​​Read the articles on canvas and answer the following questions:


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Read the articles on canvas and answer the following questions:

1) Explain how "Nudging" works, and why it can be an effective behavior change intervention.

2) Find one example of behavior change interventions you like from the articles this week, and explain why you think each could help people develop better habits, particularly when it comes to their ONLINE behavior.





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How behavioral decision research can enhance consumer welfare: From freedom of choice to paternalistic intervention Author(s): Rebecca K. Ratner, Dilip Soman, Gal Zauberman, Dan Ariely, Ziv Carmon, Punam A. Keller, B. Kyu Kim, Fern Lin, Selin Malkoc, Deborah A. Small and Klaus Wertenbroch Source: Marketing Letters, Vol. 19, No. 3/4, Seventh Tri-Annual Choice Symposium (December 2008), pp. 383-397 Published by: Springer Stable URL: http://www.jstor.org/stable/41217928 Accessed: 17-04-2017 21:26 UTC REFERENCES Linked references are available on JSTOR for this article: http://www.jstor.org/stable/41217928?seq=1&cid=pdf-reference#references_tab_contents You may need to log in to JSTOR to access the linked references. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms Springer is collaborating with JSTOR to digitize, preserve and extend access to Marketing Letters This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms Market Lett (2008) 19:383-397 DOI 1 0. 1 007/s 1 1 002-008-9044-3 How behavioral decision research can enhance consumer welfare: From freedom of choice to paternalistic intervention Rebecca K. Ratner • Dilip Soman • Gal Zauberman • Dan Ariely • Ziv Carmon • Punam A. Keller • B. Kyu Kim • Fern Lin • Selin Malkoc • Deborah A. Small • Klaus Wertenbroch Published online: 5 June 2008 О Springer Science + Business Media, LLC 2008 Abstract Decision-making researchers have largely focused on showing errors and biases in consumers' decision-making processes without paying much attention to the social welfare and policy implications of these systematic behaviors. In this paper, we explore how findings and methods in behavioral decision research can be used to help consumers improve their decision making and enhance their well-being. We first review select findings in behavioral decision research to explain why This paper draws on discussions in a session "Helping Consumers Help Themselves through Choice" at the Invitational Choice Symposium in June 2007 co-chaired by Rebecca Ratner, Dilip Soman, and Gal Zauberman. R. K. Ratner (SI) Robert H. Smith School of Business, University of Maryland, College Park, MD 20742, USA e-mail: RRatner@rhsmith.umd.edu D. Soman Rotman School, University of Toronto, Toronto, ON M5S 3E6, Canada e-mail: Dilip. Soman@Rotman.Utoronto.Ca G. Zauberman • B. K. Kim • F. Lin • D. A. Small Wharton School, University of Pennsylvania, Philadelphia, PA 19104, USA G. Zauberman e-mail: gal@wharton.upenn.edu В. К. Kim e-mail: bkyu@wharton.upenn.edu F. Lin e-mail: femlin@wharton.upenn.edu D. A. Small e-mail: deborahs@wharton.upenn.edu Ö Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms 384 Market Lett consumers (2008) need interventions 19:383-397 help that in could decisions, be effectiv Ethics and effectiveness of the interventions are also discussed. Keywords Behavioral decision research • Consumers • Interventions 1 Introduction "We believe that the anti-paternalistic fervor expressed by many economists is based on a combination of a false assumption and at least two misconceptions. The false assumption is that people always make choices that are in their best interest. This claim is either tautological, and therefore uninteresting, or testable. We claim that it is testable and false - indeed, obviously false." (Thaler and Sunstein 2003). The goal of this paper is to explore how findings and methods from behavioral decision research can be used to help consumers improve their decision making, to enhance their own welfare or that of society as a whole. Behavioral decision research has largely focused on accumulating evidence of individuals' decision biases, successfully leading researchers to question the rationality assumption whereby people consistently make choices that maximize their self-interest. However, behavioral decision researchers have largely refrained from utilizing their understanding of human decision making to suggest how to improve decisions. Consumers often make choices that are not necessarily good for them, and their mistakes provide clues that could facilitate the design of simple interventions that could help consumers avoid making problematic choices. Errors in choices arise from systemic cognitive biases, emotion, incomplete information, and the limits of cognitive capacity. We propose that some of these problems can be easily corrected through suitable simple interventions. Such interventions