Under the Influence with Terry O'Reilly - S3E17 - Nudge: The Persuasive Power of Whispers

Episode Date: April 27, 2014

This week, we look at the subtle art of "nudging." Schools, marketers and even governments are now using small nudges to gently steer people toward making more positive decisions in their lives. Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please, do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan, you just have to love storytelling.

Subscribe now, and don't miss a single beat. From the Under the Influence digital box set, this episode is from Season 3, 2014. You're so king in it. You're loving it in style. Your teeth look whiter than noon, noon, noon. You're not you when you're hungry.

You're in good hands with us. You're under the influence with Terry O'Reilly. Back in 1974, George Foreman was aptly named because he was the undisputed boss of the heavyweight boxing division. George wasn't the smiling pitchman we see today selling cooking grills. He was a menacing, dangerous, 6'3", 220-pound machine that struck terror in the hearts of men who fought for a living. Back in 1971, undefeated Muhammad Ali lost to heavyweight champion Joe Frazier. Many called it the fight of the century.

It went the full, grueling 15 rounds. In 1973, Muhammad Ali lost to Ken Norton. Norton broke Ali's jaw in a 12-round slugfest. Now, to put all this in some context, when George Foreman met champion Joe Frazier, the man who beat Ali, Foreman knocked him down six times before the referee stopped the fight in the second round. Down goes Frazier! Down goes Frazier! Down goes Frazier! The heavyweight champion is taking the mandatory eight count,

and Foreman is as poised as can be in a neutral corner. When he met the man who broke Ali's jaw, Foreman knocked him down three times before the ref stopped the fight in round two. So, when the rumble in the jungle was announced, Foreman knocked him down three times before the ref stopped the fight in round two. So, when the rumble in the jungle was announced, it was to be an epic battle for the ages. George Foreman versus Muhammad Ali. The fight was held in Zaire, Africa. When the night of the fight finally arrived, the boxing world was on edge.

Most felt Ali would take a savage beating. Even the atmosphere in Ali's dressing room was quiet as a funeral, provoking Ali to ask everyone there why they were all so quiet. But the reason was clear. They feared for Ali's life. Look at this now as they stare. Muhammad Ali beginning to talk to George Foreman. They're really putting the stare on each other. George Foreman has that serious look. Ali definitely talking to him. Look at the stare on George Foreman. Look at Ali.

Give him the word. When the first round began, Ali traded punches with Foreman. But soon, Foreman began pounding on Ali's body with those huge arms. Ali started to cover up to protect himself. Three minutes later, the bell rung to end the first round. Then, the most remarkable thing happens. Ali goes to his corner but doesn't sit down. He just stares across the ring at Foreman.

You can see his mind racing. He has now finally felt the punishing power of Foreman's punches, the power that crushed Frazier and Norton. Ali realizes he can't go toe-to-toe with Foreman. He has to win another way. And in that moment, Ali changes his entire fight plan. When the second round starts, Ali just leans against the ropes and lets Foreman do all the punching. He just lets Foreman pound his body round after round.

But people at ringside start to notice Ali is whispering in Foreman's ear. As writer Norman Mailer later said, it was almost intimate. What nobody knew was that Ali was asking Foreman why he was doing most of his punching with his right hand. He taunted Foreman, saying he must not have much of a left. After rounds of whispering to Foreman, Foreman changed hands. He began punching Ali with his left.

It was genius, because Ali's left side was starting to go numb from Foreman's right punches. But nudging Foreman to change sides, Ali bought the time to get the feeling back in his left arm again. Meanwhile, Foreman was getting exhausted punching Ali. Then, in the eighth round, Ali saw a sliver of opportunity. Ali, a sneaky right hand. Another sneaky right hand. This time he works over the shoulder of Foreman. This is a combination.

