What is nudge marketing?

Nudge marketing originated in research into behavioural economics by Cass Sunstein and Richard Thaler, who won the Nobel Prize in Economic Sciences in 2017. One of the most widely quoted examples is that of towels in hotels. Guests are now often asked to keep their towel after using it so as not to waste water. By complying with this request, the guest does "something good" for the planet, thereby boosting their self-esteem. The hotel, meanwhile, saves on laundry.

Wide-ranging applications

Nudge marketing can be seen in all sectors. The SNCF used this technique for its Ouigo brand (its low-cost high-speed train offering) to improve the cleanliness of its trains, which had been heavily criticised by passengers. Through the use of specific signage and dustbins disguised as a monster to encourage passengers to bin their waste and adopt the right behaviour, the dissatisfaction with cleanliness spectacularly improved.

Another example comes from cosmetics. La Roche-Posay developed a smart sun patch called My UV Patch. It monitors the user's sun exposure to reduce the risk of skin cancer. Nearly 400,000 patches were distributed in 2016 across 14 countries through pharmacists and dermatologists. The result was an improvement in safe sun behaviour among users and fewer cases of sunburn.

An approach still in its infancy in the financial sector

The approach has been applied in the assurance sector too, although to a more limited extent so far. The best example is the Vitality plan from the South African insurance company Discovery. They reward policyholders who adopt healthy behaviours in everyday life (like watching what they eat and doing exercise) and who therefore reduce their risk of cardiovascular diseases, diabetes, and so on.

On a funnier note (which still illustrates its effectiveness), the approach has also been used by an American motor insurance company. Every year, policyholders must state how many kilometres they drove the previous year to determine their premium. They must also certify the truth of their statement and sign it. The company compiled a file of 13,000 drivers which it randomly divided into two groups, those who had to certify their statement at the beginning of the form and those who had to do it at the end. It turned out that the first group reported 42,000 km on average whereas the second only reported 30,095 km, a difference which amounts to a potential gain of $500 million across the group. Nudge marketing is most commonly used by governments to increase the effectiveness of their public policies on, for example, health, environmental issues, or encouraging savings to prepare for retirement. It is still struggling to gain ground in the financial sector.