can be seen as a form of libertarian paternalism, a weak form of paternalism that guides consumers to be better off without necessarily restricting their choices (Thaler and Sunstein 2003). D. Ariely Duke University, Durham, NC 27708, USA e-mail: dandan@duke.edu Z. Carmon INSEAD, Singapore, Singapore e-mail: ziv.carmon@insead.edu P. A. Keller Tuck School of Business, Dartmouth College, Hanover, NH 03755, USA e-mail: punam.a.keller@tuck.dartmouth.edu S. Malkoc Olin Business School, Washington University in St. Louis, St. Louis, MO 63130, USA e-mail: MALKOC@olin.wustl.edu K. Wertenbroch INSEAD, Fontainebleau, France e-mail: klaus.wertenbroch@insead.edu Ö Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms Market Lett (2008) 19:383-397 385 In the following sections we illust leveraged to help individuals and so decision research can say about why decisions about about nutrition, issues that financial health-enhancing can ha planning product or ser interventions would be effective to domains. We introduce a taxonomy how effective and ethical these vari list types of choice problems in wh making, as well as possible interven interventions are listed and discusse intrusion. 2 Why When to to do consumers consumers make need help? suboptimal c personal characteristics (they wer characteristics of the decision tas behavioral decision research, how motivated to make personally and s the decision process or aspects of th optimally. In this section, we docum when making important decisions. 2. 1 Neglected Some consequences decisions are made of distr several tim decide what and how much to eat marginal impact of each decision these decisions only manifest them Choosing not to exercise or save tod like manner, choosing not to exercis Table that 1 are decision interventions to enhance Choice by types Possible Interventions flawed making and possible Provide information Neglected consequences consumer welfare, in order of increasing degrees of paternalistic intrusion problem Choice problem types characterized of distributed choices Intertemporal trade-offs and self-control problems Prediction failures Processing difficulties Emotion and deliberationbased distortions Provide decision tools: Change cognitive representation Tap emotion Organize choice options Restrict choice options Add restrictive choice options Manage expectations & Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms 386 Market itself, on occasion, 2.2 Lett (2008) one's and as 19:383-397 health. a Intertemporal result Each decisio people trade-offs are and of self-c A hungry dieter who has been offered can politely refuse the pastry while h eagerly consume the pastry relishing instance, the costs of his decision are f felt until weeks later. In the latter in immediately, while the costs are realiz Such situations are commonly frame "fail" these tests by making decisions but also greater long-term costs. I (O'Donoghue and Rabin 1999), people in the present compared to outcomes i Loewenstein (1996) attributes the p visceral factors, such as hunger or factors, he believes, distort the percei The perceived utility of consumption increases, while the utility of consump Even in the absence of strong visc cognitive and perceptual distortions of asserts that benefits loom larger than c present (Liberman associated with and greater Trope 1998 importance on and Trope 1998) as well as greater foc attributes (e.g., degree of comparabili deciding whether to save in the prese present is more salient than the additi Resource slack theory (Zauberman and mistakenly perceive a surplus (i.e., slac present. Thus they discount the futu present resources, reasoning that those in the future (for public policy impli 2.3 Prediction failures A stream of literature on what has been named "affective forecasting" documents several common mistakes people make when predicting how they will feel in the future. For example, they tend to overestimate the impact of future events on their emotional states and underestimate their degree of emotional adaptation to changes in their lives (Buehler and McFarland 2001; Gilbert et al. 1998). People often mispredict not just how they will feel, but also what they will do. It is common to believe that one can and will act differently in the future (e.g., "I can stop smoking later if I want to"), but such beliefs usually reflect overconfidence (Soman 1998; Zauberman 2003; Zauberman and Lynch 2005). Ф Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms Market 2.4 Lett (2008) Processing Individuals 19:383-397 387 difficulties have limited cognitive c there are too many tasks competing study, Soman (2007) asked people to 3 months. He found that the vast m to go for lunch, consequences what were to rarely wear. M reported. inconsequential decisions saps co become too "burnt out" to devot decisions. While most people would favor having more options in most contexts, more options also mean more information to process, greater demand for cognitive resources, and higher potential for cognitive overload. Indeed, having too much information and too many choices can lead to suboptimal choices (Gourville and Soman 2005), be demotivating (Iyengar and Lepper 2000), result in deferral of choices (Dhar 1997) and can lower satisfaction with choices (Gilbert and Ebert 2002), particularly when choice alternatives force individuals to make trade-offs. For example, Sethi-Iyengar et al. (2004) found that providing employees with too much information and too many fund choices actually reduced employee participation in retirement funds. 