MKT642 Interdisciplinary approach to consumer

understanding
Section I
Assignment III
Literature review on Nudge theory
Submitted to Ravi Miglani

Name: Janki Solanki

Roll. No: AU1813051
Program: IMBA (Third year)
Introduction:
Nudge theory in Marketing is applied to manipulate buyers’ choices implicitly via insinuation
and emphasis. Marketers make use of shrewd involvements to alter the “Choice
Architecture,” creating specific results further expected. As nearly all judgments are built on
preferences and guesswork.
a Nudge is once foundations, labelled as ‘choice architect’, pursue to sway individuals'
choices in a prearranged manner with no meddling with individual’s independence of
preference or granting them any financial inducements to perform so. Nudge would not make
it to alternatives compulsory. A Nudge can for instance be to set bear fruit at eye level. To
prohibit junk foodstuff and push individuals to eat nutritious is not a Nudge.
One of the crucial characteristics of Nudge is that it has to be useful, safe, low-budget and
simple to opt-out. Individuals require Nudge for choices that they do not obtain instant
response, and once they have difficulty recognizing the stress of the state.
Nudge is regarding preference set up. Currently people are loaded with knowledge around
what’s finest out there. We have not enough time to deal with an escalating number of
indications, therefore we make use of social signals to do improved judgments.
Choice Architecture is a trend where the choice architect (organization, merchandise
designer, marketer, etc.) act the action of choice framing - constructs the framework in which
individuals make selections, of which several are not yet informed of the knowledge being
determined, and they ought to be better off from the pre-set choosing. Example of Choice
Architecture is Opt-in/ Opt-Out. If individuals get to opt-in, several switch with the
defaulting choice of not choosing in. However, if you get to opt-out, numerous more will take
the idea. For instance, if donor vehicles are opt-in, take-up prices might be minimal. But, if
donor vehicles turn out to be opt-out, then take-up numbers have remained proven to rise. A
related illustration is with company retirement pension. Getting them opt-out substantially
rises take-up levels.[ CITATION Ste20 \l 16393 ]

Dual process theories: an overview

Established work in social cognitive psychology separate cognitive procedures into dual
distinct types, putting the initial stepping stone of what later on came to be generally
recognized as the dual process theories. Dual process theories suggest that, ‘there are two
different administering versions presented for cognitive duties: one (type 1) that is quick,
automated and non-aware, and another (type 2) that is gradual, regulated and conscious’.
These notions date backward to the 1960s and have remained developing ever since. Though
dissimilar schools of opinions have arose within the field of the dual process theories, the
dominant importance has been on the awareness that cognitive processes can be evidently
famed into an instinctive (or, exploratory) and logical (or, organised rule-grounded) kind that
might interrelate with one another, and take superiority over each other contingent on the
nature of the duty. These hypotheses fell to existence separately until an effort was rendered
to merge them into a further defined and comprehensive context founded on the familiar
characteristics of these versions. A key principle of these dual process theories is the obvious
difference among the two categories of mind practices. Frederick and Kahneman (2002)
reveal by what means the cognitive processes identified as system 1 and system 2 were
commonly utilized following Stanovich (1999) and Stanovich and West (2000), then later
explained by Kahneman (2012) in his book Thinking, Fast and Slow. These classifications
have a set of features: the more automatic system 1 is typically believed to be involuntary,
unforced, associatory, fast, and corresponding, and is frequently contextualised as the deep-
rooted mind while the reflective kind system 2 is every so often summoned as the skilful,
effortful, sensible, indolent, and law grounded. Nevertheless, the descriptions given to the
two classification of procedures are probably ambiguous and suggest two separate kinds of
cognitive activities interrelated by neural qualities simply. [CITATION Unk12 \l 16393 ]

