’s my nudge for today…


By jonathon@icononline.co.za


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