2.5 Emotion and deliberation-based distortions The previous section described the potential downsides of having insufficient cognitive resources to devote to a decision task. However, it is also possible to devote too many cognitive resources to a task. Research suggests that when people deliberate excessively about a decision, they are more likely to focus too much on less important or relevant criteria (Wilson and Schooler 1991), develop an attachment to the options and later feel a sense of loss toward unchosen options (Carmon et al. 2003), and experience lower post-choice satisfaction (Dijksterhuis et al. 2006). Restricting deliberation can also be beneficial from a social perspective. For example, Small et al. (2007) found that charitable giving is higher when requests for donations rely on simple emotional appeals using identifiable victims, rather than presentation of statistical victims. However, triggering deliberation actually reduced giving toward the identifiable victims, and it did not increase giving toward the statistical victims, suggesting that in some cases reduced deliberation can have benefits for society. 3 Types of interventions Given the various causes of suboptimal decision making that the behavioral decision literature documents, what types of interventions can help consumers make better decisions? In this section we review several types of interventions and their potential to help people make better decisions. Ô Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms 388 Market Lett (2008) 19:383-397 3.1 Provide information Sometimes people do not know how to achieve their goals. They may be overwhelmed by the number of steps they think would need to be taken to accomplish their goals or might find the task so complex that they do not even know where to begin. For example, people may want to set aside money for retirement but not have a solid understanding of their options and how to utilize them. Or they may aim to follow a more healthful diet but not know what constitutes "healthful." Other times, people may hold goals such as protecting the environment, without realizing that their personal habits work against those values. A common suggestion for helping people in these situations is to simply inform them: if they know, they will do. In particular, research by Gollwitzer and colleagues (Gollwitzer 1999; Gollwitzer et al. 1990) indicates that having a plan facilitates movement from fuzzy goals to goal implementation. And there is evidence that this approach can be effective. Lusardi et al. (2007) found that university staff were motivated to save for retirement, but many did not know how to enroll in a retirement fund. They seemed to think the process was more complex than it actually was. When employees were provided with seven simple steps walking them through the enrollment process and emphasizing the ease of enrollment, participation in the university's matched individual retirement fund program increased from 7.3% to 21.7%. In like manner, with increasing coverage in the media about the risks Americans face if they continue their eating habits, millions of Americans are motivated to eat a more healthful diet. The US Department of Agriculture (USDA) seized on this interest by designing a website, www.mypyramid.gov, that provides personalized eating guidelines. Users enter their age, sex, height, weight, and eating level and receive a table detailing their recommended daily intake in several food groups. The USDA, like Lusardi et al. (2007), attempted to help motivated consumers achieve their goals by providing them with information. However, the way in which the information was presented likely was too complex to be helpful to most consumers (Ratner and Riis, unpublished data). For example, the USDA's personalized nutrition recommendations might advise users to consume 6 oz of grains each day, three of which should be whole grains. But how much is 6 oz, and what is a whole grain? (Users could click a link and learn that "whole grains contain the entire grain kernel - the bran, germ, and endosperm," but it seems unlikely that most consumers will eagerly embrace an endosperm-counting diet.). The recommenda- tions also use uneven amounts (e.g., 3.5 or 6.5) and different metrics (e.g., cups and ounces), which could make it difficult to remember the details. It is