Behavioural economics is helping brands to innovate as well as improve products, services and the customer experience, but when marketers apply psychology to economic decision-making processes, questions inevitably arise around ethics.

Nobel Prize for nudging

When Richard Thaler won the Nobel Memorial Prize in Economics Sciences last year, it was a call to action for many marketers to delve into his nudge theory.

Comprehension that purchasing decisions are often irrational as well as rational is not new to our industry. For decades we have nudged behaviour, informing strategies and communications with behavioural insights and techniques such as anchoring to make brands more desirable.

Insightful intervention or manipulation

Marketing guru, Philip Kotler believes that behavioural economics is just another area of marketing:

“Classical economists never really studied how sellers and buyers made their decisions, but marketing has always tried to explain the motivations of buyers, sellers and their belief systems.”

The application of behavioural economics may be far from new, but critics have argued that theories can be ‘infantilizing’ because of the assumption that people don’t know what’s good for them, Dunt (2014) claimed that people are mostly unaware of interventions and other sceptics have argued that it has parallels with manipulation.

Conversely, according to Thaler and Sunstein (co-authors of the original ‘Nudge’ book), the paternalist approach of applying nudges, suggests interventions can help people to make decisions that are in their best interest and, as there is no such thing as neutrally presented choices, they preserve freedom of choice:

“By knowing how people think, we can make it easier for them to choose what is best for them, their families and society”.

The UK government’s Behavioural Insights Team has been ‘nudging’ people to make better choices for themselves and society for nearly a decade and authorities around the world have been quick to follow suit. Applying behavioural science to choose healthier food or adopt safer behaviour is beneficial for the individual and the greater good.

Sunstein has gone on to undertake research, which showed that most people welcome such nudges as they can help them to live better lives.

We believe that any tiny amount of customer insight is a force of good for brands, so when you add a layer of behavioural science, only great things can happen.

Only by truly understanding how someone makes a decision, can you help them to make new decisions. This isn’t about penalising people financially if they don’t act a certain way; it’s about helping them make decisions that have the potential to make a positive impact on their lives and even those around them. Applying techniques such as framing or chunking can positively help people consider information and make good choices more efficiently.

Ethical choices lie ahead

Whether we like it or not, marketing has always been in the business of persuasion. As long as we remain in that territory, void of coercion or manipulation, then we can practice ethically – understanding the science behind why people make decisions and applying that carefully. We must continue to tread with caution. With great power comes great responsibility.

For more information and advice on leveraging behavioural economics for marketing, download Top Trends Driving Consumer Behaviour 

By Sue Benson

Managing Director