This lack of alignment  between knowledge and behaviour is the reason why we need to understand Behavioural Economics and the Nudge theory.

Abhijit Banerjee and his team launched a series of eight messages, each less than 2.5 minutes long and with a variant of keypoints (like mask, social distancing). These video messages were delivered through a mobile network to 2.5 million people in West Bengal to educate people about safety measures. The key result was that this intervention induced behavioral changes both in reporting of symptoms and preventive behavior.

The study further mentions that the exact content of the message may not matter much in such cases, since the information is already out there and what was needed is a nudge to pay attention to it.

‍What is Behavioural Economics?

Behavioural economics incorporates the study of psychology into the analysis of the decision-making behind an economic outcome, such as the factors leading up to a consumer buying one product instead of another. Richard Thaler won the Nobel prize in Economics, with Behavioral Economics being his pioneering work. Thaler is particularly well known for his work on “nudge theory”, a term he coined to help explain how small interventions can encourage individuals to make different decisions

What is a Nudge?

“By knowing how people think, we can make it easier for them to choose what is best for them, their families and society,” wrote Richard Thaler and Cass Sunstein in their book Nudge, which was published in 2008.

A nudge is any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. the fruit at eye level counts as a nudge. Banning junk food does not.

Mr Abhijit Banerjee’s messages was a way to nudge people’s behaviour towards Covid-19 prevention. The report also suggests that there is value in persistent messaging, at least by celebrities. Though there is a lot of existing information, a new message can act as a useful nudge. It also suggests, given that governments have a fixed budget for messages and since within-community spillovers are large, it is important to disseminate the messages broadly across many communities, rather than using the same budget to target more people within a particular community. Hence, two important takeaways about nudging – frequency of messages and community messaging.

How can you use Nudge Theory and Behavioural Economics in your business?

The United Kingdom’s government set up the Behavioural Insights Team in 2010 – popularly called the Nudge unit to address “everyday” policy challenges where human behavior was a key component. David Halpern, the chief of the unit has described his experiences in the book Inside The Nudge Unit.

The nudge theory focuses on communication interventions to change behaviour. The Nudge Unit designed interventions to increase tax payments, drive organ donations, declare incomes, change poor habits like smoking and poor financial saving habits etc.

Halpbern has shared a framework to design a nudge: EAST where the intervention needs to be Easy, Attractive, Social and Timely.  

1.Easy:

Keeping the messages simple and clear of expectations increases the response rates. I have written about clear communication in this piece. The other way is to make an action the default action. When the Nudge unit needed people to sign up for a pension fund, they made pension enrollment as the default option. Under the old system, workers had to actively opt-in to a workplace pension. While most people see pensions as an important part of their future, doing something about it was a task. So the government changed the game by making workplace pensions opt-out, not opt-in.

2.Attractive:

The messages can be made attractive to nudge behaviour. The first part of the attractive message is that it needs to catch the attention and the second is to make the offer attractive enough to drive action. Bright aisle messages and sale offers are the commonly used tools by Supermarkets & marketplaces. I personally feel, if like businesses, the government used attractive messaging in changing behaviour, it would be far more effective. Do you remember the anti smoking ads which start with pictures of cancerous tumor. Those images make you turn your eyes away from the message. This type of messaging is based on fear. As an alternative, it would be interesting to see the effectiveness of messages carrying mountain climbing or fitness images instead.

3. Social:

We are deeply social in our behaviour. We are influenced by what others around us are doing and particularly by the behaviour of those we know or feel are like us. Abhijit Banerjee, a Bengali Babu, was the face and voice in the covid related messages. People of West Bengal, the state where the test was done, were able to associate with him and therefore the impact was positive. Community messages work well because the community gives opportunity for people to see each other’s shift in behaviour. Research shows that if a park is littered, people will continue to add more litter, however the behaviour changes if the park is clean. In this case, people will behave responsibly as well.

4. Timely:

The timing of the prompt to people when they are likely to be most receptive makes a difference. A series of studies have shown that what we choose for our future selves often differs greatly from what we choose for our present selves. For example most people choose for an healthy snack option for later in the day – especially if they have just eaten- but the reverse is true when asked immediately before the snack is available.

My latest Nudge story for you

A school asked the parents to fill up a survey form. The form was individually mailed to parents and the link was also shared on Whatsapp groups. Grouped by grades, these whatsapp groups are managed by one parent as the coordinator between the school and the parent body. The information was critical to the school and therefore more the participants, more successful the exercise would be. However, the response of parents’ was poor despite repeated reminders.

In one group the nudge theory was applied. Instead of a reminder, a message was shared that read:

Once you complete the survey, kindly remove your name from the list and paste it again. Thank you.

List of names yet to do the survey:

Karishma

Neha

Karthik

This was a magical intervention. Respondents rushed to remove their name from the list on the Whatsapp group. No one wants to see their name in the yet-to-do-task list. Remember, the backbencher doesn’t like the class to turn towards her. Soon this message was adapted by all other grades and the school witnessed a great response rate.

A nudge can be designed to change behaviour in a positive way. Keeping it simple, removing friction, making it visible, creating a social presence are some of the ways of designing nudge interventions.

I have an ongoing research on a unique consumer behaviour through nudge interventions. If you wish to try your hand or discuss more, please write to me at Vishakha@habitsforthinking.in