Nudge Economics
Home / Uncategorised / Nudge Economics
1 April 2022, by , in Uncategorised, No comments

Three ways that a ‘Nudge’ could benefit your organisation.

Nudge economics is no pushover.  It is an amazing concept which helps alter our behaviour.  It is the carrot, not the stick and can influence both your customers and teams.

Think how our plastic bag behaviour has changed since charges were introduced in 2015 in England.  This has led to plastic bag purchases in England falling drastically, through a simple nudge and a minimal charge.

First, a quick history.  The Nudge term and principles were developed in the early 1990’s and brought to prominence in 2008 in the book, Nudge: Improving Decisions About Health, Wealth and Happiness and gained a following among UK and US politicians, in the private sector and public health.

Nudges must be easy and inexpensive and national ‘Nudge Units’ have been created in the UK, Japan and Germany, amongst other countries.

Here we highlight three ways that creating a Nudge could benefit your organisation.

1. Peer Power:  we’re tribal by nature and seek ways to conform.  This is where you can harness tribal impulses by using feedback and statistics to change attitudes in your team.

For example, straggling employees reluctant to go on a training course may change their attitude if you say, ‘90% of the team has completed the training, so please make sure you do so as well’.  Peer Power.

2.  Decoy Pricing:  take two products.  Say a small popcorn bucket at £3 and a large popcorn bucket at £7.    Customers will generally go for the small bucket, considering the large bucket expensive.

The decoy effect occurs when customers are presented with a third option – the decoy.  It’s a medium-sized bucket priced at £6.50.  The higher priced product is only slightly more expensive than the decoy, but has significantly higher value.

Customers immediately go for the large bucket which provides better value. Kerching!

Watch how this works in this two minute video.     It’s cheesy but interesting.

3. Missing Out:  the fear of missing out (FOMO)  is a major trigger for consumers.  Our desire to avoid loss is far stronger that the desire to seek gain and we are capable of behaving irrationally to sate the urge.  This is where time-limited offers and highlighting the scarcity of your product comes into play.

Think about when you’re looking to book a hotel online and there are ‘only three rooms available’.  The urge to book there and then, to not miss out, is a powerful one.

How could you apply the Nudge principles in your organisation, to influence change?

Get in touch and see how we can help

Ph: 07495 766622

About author:
Emma Finn is the Founder and Director of Pathfinder East. Read more here.

Leave a Reply