What is the Nudge Theory? A mixure of beavourial economics, psychology, political theory, marketing and sales. Its the theory that considers how people make decisions – and how others impact them.
Text of Nudge theory
What is Choice?
What the Nudge?
A mixture of –
Growing popularity in public and not-for-profit sectors
Considers how people make decisions – and how others impact them
“A nudge, as we will use the term, is any aspect of choice architecture that alters people’s behaviour in a predictable way without removing any options or significantly changing their economic incentives.
To count as a mere nudge, the intervention must be easy and cheap to avoid.”
Why can we be Nudged?
Traditional economic theory says that all human act rationally when making purchasing decisions
In other words, we consider all things, researching all alternatives, and choose that which provides the most economic benefit to ourselves as individuals
But if this was true we couldn’t be nudged…
Smoking wouldn’t exist if we were truly rational
So how are we Nudged?
Need to start looking at how humans actually think
Two Systems of Thinking
Consumes a LOT of energy
Works by creating hypotheses and
testing these with prior knowledge.
Meanwhile sorts between relevant
and irrelevant bits and pieces of
You can activate this system by will,
and it resembles what we typically
associate with thinking in many ways.
Controls day to day thoughts – how much
butter to spread, how long to brush teeth for,
smiling when you see a cute puppy, etc.
Although the reflective system might seem
superior to the automatic system, it really isn’t.
The reflective system is simply too slow and too
single minded to handle even a fraction of the
alternatives we are faced with every day.
The automatic system can handle thousands
of problems and alternatives for us without
even bothering us with the outcomes.
Two Systems of Thinking
The two systems generally work well together, allowing us to act quickly and instinctively when required, or allowing deep, powerful thought
However they don’t always work well…and can ‘fail’ in many different ways
The automatic system is especially prone to bias, in fact it uses bias to speed up decision making
While the reflective system can often back up or reinforce decisions made by the automatic system, even if obviously wrong
Targeting Your Automatic System
Three questions. Three seconds only to answer each. No answers after Three seconds.
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much
does the ball cost?
2. If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines
to make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48
days for the patch to cover the entire lake, how long would it take for the patch to cover
half the lake?
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?
2. If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half the lake?
1. 5 cents 10 cents
2. 5 minutes 10 minutes
3. 47 days 24 days
In order to speed up decision making, the automatic system uses biases
Optimism and Overconfidence
Gains and Losses
Nudges are what ‘Marketers’ do every day –
What will make an individual ‘buy’?
Target nudges, usually lots of different ones, at
• Which ‘Nudge’ will work best?
• However some of the best
nudges are changes in
design, tone, copy – or data!
• Especially prevalent in –
• Direct Sales
• Direct Marketing
Behavioural Insights UK
Tests with social norms
Tax debt payment DM
i.e. ‘9 out of 10 people pay their taxes on time’
Real numbers, as in taken from the data, work best
Control Social Norm National Social Norm Postcode Social Norm Town
Let the pictures tell the story
From ‘Waste’ to ‘Landfill’
Make slightly more difficult to use less preferred