Using Nudge Principles in Business: Guest Post from PsySci.co

Note from George: It’s a good idea as an analyst to learn about psychology — after all, we are at the core studying human behavior. One such basic and powerful principle is the “nudge theory,” popularized by Cass Sunstein and Nobel Prize-winning economist Richard Thaler in their 2008 book (Fun fact – Thaler’s undergrad alma mater is Case Western, my school.).

In the below post and infographic, Marcus from PsySci.co points out some examples of nudge theory at work in business and innovation.

Any business worth its salt wants to improve.  Leaders will want to find new ways to attract customers and improve the attractiveness of their product. Obviously the main way to do this is to create a quality product that offers more than your competitors. However, there are other ways to improve your competitiveness. One way is to use behavioral theory and the ideas put forward by Nudge theory. Nudge theory says that if you use the principles of behavioral theory and make subtle changes to the environment, this can have profound effects on the behavior of people.

For example, in the UK, the tax authorities sent letters to those who weren’t up to date, and they worded them to imply that the culprits were outliers. This resulted in quicker payments. Thus it shows that making small suggestions to customers improves uptake. This is often despite the product available. For example, research has shown that if you ask someone to ‘supersize’ their meal, they will often take you up on the offer. However, they will also do so if you ask them to ‘downsize’ their meal.  Thus, simply changing your business practices in a really small way and getting down to the minutiae of how you do business, will improve our business and increase turnover.

Innovators in the business world are always looking for new ways to improve their product and increase their company’s competitiveness. If a business wants to gain more customers, it could do worse than to utilize the tenets of Nudge theory, which shows that tiny changes in your business model can have a profound impact.

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To find out more ways in which businesses, politicians and those in other sectors have utilized Nudge theory, see the infographic from our friends at PsySci.