Nudge, nudge, think, think

We are all familiar with the sweets and snacks in the checkout queues of supermarkets. And we have all carefully averted our eyes from them, or – somewhat more difficult – tried to distract our children from them. This is just one – and possibly the most graphic – example of how we as humans (and especially as consumers) are nudged into ‘desirable’ decisions daily. But who decides what is ‘desirable’?

Nudge theory – it’s not rocket science

The 2017 Nobel Prize for Economics was awarded to Richard Thaler for his work on Nudge Theory, which explores how humans make decisions – particularly economic decisions – and how those decisions can be ‘nudged’. In the award announcement, the Royal Swedish Academy of Sciences stated that ‘by exploring the consequences of limited rationality, social preferences and lack of self-control, [Thaler] has shown how these human traits systematically affect individual decisions as well as market outcomes.’ What that amounts to is the fact that humans do not make economic decisions rationally, but Thaler’s research does show ways in which we (humans, that is) can be ‘nudged’ into making decisions that are rational, and in our best interests.

Of course, that also means we can be nudged into making economic decisions that are not in our best interests – which is hardly news to anyone running a 419 scam, all casino operators, and – yes – the supermarket executives who pack the shelves lining the till queues with sweeties.

Supermarkets – the cosmic crucibles of human behaviour

It’s not just the sweeties at the checkout. There is a very sophisticated science to supermarket design, and it’s all based on Nudge Theory. Everyday necessities like bread and milk are close to the back so that you have to walk through the store to get to them, and high-profit goods are placed in strategic locations: to the right of the entrance (because up to 90% of shoppers turn right when they enter a store) and at eye level on the shelves. The first may seem weird, but the second is a no-brainer – no-one will stretch or squat to get an item off a shelf if there is an equally appealing one at a convenient height.

And supermarkets have perfected the art of persuasive pricing. Volume discount, for example, is more common with perishable goods than non-perishable. Have you ever seen an offer of a cheaper price for buying two cans of baked beans? Probably not, but I’ll bet you’ve seen it for punnets of tomatoes, avos or other veggies. But, really, will you use all of them before they start to wilt, or go brown? Probably not, but you didn’t think about that when you made the purchase. I’ve even seen a huge saving on buying two choccy-coated ice cream bars instead of one. Better eat them quickly! (True confession time. I did.)

But we think logically about big purchases, don’t we?

Okay, fine. That’s a supermarket, but we would not be swayed by the same arguments when making a big purchase, would we? Like a fridge, or a car? Or a house?

We certainly do more homework when making big purchases, but do we apply logic? According to Thaler, we try to apply logic, and we think we are applying logic, but most people do not make completely rational decisions. They make decisions based on short-term advantage, mostly without realising how these short-term decisions influence the bigger picture – rather like buying two punnets of mushrooms when you need only one, but it’s such a bargain you can’t resist.

Choice architecture – the little nudges that convert prospects into sales

As developers and estate agents, we know that the easier you make a sale, the more likely it is that people will sign on the dotted line. That’s why agents and developers will help with obtaining finance, selling existing homes, even furnishing apartments. All these little extras collectively ‘nudge’ the buyer to a decision.

Most of us also know that the more paperwork a prospective buyer has to deal with is inversely proportional to the likelihood of their buying. That convoluted sentence was deliberate, and I’ll bet you glossed over it. But the message is a simple one: if you want people to read documents, make them simple and intuitive. Because – even though we’re working on the principle that most buyers are not 100% rational – very few people will sign an offer to purchase that they have not actually read.

So, what choice architecture is about is using a series of nudges to influence desired behaviour. Now this might sound devious and conspiracy-theorist-y but it’s not. It’s not about forcing people to do what you want – it’s about making it easier for them to do one thing rather than another. What this means is that, if they feel strongly enough about the decision, they can do the opposite of what the choice architect wants – at no cost, other than convenience. It’s a bit like taxing cigarettes, rather than banning them, or putting the sweeties on a high shelf and putting apples and bananas on a low shelf.

As Thaler is on record as saying: ‘Economic agents are human, so economic models have to incorporate that.’

Choice architecture – using nudges to influence resident behaviour

Interestingly, choice architecture is even more important in management and politics than it is in retail or property sales. Take, for example, a famous nudge that was implemented in Schiphol Airport. The men’s toilets were – well – like men’s toilets, despite all the signs urging men to ‘aim to please’, etc. But then someone came up with the brilliant idea of putting a little sticker that looks like a fly deep in the urinal. It was just too tempting as target practice, and the strategy reduced ‘spillage’ by 80%. Interestingly, Barack Obama and David Cameron, former leaders of the USA and UK respectively, both appointed task teams specifically to implement the strategies that Thaler outlined in his theory and his bestselling book.

So think about how you can nudge – rather than coerce – residents and home owners to, for example, attend meetings, not park in undesignated areas, and – even – pay their levies on time. For the latter, perhaps a general, estate-wide letter thanking those home owners who had paid their levies would be more effective than nagging mails. It was found to work in the UK when used by a local council.

There are so many ways you can incorporate Nudge Theory into your management strategy – and it’s not creepy – after all, management is about getting people to do ‘the right thing’. You’ll find so much more information in Thaler’s book Nudge.