Application of nudges:
 Exhibiting social responsibility. One of the clearest nudges is to demonstrate
reaction from colleagues. Optimistic evaluations shown significantly – play a
substantial part in persuading individuals to purchase. Businesses may present
positive reviews next to their manufactured goods. The government might also
demonstrate instances of individuals who have gained from specific policies (like
show pictures of individuals captured and then identified and defamed for tax
evasion/benefits scam.)
 Particular messages. To lessen ignored hospital appointments, most clinics send out
SMS text notices on the day. Surveys indicate that altering the words of the SMS can
impact how effective these text messages are. For instance, if text messages refer to
the direct costs to the NHS for missing an appointment (£160) – it improved missed
schedules from 11.1% to 8.5%.
 Promoting certain actions. A study uncovered that if school children are sent
inspiring text emails, attending percentages get better.

Several companies use nudges to increase profit. For example:

 Insurance expense protection. Banks persuaded the selling of compensation

protection insurance for retirement pension and other commercial benefits. They were
offered as an indispensable package for the product. But the price and revenue surplus
for the bank was certainly not completely clarified. The government later on forced
banks responsible for testimony of mis-selling.
 Unique offers. Some companies propose a free of charge subscription for a month.
But, to get hold of the free subscription it is required to give credit card specifics and
pay for a month upfront. To earn free subscription, it is required to call up and
withdraw ahead of the end of the month. But, due to the hassle, several customers
might end up paying additional than anticipated.
 Assertive salespeople. If a customer attempt to withdraw particular services, e.g.,
internet supplier. To terminate they need to phone up and a committed salesperson
will seek and prevent expenditure – all through presenting a particular price cut for
later three months. The solid deals pitch can nudge users into not adjusting.
  Special offer finance deals. In the early 2000s, numerous US customers were
presented unique rebates on loans. It made bank loan incredibly inexpensive for the
initial year or two – to persuade individuals to obtain the mortgage. But, following
that initial period, interest rates went up to usual amounts – triggering a big upsurge in
the price of loan payments. Several individuals failed to pay on debts since they didn’t
completely grasp how much loan payments would increase when the end of an
opening period. This showed a root of the credit crisis.[ CITATION Tej20 \l 16393 ]

Nudging used to reduce the consumption of alcohol:

In 2018, ICE was appointed by a commission to lessen alcohol intake in 18–25-year-old
women. Key insights of the study, Through ICE’s investigation, it was uncovered that - in
arrears of mostly to a nationwide operation known as ‘know your limits’ - youthful females
describe responsible drinking as consumption to their personal understood limit.
Nevertheless, they describe this restrict as a state when they are extremely drunk and
susceptible. Young females are conscious of drink defending behavioural tactics (such as
drinking water, slowing down, spacing their drinks out), but in actual time drinking terms,
this can mean that the harm is by now thru as these variations in actions were found to one be
realised once they had knockout their self-imposed and standardised ‘limit’.
Extending this limit was portrayed as ‘can’t see straight’, ‘the ground is moving’ and ‘I see
double.’ Though this did work as a nudge to discourage more intoxicating drinks, this is
exceedingly late to lessen their threat of short-term adverse effects of alcohol intake.
Solution:
ICE constructed a sequence of behaviour nudges (e.g. blurry reflections in bathroom mirrors)
that were used at bars and clubs to help young females’ unconscious judgements and push
them to self-recognise that they might be approaching their curb, thus facilitating them to use
drink shielding behavioural tactics more proactively.
Since we hardly use balanced choice making progressions when determining when and how
much to intake (mainly explanations comprise 'it’s fun', ‘relaxing’ and 'social'), approaches
that plea to such coherent decision making (counting those that emphasis on the grave
undesirable consequences of consumption) are improbable to have a noteworthy influence on
dropping how much and how regularly young females drink liquor. Whilst they might look
fantastic and persuade everybody in the authorized organization that they are ready to have
the preferred consequence, they basically get vanished when they are applied in the actual
world and attend as more of a continuous cliché than an actual and constant behaviour
variation drive.[ CITATION Kla18 \l 16393 ]

Nudge used to stop littering:

