How a Simple Nudge Can Create Big Change
To make healthier choices, sometimes we need a gentle push in the right direction. Consider the seemingly innocuous habit of consuming one can of soft drink a day. In one year, that single can of soda snowballs into a cube of sugar weighing fifty pounds. Think about that: that’s the size of a small dog. It’s not that we don’t want to be strategic or long-term oriented. It’s just not how we naturally frame things.
Your environment plays a big role in how you make choices--even for the simple decisions--like choosing to consume a soda.
That’s why we believe in creating “nudge” strategies to facilitate healthier choices. Take the decision of saving in a 401K account for a new employee. How that choice is presented has much influence on the outcome. If you are automatically “opted-in” as the default, you are much more likely to save than if the default is set as “opted out.” As a result, many employers have adopted this nudge strategy to promote good saving habits. Similar nudge effects are seen in no-fault car insurance and organ donations, which some states in the U.S. have as their default and others do not. People mostly tend to choose the default option.
The bestselling book Nudge by Thaler and Sunstein goes deeper into such strategies, including the underlying behavioral economics and decision psychology at work. The challenge in designing nudge strategies is not to come off as manipulative, rather as helping people make choices more in line with their long-term objectives. So, nudge strategies must navigate a fine line between paternalism where the company dictates vs libertarianism which assumes the individual knows better what is best for them.
A group called People Analytics at Google has experimented with several nudge strategies in the context of consumption. We eat in units. You have one carrot or one cupcake--not 1.5 cupcakes. At Google, they cut down the size of the “unit” for desserts so that you can finish them in a few bites. This means less calories and sugar. It also means that you have to think about getting another dessert if you are still hungry--forcing another decision. Their hope is to curb binge eating. Google runs other nudge experiments such as changing the physical placement of healthy food items (salads in the front and desserts in the back) or increasing awareness of caloric intake with small placards. The nudge parameters are designed to promote healthier habits but ultimately, the choice is still in the hands of the employee.
Cleveland Clinic has implemented nudge strategies with a more paternalistic approach. To promote healthier habits, they have eliminated soda machines, banned smoking on-campus, provided free gym classes to employees, and removed fried foods from the cafeteria. These changes were initially met with resistance but have slowly gained traction. The results are millions of dollars in healthcare savings and measurably healthier employees.
Nudging strategies can also be used at an individual level. By controlling your environment, you can create the right formula for better choices. For example, if you are on a diet--perhaps you need to remove junk foods from your kitchen completely. Taking sugary items out of the picture eliminates eating junk food as a choice. Another example could be using a gym partner as a nudge to make sure you exercise (sometimes making the trip to the gym is the hardest part).
Companies that deploy nudge strategies must carefully balance between paternalism and libertarianism. Nudge strategies should harmonize with the culture and heritage. While this article focused on health, we believe nudge strategies have broader application including in the areas of finance and energy. A strategic and cost effective tool, nudge strategies can be implemented by businesses to save significant dollars and facilitate better decisions.
This article was co-authored with Viraj Narayanan, senior consultant at Decision Strategies International.
PAUL SCHOEMAKER | Research Director, Wharton School
Paul J. H. Schoemaker is the founder and chairman of Decision Strategies International. A speaker, professor, and entrepreneur, Schoemaker is research director at the Mack Institute for Innovation Management at Wharton, where he teaches strategic decision making. His latest book is Winning the Long Game: How Strategic Leaders Shape the Future.