thus too simple to say that providing information can help consumers. That information must be provided in a way that is easy to understand and act upon and that addresses consumers' major concerns. The two interventions described thus far provided information relating to the final goal state - how to get there in the retirement fund case, and what that goal state should be, in the case of nutrition. Sometimes it is not enough to focus on the end state; however, consumers also need information on their current state. In the domain of spending, Soman (2001) showed that consumers who spend using credit cards lose track of how much they spent until the time they get their monthly statements. Ф Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms Market Lett (2008) 19:383-397 389 Relatedly, many people value environ of trash they produce, but t and thus cannot track their progress amount was implemented in several neigh households' trash production and pro or itemized monthly trash statement motivated by social comparison, the with feedback about how their trash Compared to control households, hou their trash production reduced their Itemizing trash boosted effect. 3.2 the Provide Earlier we decision discussed under-saving. lead people Such to the alleviate this Malkoc presented in self-control bias. mental In al. cog prob in pa present representation particular, representations et pr arise the Consistent an and change problems cognitive gratification. 2006; tools: overweigh changing concrete production with 2007) abstract of M imm this, provide manner, M e cons present and an enhanced ability to wa to visualize future states (i.e., proces shown to lead them to place greater w neglected (Malkoc and Zauberman 2 Applying similar ideas about the im decisions, Ariely (2007, unpublishe budgeting." People first concretel grandchildren overseas, maintain a h private home care as needed). The con to expected costs and estimates what afford those costs. Thus, the tool co retirement goals, which should about financial planning. 3.3 Tap enco emotion While emotion has been commonly re Loewenstein 1996), learning to recogn help people 2008). less In avoid addition, "rational," review). respond In a making there can be rational more to the are socially manner, statistical ben consu inform & Springer This content downloaded from on Mon, 17 Apr 2017 21:26:28 UTC All use subject to http://about.jstor.org/terms pred instances 390 Market Lett information (2008) about 19:383-397 just a few victim (Small and Loewenstein 2003; Smal giving increases with emotional Identifiable victims tap emotions b whereas statistical victims motiva important to note that this is not a increases giving to identifiable vict victims. In addition, a victim with and charitable giving vis-á-vis em Finally, personal experience with a victim) leads individuals to feel more f misfortune (Small and Simonsohn 20 with respect to others' welfare (i.e. s 3.4 Organize options When employees enroll in retiremen dozens of funds to choose from. La funds they should choose, some emp decline to enroll. Organizing opti overcome the intimidation that it c allows consumers to avoid feeling t among them. When one option is set Cycle Funds, the burden on the con work of shows the that plan, when the enrollment default is t percentages Options also can be organized or par consumption to achieve goals. Some ments consumers partitioning the decision naturally hav provides a decision poin to consume. They show popcorn) into smaller units (e.g., se time consumers encounter a partiti continue consumption. In essence, th decision-point that shifts their dec deliberative. Building on these ideas, Soman (2007) conducted a field study of workers in India and China who were paid every 5 days for their labor. These workers expressed a desire to save some of their earnings but found it hard to control their spending to have savings left over. Reasoning that the workers mentally compartmentalize consumption by day, Soman divided their wages into six envelopes. These envelopes provided an easy way to control daily spending until the next salary distribution and included an extra en ...
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School: Rice University

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Nudging and Behavioral Change in Marketing

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29th April 2019

Nudging and Behavioral Change in Marketing

Nudging and Behavioral Change in Marketing
Nudging in marketing applies the deliberate manipulation of the decision making process.
The goal, in this case, is to steer customers or consumers towards choosing options that are good
for them or those that the marketer considers being good for them (Truss et.al, 2011). As a
result, the marketers are able to influence the choice of the consumers thus increasing sales for
their products. Nudging bas...

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