Three, four, five, six. Foreman gets up to the knee, 8, that's it, the fight is stopped for Homan Ali, the dramatic 8-pound knockout. Ali had done the impossible. He had knocked out the mighty George Foreman. I remember watching that fight as a teenager and thinking it was boring because of Ali's rope-a-dope strategy. But now, I consider it one of the best fights ever. Because Ali didn't beat Foreman with his fists, he beat him with his mind. Those whispers in Foreman's ear convinced him to make a small change, and that small

change helped give the heavyweight title to Muhammad Ali. The world of marketing has started to use the power of whispers. It's called nudging. And it's the study of giving people a subtle nudge to influence their decisions, to steer them to positive outcomes. It's a fascinating area of persuasion, and it can generate huge results. And the art of the nudge has been adopted by schools, charities, marketers, and even governments. The field of behavioral economics is a relatively new area of study. While influencing behavior has been intensely studied by the advertising industry for decades, the subtle motivation now being employed has taken a big leap forward.

The classic definition of behavioral economics is to gently steer people toward decisions that improve their lives, while still leaving them free to choose. To get them to take a little step in order to undertake a bigger one. That gentle ushering is based on both the social and emotional factors behind decision making. In other words, the concept resides at the intersection of economics and psychology. In a recent episode, I talked about how colors gently influence purchasing decisions. In another show titled Speed Bumps, I explored how slowing the buying process down by adding additional steps can be influential.

But using a nudge is different. Consumers are not always rational in their decisions and will often make a poor decision even when provided good options. And, in many instances, the way a question is framed can influence a decision for the better. That's why behavioral economics has also been referred to as choice architecture.

It is the deliberate designing of choices in order to steer someone to a positive outcome. The term nudge was first put forth in a fascinating book of the same name by behavioral science professors Richard Thaler and Cass Sunstein. The stories they told

not only influenced marketers, schools, and charities, but the governments of two countries. In Britain, the government tried to encourage homeowners to insulate their attics to save energy costs and prevent heat loss. As part of that campaign, the government put forth compelling economic arguments

to persuade the public to insulate. On top of that, generous monetary incentives and subsidies were offered. Yet, nothing seemed to work. The public appeared to have no interest in insulating their attics and saving money in heating costs, which puzzled the government. But when they dug further,

they stumbled upon the reason for their resistance. Apparently, UK homeowners simply didn't want to clear the junk out of their attics. In the UK, attics are storage spaces, and just the thought of having to clear out their attics was enough for people to forego the energy savings of insulating.

Once the government had isolated that reason, they got to work on an interesting solution. They teamed up with a local home improvement company and offered an attic cleaning service. With that, the number of people who insulated soared. The attic cleaning offer was the nudge to get people to do the bigger thing, which was to insulate.

The British government soon began to experiment with other nudges. For example, they discovered that people who were behind in paying their taxes responded to handwritten notes far better than computer-generated ones. Did a handwritten note suggest that a real person was monitoring them? Or was it the mere courtesy of a handwritten note that made people react? It was hard to say, but writing a note was the nudge that worked. People who were behind in paying the road tax in the UK were found to be more likely to respond when presented with a letter that included a picture of their car.

The photo was the nudge. When British Prime Minister David Cameron saw the remarkable effect of nudges, he embraced the concept and set up an official nudge unit, making Britain the first country to adopt nudging as a mainstream strategy on a national level. He strongly believed that nudging was not only a way to get people to make better decisions, but it could help the government do so much more for less. Because when small nudges scale up to include millions of people, the impact could be enormous. As one minister said, imagine if the government could improve what it did by 5, 10 or 15% every year using nudges.

The resulting revenue or savings could almost fix problems of budget and austerity. Sensing a vast opportunity, Cameron doubled the size of his nudge unit and now has a waiting list of other government departments eager to work with it. Not only that, other countries have expressed interest in tapping the department. Even the American government has set up its own nudge squad. And we'll be right back.

If you're enjoying this episode, why not dip into our archives, available wherever you download your pods. Go to terryoreilly.ca for a master episode list. A supermarket in El Paso, Texas, tried their own nudge experiment to see if they could steer people toward healthier foods. It placed a mirror on the inside front of grocery carts, allowing people to see themselves as they shopped. So, when people reached for junk food and turned back towards their cart, they saw an image of their double chins in the mirror. The store saw a dramatic increase in the purchase of fruits and vegetables as a result.

