Behavioral Economics in Action: Simplifying Consumer Decisions for Better Outcomes
Did you know that 95% of our decisions are made subconsciously? As surprising as it might sound, most of what we do daily, including how we buy, behave, and choose, happens without serious thought. These choices can be explained by 'Behavioural Economics', a field combining psychology and economics to justify our decisions.
Behavioural economics mainly simplifies complex decision-making processes by gaining insights into our repeated actions, sometimes against our interests. This happens due to subtle prompts, also known as "nudges," which guide our behaviour but do not force particular outcomes. Nudges influence our decision-making without limiting our freedom of choice. This powerful concept affects decisions taken by people, as policymakers, marketers, and organisations design systems based on 'nudges.
Think about a common example of a typical supermarket visit. Has the thought ever crossed your mind about how essential grocery items such as milk, bread, and eggs are usually placed at the end of the racks or in the store? Such a layout is intentionally designed so that customers can see other items that may attract them to buy more than they came for. Though it may seem unnoticeable, the arrangement affects our buying behaviour; hence, it is termed 'choice architecture' by behavioural economists, meaning that store items are explicitly placed to influence buying behaviour and decisions.
Similarly, retirement policies are a good example of choice architecture. Companies often motivate their employees to save up for retirement with pre-defined options. For example, employees are added to the retirement plan by default but can opt-out later. Employees tend to stick to the default option, which leads to increased saving rates over time.
Nudges are not limited to buying behaviour or retirement plans. Instead, they are applied in several domains, including the health sector, education and the environment. For example, the government encourages placing nutritious and healthy food in the front or at eye level in cafeterias. Similarly, to promote a clean environment, reminders are placed in the form of ads and boards to recycle, reduce and reuse resources. Implementing behavioural economics concepts in its true sense leads to positive results without having complex rules or getting things done by force.
View attachment 1215(1).mp4
In a nutshell, the next time you make a decision, think about how things are manipulated and how to control the prompts to make a better decision. So! How do you plan to nudge yourself today for better outcomes?
Did you know that 95% of our decisions are made subconsciously? As surprising as it might sound, most of what we do daily, including how we buy, behave, and choose, happens without serious thought. These choices can be explained by 'Behavioural Economics', a field combining psychology and economics to justify our decisions.
Behavioural economics mainly simplifies complex decision-making processes by gaining insights into our repeated actions, sometimes against our interests. This happens due to subtle prompts, also known as "nudges," which guide our behaviour but do not force particular outcomes. Nudges influence our decision-making without limiting our freedom of choice. This powerful concept affects decisions taken by people, as policymakers, marketers, and organisations design systems based on 'nudges.
Think about a common example of a typical supermarket visit. Has the thought ever crossed your mind about how essential grocery items such as milk, bread, and eggs are usually placed at the end of the racks or in the store? Such a layout is intentionally designed so that customers can see other items that may attract them to buy more than they came for. Though it may seem unnoticeable, the arrangement affects our buying behaviour; hence, it is termed 'choice architecture' by behavioural economists, meaning that store items are explicitly placed to influence buying behaviour and decisions.
Similarly, retirement policies are a good example of choice architecture. Companies often motivate their employees to save up for retirement with pre-defined options. For example, employees are added to the retirement plan by default but can opt-out later. Employees tend to stick to the default option, which leads to increased saving rates over time.
Nudges are not limited to buying behaviour or retirement plans. Instead, they are applied in several domains, including the health sector, education and the environment. For example, the government encourages placing nutritious and healthy food in the front or at eye level in cafeterias. Similarly, to promote a clean environment, reminders are placed in the form of ads and boards to recycle, reduce and reuse resources. Implementing behavioural economics concepts in its true sense leads to positive results without having complex rules or getting things done by force.
View attachment 1215(1).mp4
In a nutshell, the next time you make a decision, think about how things are manipulated and how to control the prompts to make a better decision. So! How do you plan to nudge yourself today for better outcomes?