Have you ever been to a restaurant and seen something on the menu that's ridiculously expensive compared to the rest? Chances are that you then ordered the second-most expensive item on the menu. If you did, you were "nudged." The purpose is actually to get more people to choose the second one. This is just one way through which smart marketers have been subconsciously influencing your decisions using "Nudge Theory."
The theory became popular after the book Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler came out in 2008. This book is based in large part on research by Daniel Kahneman, which won him the Nobel Prize in Economics. Since then, more marketers have been using nudges to change behavior and help them make decisions. Let's look at some of the most effective nudges that you can use to influence the behavior of others.
The Power of Default
If you want people to choose something, try making it the default option. When faced with new products, services or opportunities, people are more likely to go with the default option than change the status quo. When you sign up with a website, you automatically agree to share information even though you can choose not to. You would have also noticed a default option on subscription sign-up pages of many websites.
This is another big subconscious motivator of our choices. Known in psychology as the "bandwagon effect," it is in our behavior to mimic other people's behavior and decisions. At an unconscious level, we tend to believe that if a lot of people are making a particular choice, it must be a good one and that we are better off making the same choice. This is the reason behind the "best-selling" or "most wanted" products. Incentive programs can be that much more impactful when they leverage these social influences.
Framing It Right
Presenting the same information with a different perspective is called "framing." It is like saying the glass is half empty or half full. Research has shown that people are more motivated to make a decision when it is framed in a way that reduces potential losses; a term in behavioral economics known as "loss aversion." Loss aversion states that people prefer avoiding losses more than making gains.
The environment and its components influence human thought process and behavior. Studies have shown that something as simple as a picture of eyes can influence people to behave more ethically and make donations to charity. Another great example is of a luxury-car manufacturer who placed cars at an exhibition for yachts and private jets. Why? Because if you've walked around for hours looking at jets and boats costing millions, suddenly a $300,000 car might seem like an impulse buy.
The tendency for us to rely too much on the first piece of information provided is called anchoring. That is, we tend to judge the value of something based on the frame of reference first presented to us. For example, in an experiment, people were asked to multiply the last three digits of their phone number by 1,000 (e.g., 315 x 1,000 = 315,000). Subsequently, they were asked to estimate the prices of homes. Results showed that their estimates were heavily influenced by the initial calculation. Businesses can use the "anchoring effect" by showing customers the higher-priced products before showing the lower-priced products.
Influencing individuals' behavior doesn't always have to require thousands or even millions of dollars spent on R&D and marketing. The most practical and economical option is to turn to the science of human decision-making and behavior for little psychological hacks -- because perception is everything, and changing how consumers perceive your products will have a significant impact on your brand and offerings.
Joseph Brady is senior director of digital marketing for Reliant Funding, a provider of short-term working capital to small and midsize businesses nationwide. He has more than 14 years of experience in B2B digital marketing, optimization and operations, with a focus in the financial services market.