The mirror was the nudge. In a Virginia store, each shopping cart had a line of yellow tape that divided the cart in half. A sign in the cart asked shoppers to put fruit and veggies in the front half of the cart and everything else in the back half. When shoppers saw how few fruits and vegetables were in the front half compared to the less healthy items in the back of their carts, they were influenced to change the way they shopped. Produce sales shot up by 102%. The visual of the dividing line was the

nudge in another grocery store big green arrows were put on the floor that directed shoppers right to the produce aisle nine out of every ten shoppers followed the arrows. In another nudge experiment, a glossy card was attached to carts that told shoppers which produce most other shoppers were buying and which five fruits or vegetables were the biggest sellers. Because people are social animals and like to conform, produce sales jumped 10% by the second week. The store was so amazed by the results

that they began duplicating the nudge in the rest of their 146 locations. Interestingly, the grocery store found that their total sales remained the same, even though produce sales went up. In other words, people shifted their preferences to the other side of the store, but still spent the same amount of money. So the store didn't lose revenue by nudging people, it just steered their customers to buy healthier. But the art of nudging is a delicate one.

In stores that used the green arrows on the floor plus an info card in the carts saw produce sales fall. The card was one nudge too many. The airport in Amsterdam, Holland wanted to solve a persistent problem in the men's washrooms. So they etched the image of a housefly into the urinals near the drain. Overspray was reduced by 80%. The housefly was a nudge because men just love to aim at things.

In his fascinating book titled The Victory Lab, author Sasha Eisenberg talks about how nudging is used in elections. First, he makes a very interesting observation, saying that very few voters are undecided. That goes against a lot of conventional thinking in politics. In much of the election advertising I've been involved with, a big effort is expended to sway undecided voters. But Eisenberg states that the real key to winning an election is to mobilize your existing supporters. A large percentage of people are infrequent voters, meaning they support a candidate, but don't make the effort to get to the voting booth on election day.

But certain nudges have had great success in overcoming this inertia. In 1998, voters in Connecticut were assigned to get one of three different get-out-the-vote reminders. 25% of people got a postcard, 25% got a phone call from a call center, 25% got a knock on the door from a volunteer, and 25% got nothing as a control group. The phone calls had no impact. The postcards got a small reaction,

but there was a massive response from the live door knocking. Having a real person ask if you plan to vote was the nudge that got people to commit to voting, proving the ground game is essential in elections. In another experiment, people were sent a formal letter from a politician saying, I see you voted three years ago. I hope we can count on your civic duty again.

And I hope I can send you another letter thanking you after this election. It, too, got a substantial amount of people out to the polling stations. In another election, the strategy of shame was used. People were sent a letter saying, here's your voting history, and here's your neighbor's voting history. Do you plan to vote in this current election? That nudge increased voter turnout by over 20%.

It had the greatest response rate of all by far. It also resulted in a few death threats. Sometimes you can be too effective. Team Obama understood the importance of getting his supporters to the voting booths

and put up billboards that asked three questions. One, do you know when polls open? Two, do you know where to vote? And three, do you know how you'll get there? The signs ended with the line, barackobama.com slash make a plan. And when voters clicked on that URL, the site helped them do just that. It's estimated that Obama generated 10% more votes with that nudge.

In India, luxury hotels were having trouble renting their high-end rooms during the economic slowdown. And like airline seats and broadcast advertising, hotel rooms are a perishable commodity at the end of every day. So, one hotel decided to add a few nudges. They began to offer extra hours to the checkout time, luxury car pickups at the airport, free internet, and white-gloved butler service. Each of these tiny benefits cost the hotel next to nothing to provide. But they sold 35,000 more rooms than the same period the year before. More importantly, while revenues grew 10%, net profit zoomed 145%.

Small nudges yield big returns. Recently, several retailers and some New York City cabs have added a digital tipping feature to their tablet and mobile apps. Calculating a tip is frustrating for many people

and research has shown that if you can lessen the amount of mental effort required to work out a tip, the greater the chance of leaving one. So many companies are giving customers three digital options. The first is called Basic and leaves 15%. The second is called Better and leaves an automatic 18%. The third is called Best and leaves a nice fat 20% tip.

The presence of those three nudges has not only resulted in more people leaving tips, but the resulting amounts have been greater. One of the critical aspects of nudging has to do with getting the wording or imagery just right. An Italian telecom company began offering 100 free phone calls to customers who called to cancel their service, in the hope they would change their minds. The response was tepid at best. So the company changed the wording of the nudge to instead say, We have already credited your account with 100 free calls.

