Read a transcript of the video below.
Let's begin with a simple fact: people make inconsistent decisions. That's the way it is.
What was initially mere intuition has since been validated by over 40 years of academic research on the decision-making process. The name of this revolutionary theory is behavioral economics, whose major message, as supported by Nobel Prize Award winner Daniel Kahneman, overthrows the Paradigm of traditional economics.
Irrational, not rational
From the point of view of standard economics, people are always making rational decisions all the time and not letting their emotions cloud their judgment. And they’re always thinking about the future.
In behavioral economics, we know this isn’t true. We see stock bubbles. We see people overextending themselves on credit cards. We see people taking on mortgages shouldn't. We are not rational beings, rather we are influenced by cognitive biases and mental shortcuts, by our emotions and by other factors, like the environment or the setting where we are at the point a decision is made.
Why is this so important for marketers? If you don’t apply the learnings from behavioral economics on what are the real drivers which influence consumers, you may design marketing actions which are not efficient.
Building upon this proven approach of observing Behavior, we developed nudge. Through better understanding of human behavior in both its rational and irrational dimensions, it becomes possible to take more effective action to modify behavior as we wish.
The idea of nudge was developed by Professor Cass Sunstein and Richard Thaler in 2008 in their book entitled Nudge. Nudge is a system of gentle encouragements, based on advanced knowledge of the decision-making process. The benefits of nudge have the remarkable power to change behaviors through cost-effective actions.
How can we encourage households to reduce their energy consumption? Simply by amending a letter informing them about their energy use - adding a comparison with their neighbors energy use. If your energy use is lower you are congratulated. If this is not the case, you are sent hints and tips to easily improve. By using social norm drivers, The Opower team has saved some 250 million dollars and all without spending a dollar. So nudge can be used to save the planet!
Another example, this time from the UK healthcare sector: how to encourage people to take part in the national organ donor program. Through the addition of a simple phrase on the government's official website. The phrase that was added? “Each day thousands of people who see this page decide to register.” Once more, social norms pressure worked, with the test showing the potential for 96,000 additional registrations and once more, at zero cost. This is what nudge is all about: a simple, effective and low-cost technique to encourage the adoption of new behaviors.
The Rise of Nudge
As we have seen in our various examples which local authorities have been quick to grasp the potential of nudge. First was the US’s Obama Administration in 2009, just before the UK’s Cameron government in 2010, then followed by Australia, New Zealand, Germany and the European commission.
Since then, the nudge approach has developed very quickly, powered by the attraction of its effectiveness in modifying behaviors and its low-cost implementation. Private companies are also beginning to discover nudge which appears to be a clear way to improve ROI from their marketing strategies - as illustrated by a small change, which has doubled the sales from a promotional Campbell Soup offer. How did they make this happen without any additional cost? By communicating what nudge calls an anchor to consumers. At the moment of the decision with this sentence written on the promotional sign: “Limit of 12 cans per person.” The results? With this anchor sales goes from 3.3 to 7 cans per buyer. It has activated the idea of a good deal more than the promotional offer alone.
As proof of this growing interest, the largest global trade fair for market research has seen success of presentations by the founder of nudge Richard Thaler, by Nobel Prize winner Daniel Kahneman, and finally, by the famous Duke University professor and author of the best-seller Addictively Irrational, Dan Ariely. In the September 2015 edition of the Harvard Business Review, Indra Nooyi, Global CEO of PepsiCo, stated “We've taken lessons from Richard Thaler and Cass Sunstein's book Nudge.” The nudge revolution is in progress.
BVA Nudge Unit
Since the establishment of its first shopper lab some 25 years ago, BVA Group has always sought inspiration from behavioral economics with a view of developing increasingly predictive study methods, which can provide results through studies, testing, and analysis of consumer behaviors undertaken in near real life conditions.
We were the first create a Nudge Unit in the world of market research, specializing in the development of behavioral change strategies. The NudgeLab our exclusive and innovative methodology rooted in behavioral economics and inspired by creativity techniques, design thinking, and consultancy, allows for the development of powerful nudges based on rigorous production processes. This work has been crowned with success, with NudgeLab receiving the Award for Excellence for Best Paper at the ESOMAR World Congress in 2015.
On the back of our successes, we have since published the very first work on nudge in marketing, called Nudge Marketing, dedicated to the application of nudge in the public as well as the private sector.
We invite you to share in the nudge adventure by coming to discover this revolutionary approach for yourself. Our goal? It is to help you benefit from the power of the nudge approach and to win at behavioral change.