Behavioural economics, also known as ‘nudge theory’, is where economics meets psychology (see page 18). Modern economics is based on the assumption that consumers are smart, coherent and rational about the decisions they make. The trouble is, we aren’t.
Behavioural economics attempts to deal with this reality of the human condition, not by dictating a list of dos and don’ts for the way people should live – or, conversely, leaving them to their own devices – but by highlighting the best option, while still leaving all the bad ones open.
The idea is that people will be ‘nudged’ into making the right choices without feeling they’ve been manipulated. A simple example comes, surprisingly, from the men’s toilets in Amsterdam’s Schipol Airport, where the etching of black flies on the urinals has helped reduce ‘spillage’ by 80%. Users try to hit the flies and miss less. Consequently, the toilets require less extensive cleaning.
President Barack Obama embraced elements of nudge theory to help influence people’s behaviour in the 2008 US election campaign; more recently, Prime Minister David Cameron has adopted behavioural economics as a compromise between state intervention and laissez faire. Now, thanks to IPA president Rory Sutherland, marketers are also switching on to nudge theory.
Those familiar with Marketing contributor Alan Mitchell (particularly his column in our 15 September issue) know behavioural economics has its shortcomings, but in an age when budgets are be-ing slashed and effectiveness is key, ‘nudge’ seems an ideal bridge between the ‘push’ marketing of the past and the ‘pull’ model of the future.