How can behavioural economics affect marketing? Richard Thaler can probably tell you. Thaler is the winner of the 2017 Nobel Memorial Prize for his research into the subject, the nudge theory. Marketing and advertising experts interviewed by the American Marketing Association believe Thaler’s approach has serious implications for marketers.
What is nudge? At a basic level, it is what prompts you to do something – read an article, click on a link, and various others. Marketers know this as a basic, but it is more important than ever because of the amount of information the ordinary consumer is bombarded with on a daily level.
Thaler coined the term ‘nudge’ along with his co-writer Cass Sunstein in their 2008 book, Nudge. It refers to the potential to change a person’s behaviour without impacting on any of their options or changing economic incentives. A Thaler example is a fly decal placed in a urinal in an airport. The fly decal was supposed to improve the male aim (!), and the terminal duly reported an 80 percent reduction in urine spillages in the toilets after the stickers were placed in all the urinals.
Nudges for marketing mainly apply to the conversion of online shoppers, from indecisive waffler to purchaser. Behavioural economics blends psychology, economics and the study of human decision making, asking questions such as why people buy chocolate instead of vegetables when they are trying to lose weight.
A nudge is additional datum (fact or proposition) used to make a decision, and if it works, it’s because the nudge has given new information to the decision maker. Behavioural economics shows that people often make irrational choices, changing what they do when the same choices are presented differently.
Consumers make rapid decisions – within five to ten seconds – and seldom think about whether their choices were good or bad. Marketers tend to believe consumers make rational decisions according to the AMA article, but there’s evidence that what they do is governed by the gut.
What’s the takeaway? Marketers should think of their consumers as people with limitless choice, but a finite attention span and work towards processes and methods of advertising and promotion that bear this in mind. What do shoppers overlook, and what grabs the attention?
You can read the full article here.