Nudging: Little Change, Big Changes

How do we get donors and volunteers to take the actions we need them to take? It turns out the nudge may be the best way.

Last October, University of Chicago economist Richard H. Thaler was awarded the Nobel Memorial Prize in Economic Sciences. Thaler’s work has persuaded many economists to pay more attention to human behavior and many governments to pay more attention to economics.

Thaler is the rare economist who enjoyed some measure of notoriety before winning the prize. He is an author of “Nudge,” the 2009 best-selling book about helping people make better decisions. He also appeared in the 2015 film, “The Big Short,” delivering a 90-second analysis on the causes of the 2008 financial crisis.

Nudge describes the strategy behind changing the ways consumers view their choices to “nudge” them to the desired decision. The idea is that it is easier to steer a person toward a given decision than it is to rationally persuade them to make a choice. Small nudges can lead to big effects when spread over a lot of people. So popular has this idea become in government, health care, consumer marketing and other areas that it has spawned an annual “Nudge Awards,” the world’s first behavioral change awards.

Why not try to persuade people to make better decisions? One of the fundamental concepts behind nudging is that people are inherently irrational, but in very consistent ways. The notion that people are irrational actors was a problem for economists to explain before Thaler came along. For example, people will buy a coffee mug for $3, and then refuse to sell it for $6. For an explanation, see the mere ownership effect. (When Thaler was asked how he would spend the $1.1 million he won with the Nobel Prize, he responded, “I will try to spend it as irrationally as possible.”)

An example of a consumer nudge is placing a product at eye level on a supermarket shelf to increase the odds that it will be seen and chosen. In government, the British found that people were more likely to pay their automobile registration fees if billing letters included a picture of the vehicle.

We tend to think that big effects require big efforts. Instead, nudges usually involve small changes. They are often Zen-like in their simplicity. The key with a nudge is that it allows people to retain their freedom of choice, even as it steers them in a certain direction.

Nudges have the potential to impact revenue throughout the nonprofit world industry.

Behavioral scientists in the U.K. developed a strategy for the restaurant Fifteen in Cornwall to fund the training of apprentice chefs by “encouraging” diners at the restaurant to make a donation. The idea was to raise as much money as possible but not do so at the expense of the wait staff, who may have lost tips, or the goodwill of the diners, who may have felt put upon by a solicitation.

Several strategies were tested. The one that was successful involved adding a £1 donation (about $1.40) to the bill by default and giving the diners the choice to “opt out” if they didn’t want to contribute. (Notice that they had full freedom of choice.) The outcome? In the following year, around $140,000 was raised with no detrimental effects to servers’ tips or diners’ satisfaction.

The way nudges are crafted is known as “choice architecture.” This is the process of structuring options in a way that they will influence the likely outcome. Most often, choice architecture is not about persuading an individual to make a choice, but instead removing a barrier for them doing so.

In the restaurant example, no one needed to be persuaded about the benefits of funding a chef’s training program. They were asked if they would like the donation to be removed and overwhelmingly chose no—the least difficult option.

Nonprofits stand much to gain by using nudges to “pave the cowpath.” This refers to figuring out what people already naturally do and then clearing out the path ahead of them to make it as easy as possible. The goal is to make whatever you are trying to get them to do to be the easiest decision they never made.

First figure out what behavior you want to nudge, then architect the moment of choice.

Sound simple? It’s not. You have to give up your pre-conceived notions of what works. Then, it takes strategy, testing and an understanding of the constituents you are trying to sway.

What might be worth nudging in a nonprofit? Self-donations might be good. How about asking people to opt out of a self-donation instead of opting in, in the case of peer-to-peer events? Do people donate on your website? How about putting the highest donation amount first in your string of donation options, instead of last?

Finally, measure success in your bottom-line.

Katrina VanHuss and Otis Fulton have written a new book, Dollar Dash, on the psychology of peer-to-peer fundraising. Click here to download the first chapter, courtesy of NonProfit PRO!