In case you never bothered about prizes awarded to scientists, this time it is different. The Nobel Prize for Economy 2017 was awarded to one of the founding fathers of ‘behavioral economics’, the father of ‘nudging’. And this is something you should care about. Nudging is something really useful when designing products, when trying to sell something.
‘Behavioral economics’ is a fascinating field of psychology. Fascinating because we humans are not as rational as we think. And even more fascinating because we can use this knowledge in real life. I have read a few books about this field and about every page offered new, interesting insights. Insights that I’ve included in the training I give with TheInnovation.Menu.
The Nobel Prize went specifically to prof. Richard Thaler for his theory on ‘nudging’. He has shown how small changes can help people make better decisions (or even: make decisions instead of inertia). And this can be very helpful. Here are a few examples.
Soda vending machines: you can influence (or steer) the choices people make at these vending machines by placing the ‘desired’ items at eye level. So to fight obesity, a small but effective action is to place the healthy choices (water) at eye level and place the unhealthy ones (sugar-loaded sodas) much lower. Simple, but it works!
Loft insulation: this is an amazing one. In the UK there has been a government subsidy for insulation of lofts, to reduce energy consumption. From a purely logical point of view, this is an interesting deal: getting funding for that insulation and paying less for your energy. But it wasn’t a success… After some study, it was revealed that cleaning up the attic was the problem: people didn’t like that. So the government organized an ‘attic cleaning service’, which was a real success and loft insulation rose significantly. Even though the total cost was higher for the house owner…
Income taxes: reminder letters for people who didn’t pay their income taxes yet now include a message, e.g. telling them what the income taxes are being used for. You could even tweak this a little and emphasize that message based upon age and family composition (e.g. focus on education for a family with kids, or healthcare for older people). These adapted reminder letters were successfully tested in the UK and also in Belgium there have been similar and successful tests.
Court fines: another example from the UK has to do with people that were fined in court. A number of them wouldn’t pay the fines, even after getting several reminder letters. But when the courts started sending text messages, using the first name of the person, the number of people paying fines increased significantly.
As you probably noticed, many examples are from the UK. And there is a reason for that: when Cameron became prime minister, he created a ‘nudge team’ to investigate novel approaches to several issues. Many proposals were tested and they seemed successful. Even small changes can have a big impact. Just think about the people not paying income taxes: this is a multi-million issue. When you can solve that with rephrasing the reminder letter, that’s a huge thing.
Why is this important?
When you are launching new products, new services, you have an intended behavior in mind. When consumers, users don’t conform to that intended behavior, small changes can have a significant impact. Try to ‘nudge’ them into the right behavior!