Nudge Theory

This is a theory that can be applied in a wide range of areas from sales to politics. The idea is to subtly encourage people to make the “right choice.” Here’s the definition from Richard Thaler, known as the father of Nudge Theory:

“A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.”

In the world of business and commerce, Nudge can be seen in a variety of ways. For example, at restaurants or takeouts, you tend to see one option which is significantly more expensive than anything else. The owners are not expecting many customers to buy this particular item but instead make the second most expensive option seem like a bargain.

Another instance can be seen ABOVE.

This is a promotion for LTV Conference for people in the SaaS industry. It’s an excellent example of enticing potential buyers to make their purchase earlier, with a focus on the reward of saving 75% on the price. Even the code plays a part, promoting the idea of “LTV friends,” which lends a personal touch.

Having a deep understanding of marketing psychology can make or break your business. Take the choice study mentioned earlier. If you could increase your conversion rate from 3% to 30% just by reducing the options you give customers (discussed yesterday), what could that do for your business? The key takeaway here is to be continually testing, monitoring results and optimizing. As this article has shown, small tweaks can make a huge difference.

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