When Not to Nudge

Nudges are everywhere.

But sometimes we don’t listen to them.

Nudges

Nudges steer us toward an easier alternative. They make life simpler. You don’t have to listen to the nudge. But you choose it because it involves less hassle.

Households, businesses, and governments nudge us. At home, I nudge my family to eat healthy food by placing a bowl of grapes on a counter. At work, your employer could encourage you to save for retirement by automatically setting aside a slice of your paycheck. As for government, countries have established Nudge Units.

The UK government reached more than 30 million people with its nudges:

My favorite nudge though is the Goldilocks strategy. The idea here is to present buyers with three choices. rather than one. The single choice could be a relatively pricey sweater but when a much more expensive one is displayed nearby as well as a much cheaper sweater, then the second item looks like a bargain. And therein lies our nudge–If one sweater is too expensive and the other, too cheap, then the middle one must be just right.

It all sounds so logical.

However, some nudging isn’t successful. In a recent study, two marketing scholars suggest that, yes, nudges have a short-term impact. However, not requiring a commitment, the long-term follow-through evaporates. Encouraged to take carrot sticks from the nearby display of healthy food, people take a pile. Then though, they don’t eat them. Similarly, the individuals that selected a default website option visited it 42% less often than the non-nudged group.

 Our Bottom Line: Transaction Costs

Ranging from money to time to travel, transaction costs are the time, effort, and complexities that tasks require. Successful nudges reduce our transaction costs

But still, trying to control behavior can backfire.

Our featured image is from Bloomberg Cities Network.

My sources and more: Thanks to WSJ for inspiring today’s post. Then, this paper had the nudge downside while “Nudging by government: Progress, impact and lessons learnt” presented its plusses (and was the source of the above table excerpt). And finally, for a very pleasant and productive read, do take a look at Nudge by Richard Thaler and Cass Sunstein.