How will you use those? That small verbal change persuaded a large percentage of people to change their minds and stay. The addition of already credited your account made people feel they owned the free talk time and they didn't want to give it up. In Thaler and Sunstein's book Nudge, they tell the story of a city in California that gave its residents an accurate reading on the average energy consumption of households in their neighborhood.

The hope was that when people saw they were using more energy than their neighbors, they would scale back. It worked. Except an unintended problem appeared. The above-average energy users dramatically decreased their energy consumption. But the below-average energy users significantly increased their energy use to come up to the average.

The solution was to use emoticons instead of numerical averages. So, if you used more than an average amount of energy, you got a frowning emoticon. If you used an average amount of energy, or if you used less than average, you received a smiling emoticon. As a result, the big energy users reduced their energy consumption, but even more importantly, the problem of below-average users bumping up their consumption disappeared completely.

The smiling, frowning emoticons were the perfect nudge. One of the truisms of choice architecture is that the higher the decision stakes, the more nudgeable people are. In other words, we're all really good at making grocery decisions because we make them every week. But we're not so great at mortgage decisions because we don't get to practice those choices often enough. The same goes for education.

We usually make the decision to go to university or college only once in our lives. The authors of Nudge tell a story about a school in Texas that wanted to increase the number of students that went on to college,

as two-thirds of high schoolers there never experience a higher education. But the school didn't have any outside funding to help with the problem, Two-thirds of high schoolers there never experience a higher education. But the school didn't have any outside funding to help with the problem. So they decided to nudge from within. First, the teachers talked to the students in terms they would understand. They didn't try to sell the high-mindedness of college education. Instead, they hooked them with the universal symbol of teenage freedom.

The automobile. They talked about how much money college grads earned compared to high school grads, explaining it as the difference between a Mercedes and a Kia. But the brilliant nudge they employed was yet to come, and it was so simple, yet so powerful. In order to graduate from the high school, students were told they had to complete an application to a nearby college. It was a stipulation of graduation.

All that was required to gain acceptance to the community college was a high school degree and a record of having taken a standardized test. Filling out the application was almost a guarantee of acceptance. So teachers helped them with the test and made sure everyone filled out a college application. In the end, that application nudge produced remarkable results. From 2004 to 2005, the percentage of high school students

who went on to college rose from 11% to 45% News of the success of that simple nudge spread to schools all over the US and dozens have adopted it since just the act of filling out an application convinced 34% more students to pursue a college education a Small nudge that would affect the entire course of their lives. There is a lot to be said for the power of a nudge. It can make people choose healthier foods, it can help them save money, and just the

right nudge can even influence someone to pursue a college education. And when nudges scale up, they have the potential to save governments billions of dollars. While there are many supporters of nudging, there are critics, too. Many are against the practice, saying they are uneasy when the government influences any decisions with an invisible hand. Asking, when does a nudge become a shove? But proponents of choice architecture point out that a nudge is a gentle push,

and people still have the freedom to choose in the end. Even George Foreman didn't have to listen to Muhammad Ali's whispers. One thing is for certain. Nudges are everywhere, even if we don't see them. As the nudge authors point out, most of us are so busy in a complex world, we can't afford to

spend time and think deeply about a subject. And that makes us candidates for nudges. And the higher the stakes, the more nudgeable you are. So, the next time you're faced with a big decision, it might be a good idea to sniff out the nudge when you're under the influence. I'm Terry O'Reilly. Hi, Terry. Prime Minister David Cameron could just hire my wife and daughters for his nudge department.

They're experts in the field. They have years of experience in covert nudging. Trust me. Under the Influence was produced at Pirate Toronto. Sound engineer, Keith Oman. Theme music by Ari Posner and Ian Lefevre. Series coordinator, Debbie O'Reilly. Research, Lama

Balagi. Feel free to nudge me on Twitter at Terry O'Influence. Okay, I won't beat around the bush. I like the cut of your jib. And your jib would look even better in an Under the Influence t-shirt. You'll find them on our shop page at terryoreilly.ca.

See you next week.