Changing Customer Behavior with a Little Nudge


Do you nudge your customers?

Most businesses do, whether they know it or not. A nudge propels a customer toward the behavior you want – whether it’s purchasing a product, signing up for a subscription or making a repeat visit to a retailer. The theory behind a nudge is that positive reinforcement and indirect suggestions can change people’s behavior at least as effectively as rules and instructions.

For example, at a restaurant the other night, a waitress came to my table and said, “Can I start you off with a glass of wine or an appetizer?” That was a nudge, encouraging me to order more food and drink. And I have to admit, it worked, and I thoroughly enjoyed my glass of Merlot.

Many businesses make the mistake of thinking that nudges have to be blatant. But obvious nudges can sometimes have the wrong effect. Have you ever left a retail store after a sales associate approached you for the third time to tell you about a special offer?

Researcher David Halpern says more subtle nudges can be hugely effective – but they must be the right kind of nudges. Effective nudges appeal to our instincts by making the desired behavior seem easier or more attractive. Or they use time pressure or social pressure. Halpern is the chief executive of the behavior insights team at the Royal Society for the Encouragement of Arts, Manufactures and Commerce.

In a recent talk, he demonstrated why certain types of nudges work better than others. It turns out that we’re good at complex intuitive tasks like catching a ball. But we’re not so hot at straightforward mathematical calculations, like figuring out how thick a piece of paper would become if you folded it repeatedly.

Put another way, we respond well to human interactions and intuition, but we have a much tougher time deciding whether it’s better to save $20 off a $100 purchase or 15 percent off a $50 purchase.

Getting Customers to Respond

How does this help you nudge customers toward the behavior you want?

Let’s look at customer interactions. Halpern cited a study of applicants at a job center. When the job center sent a text saying “you’ve been booked for an interview,” only 10 percent of recipients showed up. But when the text was personalized by addressing the applicant by name and having a person sign the text, the response rate increased. The texts with the best response rate – 27 percent – included both personalization and reciprocity: “Mathew, you’ve been booked for an interview. Good luck! David.”

What’s more, the people who received the personalized text felt better about the communication than those who didn’t.

Notice that the texts didn’t pressure the applicants or ask them to complete additional tasks. They merely reached out in a personal and encouraging way.

In a Customer Experience setting, a similar nudge could look like this: As you walk into a clothing store, a salesperson compliments you on your sweater. Then, as you pick up a shirt, she says, “Oh, I love that shirt. We just got them in last week and we’ve almost sold out of them.” In just two sentences she’s given you the message that you look good, you have good taste, and you’d better act fast if you want that shirt.

When we undertake designing a Customer Experience we look at these types of ‘nudges’ through the subconscious and psychological experience. We use a tool called Behavioral Journey Mapping.

Can You Nudge People to Pay?

Another of Halpern’s examples shows how a nudge can help with collections and payment issues.

Researchers found that when people received a letter reminding them to pay their taxes on time, only a third of them actually sent in a check. But researchers were able to increase the payment rate by exerting subtle social pressure. While it helped to point out that most people paid their taxes on time, they got the highest response rate by giving recipients the impression that they were among the few in their immediate area who hadn’t paid.

The research suggests that businesses might reduce their collections issues by sending letters like this: “We value our relationships with customers like you, and that’s why we don’t want you to be one of the very few that we’ve had to send to a collections agency.” Of course, some people won’t pay no matter what, but it takes little effort to add a subtle nudge and it could reap big rewards.

Or consider using social pressure to steer customers toward a larger purchase or a faster payment method. “The Gold Package is our most popular” or “Most of your neighbors use our quick and easy credit card payment system.”

By suggesting that we’re special, or that time is running out, or that everybody else is doing it, we give customers just the nudge they need to pull out their credit cards.

 

This blog post has been re-published by kind permission of Colin Shaw – View the original post

Published On: 2nd Feb 2016 - Last modified: 6th Feb 2019
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