I recently learned about seven fascinating behavioral economic concepts. The goal of this seven-part series is to (1) define those concepts in my own words and (2) pair each concept with one example of its application in advertising.
The seven concepts that will be covered:
The reason for this series? To inculcate these powerful concepts into my tool bag.
Before we start, I will remind you that behavioral economics attempts to identify predictable irrational behaviors. Unlike classical economics, behavioral economics takes into account complex and thus irrational human behavior even when that behavior is not in our best interest.
But irrationality doesn’t mean unpredictability. Turns out our mind uses the same heuristics (mental shortcuts) in the same sort of ways. This allows us to better predict how a person might behave.
And now, for the fun.
Part 1: Nudging
A nudge doesn’t tell you what to do. It doesn’t say, for example, to ban all junk food. Instead, it nudges you in a predictable direction such that you might not even realize. Take, for example, putting fruit at eye level. You might not even notice the difference. But research shows it will increase the purchase of fruit.
It’s important to note that the nudge must be easy—the mind, after all, loves the path of least resistance (i.e., it doesn’t want to think).
The term was coined by Professors Richard Thaler and Cass Sunstein in their brilliant book, Nudge: Improving Decisions about Health, Wealth and Happiness. Automatic savings enrollment is perhaps their most famous example.
Americans are historically terrible savors. While many employees have the option to put their pre-tax money into a retirement account, many don’t do it. And that decision often comes back to bite them.
So why don’t they do it? Especially if an employer will match the savings. Because human beings tend to place higher value on recency. We value the money we have today differently than at some point in the future, even if that future will result in more money than today. (I know, super irrational. But true!)
Thaler and Sustain discovered a powerful way to nudge people into more people enrolling in these savings plans. Typically, employees must opt into these accounts. That means, they physically have to fill out a form to opt in. They have to do work, in other words—something the human mind doesn’t like to do.
If, on the other hand, an employee is automatically opted, meaning they don’t have to do anything to take advantage of the savings plan, then it turns out they are much more likely to save. In fact, Thaler and Sustain found that automatic enrollment in a savings plan increased savings from 3.5% to 13.6% when compared to savings plans you had to opt in.
The options didn’t change. Employees could still either opt in or out. A nudge was just used to leverage the predictable way the mind works in order to get the desired outcome.
So how does nudging relate to advertising?
Well, advertising is itself a kind of nudge. Without eliminating choices, the purpose of ads is to nudge consumers to a predictable behavior. Though I would argue ads are, in general, very poor nudges.
So how can nudging be used in the ads themselves?
Let’s take Apple’s infamous “Think Different” campaign as our example.
The core message of the ad is as follows:
An Apple computer is for anyone that doesn’t fit in with mainstream society.
That, in itself, is a nudge. (It’s also a brilliant brand story.) By buying an Apple computer, I am saying that I don’t fit in with what’s considered “normal.” Which according to this ad is not something to be ashamed about.
In the ad, being a misfit is something of a rallying cry. In fact, the ad opens with people like Einstein and Gandhi—two people who didn’t fit in with mainstream society, who were considered weird and different.
So, in a strange way, I, in buying an Apple computer, am like Einstein. Or at the very least, in the same category as Einstein.
And there lies the nudge.
Done through brilliant copywriting and art direction.
The choices for the consumer haven’t changed. But what’s at stake has—my identity and, as a result, the social group I want to take part in.
Nudging to perfection. Something most great ads do.