Nudge decay

Behavioural nudges have done tremendous good for society. The many examples provided in the classic book “Nudge” by Cass Sunstein and Richard Thaler show how nudges are able to exploit our human tendency to opt for the default selection when confronted with a wide range of options or our “laziness” to change a selection made in the past. If done right, these nudges can steer consumers in the right direction towards saving more for retirement (e.g. through the save more tomorrow scheme, where retirement contributions start small and then automatically increase over time) or towards better investment portfolios (e.g. by making a target date fund the default choice for a retirement portfolio). 

But of course, every scientific discovery gets abused if one can make money with it and marketers around the world are increasingly using nudges to trick us into buying stuff we don’t need. Why do you think we have to walk through every section of an Ikea furniture store before we reach the cashier? And in particular, why do you think there are small, cheap and “useful items piled up in the last room before we get to the cashier? Why do supermarkets have candy bars and sweets next to the cashier, right when your toddler has reached maximum boredom and threatens to throw a fit if he does not get a candy bar soon?

And if you book a hotel room online or go to online supermarkets, why are there constant reminders that there are “only two rooms left” or this discount is only available for a limited time? These are all nudges markets use to sell us crap we don’t need. I for one have had what I call “the Ikea experience” way too often: You go to Ikea planning to buy a new pillow and you come back home with a car full of plants, new dishes, three carpets and a new bed delivered in two days’ time. And of course, every time I hate myself for buying these things, but then again, they are really good value…

But interestingly, these nudges, seem to work less and less over time. The more often I went to Ikea, the better I knew where one can take shortcuts in the store to skip a few rooms. And going to an Ikea store with a shopping list and then rushing through the store without looking left and right helps avoid buying stuff I don’t need. In online shops, I have learned to ignore the warnings that a discount is only available for a limited time or that a flight has only two seats left. In fact, research by marketing firm Trinity McQueen amongst British consumers recently showed that such “scarcity tactics” by travel websites are interpreted by 65% of people as sales pressure and only 16% of consumers believed these claims were true. 

As nudges become more widespread their efficacy seems to decay. Thus, efforts, such as those by Facebook to use neuroscience to identify neural triggers for our desires to hook people to specific services may be less effective over time. And, more importantly, they may increasingly undermine public trust in these companies and create a backlash amongst consumers. Nobody likes to be manipulated, and if the manipulation becomes obvious, we tend to shun the company that tries to manipulate us. Thus, the current tech backlash may widen into a broader consumer backlash against all kinds of nudges and marketing efforts. Instead, we look increasingly for authenticity in our lives. Authentic behaviour is building trust between companies and its customers. If your sales representatives come across as well-trained and working according to a predefined sales script they may sell less than a salesperson who talks like a normal person and is transparent about the flaws and shortcomings of a product or a service, not just its benefits. 

And when a company has made mistakes in the past, like Facebook and Twitter by promoting fake news and propaganda via its algorithms (which are nothing more than sophisticated nudges) they can react in two ways. They can come up with a lame apology and try to implement minimal fixes so that advertising revenues don’t decline too much. Or they can stand in front of the public, offer a sincere apology, promise to do better in the future and subject themselves to public oversight by making their algorithms transparent to the public and fundamentally changing their business practices. The first course of action will keep profits intact in the short term at the risk of being abandoned by customers in the long run. The second course of action will increase costs in the short term with the benefit of creating a sustainable business that customers trust. It’s a sign of our times that most businesses will choose the short-term fix and thus put themselves out of business in the long run.

Reactions to sales nudges such as “only 2 rooms left” etc.

Source: Trinity McQueen.