In 2011 in Copenhagen, Nudge was applied to promote improved usage of street litter
rubbish bin. Footprints were made on the floor heading up to the bins and the containers were
‘wrapped’ in a vivid shade. A test was intended to assess the influence of the nudge, which
included delivering free candies prior to and afterwards the footprints and wraps had been
used, and with how much of the packages ended up properly in the bins. A 46% decline
was reported by the testing group in the percentage of packages which ended up on the road.
The experiment team asserted that the nudge operated in two aspects:

 initially, it made it simpler for individuals to locate the bins as they were more
noticeable.
 next, the footprints persuaded them to assume the planned, appropriate action - that is,
to make use of the bin.

Nudging used to reduce the consumption of junk food: 

Background
The recent field research proves the efficacy of nudging to encourage healthy food
preferences.
Procedure
Three kinds of nudges were applied at a take-away food seller:
1) an availability nudge that positioned heathy food products at the facade stand;
2) a salience nudge that introduced healthy daily bread rolls to be more visually appealing;
and
3) a social proof nudge that expressed yoghourt as a prevalent preference.
Furthermore, the experiment evaluated whether nudging results would persist strong when a
release message was incorporated. The field experiment was performed over a seven-week
phase. The calculated result was the sales of the aimed healthy food commodities.
Results
The convenience nudge considerably boosted the sales of the fresh produce fruit. The
influence of the salience nudge was restricted apparently owing to current first choices or
behaviours that usually accelerate bread purchases. As the sales of the yoghourt shakes
persisted consistently at a low level over the seven-week period the impact of the social proof
nudge remained unexamined. Crucially, disclosing the objective of the nudges did not meddle
with results.[ CITATION Che19 \l 16393 ]

Drawbacks of Choice Architecture:

 Customers might respond in a different way to the presentation of options and
opportunities.
 Several customers might dislike the administration sway and stay put to their favoured
option.
 Choice architecture could be inadequate and additional strategies, such as sugar excise
utilized to lessen demand.
  By nudging buyers into making particular items, it may diminish their capability to
create judgments for themselves.
 It varies on the value of knowledge about commodities. For instance, in the 1980s, it
was trendy to exclaim that fat in foods was harmful, but now proof is less convincing,
and a few say that low-fat diets can be harmful if they promote surplus sugar intake.

Conclusion:
To summarize, the idea is a comparatively refined procedure change that boosts individuals
to make choices that are in their broad self-interest. It’s not about disciplining individuals
monetarily if they don’t perform in specific way. It’s about making it simpler for them to
make a positive decision. As. by understanding how people think, we can make it easier for
them to select what is finest for them, their families and society.
Through this study we can say that to identify the issues and design a effective nudge it first
requires to recognize any conducts you want to modify or change, then to find out what
people’s current behaviours are, and what are the existing patterns, following with decision
making about which nudge to apply, to bring out the best solution, ending with testing and
evaluation.

Bibliography
Cheung, T. G. (2019, July 22). Cueing healthier alternatives for take-away: a field experiment on the
effects of (disclosing) three nudges on food choices. Retrieved from BMC Public Health:
https://bmcpublichealth.biomedcentral.com/articles/10.1186/s12889-019-7323-y#citeas

Courtney, S. (2020, January 3). What is Nudge Marketing? Retrieved from Convertize:
https://www.convertize.com/what-is-nudge-marketing/

Davidson, K. (2018, March 1). collective voice. Retrieved from voice ice creates:
http://voice.icecreates.com/voice/behavioural-nudges/

Inudgeyou. (2012, May 3). Nudge Theory 1: The Mechanics Of The Brain. Retrieved from Inudgeyou:
https://inudgeyou.com/en/nudge-theory-1-the-mechanics-of-the-brain/#:~:text=The
%20first%20and%20most%20important,is%20called%20the%20reflective%20system.

Pettinger, T. (2020). Nudges. Retrieved from economics help:

https://www.economicshelp.org/blog/glossary/nudges/