What is the Nudge Theory? A mixure of beavourial economics, psychology, political theory, marketing and sales. Its the theory that considers how people make decisions – and how others impact them.

1. Nudge Theory
What is Choice?

2. What the Nudge?
 A mixture of –
 Behavioural Economics
 Psychology
 Political Theory
 Marketing/Sales
 Growing popularity in public and
not-for-profit sectors
 Considers how people make
decisions – and how others
impact them

3. More Specifically
“A nudge, as we will use the term, is
any aspect of choice architecture that
alters people’s behaviour in a
predictable way without removing any
options or significantly changing their
economic incentives.
To count as a mere nudge, the
intervention must be easy and cheap
to avoid.”

4. Why can we be Nudged?
Traditional economic theory says that all
human act rationally when making
purchasing decisions
In other words, we consider all things,
researching all alternatives, and choose that
which provides the most economic benefit
to ourselves as individuals
But if this was true we couldn’t be nudged…
Smoking wouldn’t exist if we were truly
rational

5. So how are we Nudged?
Need to start looking at how humans actually think

6. Two Systems of Thinking
Automatic System
Fast
Unconscious
Parallel
Associative
Low Energy
‘Doer’
Reflective System
Slow
Conscious
Serial
Analytic
Consumes a LOT of energy
‘Planner’

7. Reflective System
Works by creating hypotheses and
testing these with prior knowledge.
Meanwhile sorts between relevant
and irrelevant bits and pieces of
information.
You can activate this system by will,
and it resembles what we typically
associate with thinking in many ways.

8. Automatic System
Controls day to day thoughts – how much
butter to spread, how long to brush teeth for,
smiling when you see a cute puppy, etc.
Although the reflective system might seem
superior to the automatic system, it really isn’t.
The reflective system is simply too slow and too
single minded to handle even a fraction of the
alternatives we are faced with every day.
The automatic system can handle thousands
of problems and alternatives for us without
even bothering us with the outcomes.

9. Two Systems of Thinking
The two systems generally work well together,
allowing us to act quickly and instinctively when
required, or allowing deep, powerful thought
However they don’t always work well…and can
‘fail’ in many different ways
The automatic system is especially prone to bias, in
fact it uses bias to speed up decision making
While the reflective system can often back up or
reinforce decisions made by the automatic system,
even if obviously wrong

10. Targeting Your Automatic System
Three questions. Three seconds only to answer each. No answers after Three seconds.
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much
does the ball cost?
2. If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines
to make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48
days for the patch to cover the entire lake, how long would it take for the patch to cover
half the lake?

11. Answers
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does
the ball cost?
2. If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to
make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for
the patch to cover the entire lake, how long would it take for the patch to cover half the lake?
1. 5 cents 10 cents
2. 5 minutes 10 minutes
3. 47 days 24 days

12. Biases
 In order to speed up decision making, the automatic system uses biases
 Anchoring
 Availability
 Representativeness
 Optimism and Overconfidence
 Gains and Losses
 Status Quo
 Framing
 Social Norms

13. So What?
Nudges are what ‘Marketers’ do every day –
What will make an individual ‘buy’?
Target nudges, usually lots of different ones, at
perceived biases
• Which ‘Nudge’ will work best?
• Promotion?
• Price?
• Place?
• However some of the best
nudges are changes in
design, tone, copy – or data!
• Especially prevalent in –
• Retail
• Digital
• Direct Sales
• Direct Marketing

14. Behavioural Insights UK
Tests with social norms
Tax debt payment DM
i.e. ‘9 out of 10 people pay their taxes
on time’
Real numbers, as in taken from the
data, work best
67.5%
72.5%
79.0%
83.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Control Social Norm National Social Norm Postcode Social Norm Town
RR %

15. Choice Architecture
Let the pictures tell the story

16. Simple Changes
From ‘Waste’ to ‘Landfill’
Make slightly more difficult to use less preferred
Use of colour

17. Barely Noticeable…
Small fly
Provides a target
Reduced spillage by 80%

18. Can Be Obvious
Especially when monotonous
Targets Automatic system

19. Heavily Science Based
 Scientific discipline, literature
focuses on randomised control
trials
 Fully or fractional factorial
designs allow large volume of
tests to run concurrently
 Test variation of series of
elements, even if they seem
‘minor’
 Can easily be identified in Direct
Marketing

20. Data Driven Works Best

21. Relevant Data

22. Government Example