The hottest business idea you’ve never heard of — ‘nudge units’

What’s a “nudge unit” and how might it help your company, your employes or yourself be better at whatever you do? The folks at PeopleScience.com asked me to look into that recently.  It’s pretty fascinating.

I’ve been writing about cognitive biases and other human behavior research for some time now — brain quirks like anchoring, or progress bias, or the Ikea Effect, and how these things push people into odd (bad?) decisions.  Many of them might fall under the category of bad habits or mental booby traps, but as scientists research them, folks are figuring out how their power can be harnessed for good.  Small changes can make a big difference. Put the bananas at eye height and the candy on a shelf close to the floor in the cafeteria, and workers will eat healthier (and call in sick less).    It’s easier to complete a task when someone else gives you a decent head start, for example (that’s “Endowed Progress.“) Want consumers to buy 10 coffees to a get a free one?  Give them loyalty cards with two free “credits” to start, and they are more likely to fill out the card.

Under the relatively new banner of “applied behavioral psychology,” corporations are hiring Ph.D.’s and putting them into swat teams under (or next to) human resources departments — then letting them loose workplaces to design all manner of nudges.  These are called nudge units — or B(ehavioral) E(economics) teams — and plenty of executives are excited about their potential. Here’s a brief excerpt from my piece, but you should read the whole thing at PeopleScience.com.


(Excerpted from Behavioral Leaders on Starting Behavioral Units)

Uber had a problem. When the ride-sharing firm launched its new Express Pool service, riders kept ordering cars, then abandoning their purchase before a driver could be found. Express Pool is a bit more complex than Uber’s traditional service, as it matches up riders going similar places. That saves riders money, but there’s a catch: They have to walk a little to meet the driver, and they have to wait while Uber’s systems search for compatible companions. That delay drove consumers to cancel.

But Uber also had a “secret weapon” – a behavioral economics team that was empowered to run experiments on new products. The group quickly identified three concepts that might be at play with the Express Pool problem: idleness aversion, operational transparency and the goal gradient effect. Working with the programming team, they ran A/B tests on simple fixes, such as “showing your work.” By pulling the cover back on granular steps, like “How we calculate your arrival time,” the BE team was able to produce an 11 percent reduction in post-request cancelation.

It was a quick win.

Stories like these are making the rounds among management teams across industries, as behavioral economics ideas are working their way from academia, through popular business books and into workplaces. Tales of successful behavioral “nudges” seem to be everywhere – like default settings that encourage employees to join retirement plans. So many executives are wondering if these techniques can be translated into bigger wins, both among their employees and their consumers. Many firms are hiring behavioral economics experts and forming teams designed to look for such wins. They’re often called “nudge units,” but if they are formed well, there’s a much bigger idea behind them: BE teams are trying to spread the scientific method across every part of the workplace, in an effort help companies maximize sales and help workers be their best.

{…}

The power of behavioral economics opens up a lot of ethical questions – using science to manipulate consumers or workers, however well-intentioned, is a power that should be managed with great care. One false step can make teams or consumers skeptical of what you are up to. Trust is essential for buy-in and to keep your experiments valid, to keep workers devoted to the “new way.” Gaining trust begins with early agreement on goals and expectations.

Quick wins are a big aid when building trust, Friedrich says.

“There are plenty of BE nudges you can use internally to show real impact to the bottom line quickly, from debt collection to reducing employee expenses to reducing stock piling of annual and long service leave, to name a few,” she said. “Use one. Show the measured benefit. Then ask to do the next one.”

Framing the experiments also helps. Sometimes it’s best to avoid arriving “guns a-blazing” as a disruptor. Explaining a nudge as a variant of “something we’ve done all along” can ease the anxiety, says Sam Tatum, head of Behavioral science practice at Ogilvy Consulting.

“Don’t walk in and say ‘stop and change.’ (Say) ‘let’s refine and add,’” he said.

 

About Bob Sullivan 1370 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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