What is a "nudge" that designs people's decisions and actions? Considering marketing strategies incorporating behavioral economics.

A "nudge" is a gentle push to help people make better choices. It's a technique based on behavioral economics that encourages voluntary behavioral change rather than coercion. Nudges are applied in various contexts, such as marketing strategies and social policies. We'll introduce examples of their use and explain key points for incorporating them into marketing.

The Mechanism of "Nudges" That Gently Push People Toward Better Choices

The term "nudge" comes from the English meaning "to lightly poke with the elbow or give a gentle push." In 2008, Richard Thaler, a behavioral economist at the University of Chicago, and Cass Sunstein, a legal scholar, co-authored the book "Nudge: Improving Decisions About Health, Wealth, and Happiness." This book proposed "nudge theory"—a concept that encourages people to make better choices spontaneously through subtle triggers, without restricting options or offering economic incentives. The book became a bestseller across the United States, and Richard Thaler was awarded the 2017 Nobel Prize in Economics for his contributions to this theory.

So, what exactly does "giving a nudge" entail? In the world of marketing, examples include the following scenario.

When proposing promotional plans for products or services to clients, you might prepare multiple options based on scale and budget. In such cases, you likely present clearly differentiated plans, ranking them like "Pine, Bamboo, Plum" from highest to lowest quality.

For example,

1. - The ideal plan, though it has a long lead time and high cost
2. A plan with minimal content and costs
3. A plan balanced between A and B in both content and cost

Suppose you have these options ready.

In this case, the proposer often secretly hopes you'll choose Plan C. Rather than presenting a plan similar to C, they deliberately include extreme options like A and B to subtly steer you toward the middle ground of Plan C. This is another method of "nudging" that leverages nudge theory.

Behavioral economics itself is a field that studies human behavior through a psychological approach, based on the premise that "humans are influenced by emotions and do not always act rationally." This differs from economics, which assumes "humans always act rationally." In other words, nudging can be described as a technique for designing decisions and actions by subtly appealing to people's psychology.

Nudge Theory in Your Everyday Life

Nudges are applied across diverse fields like social policy, marketing strategies, and UI/UX design. It's common in daily life to realize choices you thought were entirely your own were actually subtly guided.

A particularly famous example is Amsterdam's Schiphol Airport in the Netherlands. To reduce toilet cleaning costs, they painted a picture of a fly near the drain of the men's urinals. As a result, users aimed at the fly, reducing splatter around the urinals and cutting cleaning costs by 80%. This is a prime example of applying nudges, leveraging the human tendency to aim at a target.

Examples of Nudge Implementation in Japan

Nudges are also being utilized by various Japanese government ministries. The Ministry of the Environment established the nudge unit "BEST" (Behavioral Sciences Team) in 2017 to promote nudge applications across various fields, including CO2 emissions reduction. By sending "Energy Saving Reports" detailing monthly electricity and gas usage along with energy-saving advice to up to 500,000 households nationwide over two years, CO2 emissions were reduced by 2% and maintained at that level for the entire period. Additionally, they developed an app that uses GPS sensors to measure vehicle acceleration and deceleration, displaying the evaluation as a ranking. By encouraging drivers in the transportation industry to adopt behavior changes influenced by conformity and social norms, this led to a maximum 14.5% improvement in fuel efficiency and reduction in CO2 emissions.

This approach is now being rolled out to other ministries. The Ministry of Health, Labour and Welfare is exploring nudges to boost cancer screening rates for preventive healthcare, while the Ministry of Economy, Trade and Industry is considering them to stimulate demand for energy-saving product replacements and promote business succession for SMEs.

How to Leverage Nudges to Enhance Marketing Effectiveness

Nudges, which encourage customers to make better choices, are a technique well-suited to marketing. The key to effectively applying nudges in marketing lies in incorporating the six basic principles and the "EAST" framework.

The Six Basic Principles of Nudges

Richard Thaler and Cass Sunstein, the proponents of nudges, established six fundamental principles, spelled out as "NUDGES" (*1).

N: Incentives
Paying monetary incentives, for example, is not a nudge. However, it is crucial to analyze what motivates (incentivizes) the person making the choice, the person bearing the cost, and the person benefiting.

U: Understand mappings
Clarify the relationship between the choice made and its consequences. This allows you to identify the cause when desired actions are not taken.

D: Defaults
Since most people will choose the default option unless they have a strong preference, present the desired choice from the outset.

G: Give feedback
Communicate the outcome of the choice to help users feel the impact of their actions.

E: Expect error
Anticipate common mistakes people make and implement countermeasures in advance.

S: Structure complex choices
When multiple options exist, devise ways to make better choices easier to find.

If you're involved in UI/UX design for digital work, you likely already strive to keep navigation elements like web pages organized and clutter-free, designing them so users can choose the optimal option. To achieve this, you probably practice the principles above as a matter of course. Incorporating these points can subtly support users' decision-making and gently guide them toward taking action.

The "EAST" Framework for Nudges

The UK's Nudge Unit also advocates the "EAST" framework for designing nudges (*2). This term is an acronym for the elements "Make it Easy," "Make it Attractive," "Make it Social," and "Make it Timely." It is believed that meeting these four elements enables the design of effective nudges.

Make it Easy (E): Simplify
Reduce the decision-making process and lower the barrier to action by narrowing choices or using clear language.

Make it Attractive (A): Make it appealing
Provide appealing options or incentives that attract people.

Make it Social (S): Socially
People tend to act similarly to those around them. By making them aware of social norms, such as "This many people chose this option," you can influence their behavior.

Make it Timely (T): Timely
The timing for taking action varies from person to person. It's crucial to present options at the right time for them, when it's a high priority.

Of course, overly emphasizing appeal or strongly urging conformity by highlighting the majority can backfire and may even drive users away. The key to designing effective behavior and experiences using nudges is to approach it with a gentle nudge—just a light nudge with the elbow.

Examples of Nudge Applications in Marketing

So, how are these principles applied in marketing strategies? Here are some representative examples.

・ Presenting Recommended Menu Items

Have you ever felt overwhelmed by a restaurant menu that's too extensive, unsure what to order? Applying the sixth principle—"Systematize Complex Choices"—by labeling menu items as "Recommended" can guide customers. Similarly, in retail stores like supermarkets, adding POP displays like "Manager's Pick" or "Top Seller" can encourage purchases of those items.

・ Point Cards

Restaurants often issue point cards to boost repeat business. For example, a card offering a free coffee after collecting 10 stamps tends to increase visit frequency as customers approach the target. One experiment even showed higher visit frequency when cards requiring 12 stamps were pre-stamped with two stamps. This demonstrates the effectiveness of the Six Principles' "default" and "incentive" concepts.

・ "Surprise Destination" Travel Campaigns

One airline offers "Surprise Tours" redeemable with miles for customers who find trip planning burdensome. Upon booking, the destination is randomly selected from four options. This unique mystery tour-like plan, where the destination remains unknown, provides excitement and fun even before the trip begins. Furthermore, by minimizing the customer's effort in "deciding the destination," it heightens interest and anticipation for new discoveries, encouraging the action of traveling.

Nudges are also essential for customer success

In businesses that build ongoing relationships with customers, such as subscription services, customer success is crucial for enhancing satisfaction. Nudges can be leveraged to build trust and ensure customers are satisfied with the services they've chosen.

One auto insurance company reportedly contacts customers when severe weather is forecast, stating: "Heavy rain may cause damage tomorrow. If your vehicle sustains any damage, it may be covered under your policy—please file a claim." This aligns with Principle 6: "Anticipate Errors." While it might temporarily reduce the company's profitability, it enhances long-term customer loyalty.

Furthermore, for services offering multiple plans, based on Principle 6: "Systematize Complex Choices," proposing personalized options or plans with clearer selection criteria can increase customer satisfaction. Nudges are an effective method not only for customer acquisition but also for encouraging continued service use.

Utilizing nudges in marketing can guide consumers toward better choices and increase customer satisfaction. However, misuse can also harm consumers. It is crucial to consider how to apply nudges with high ethical standards, guiding people and society in a positive direction.

※1 Source: 'Nudge: Improving Decisions About Health, Wealth, and Happiness' (Richard Thaler, Cass Sunstein, translated by Mami Endo / Nikkei BP / 2009)
※2 Source: EAST: Four Simple Ways to Apply Behavioral Insights(The Behavioral Insights Team/2010)