Vital for 2021 – Digital Nudging Will Revolutionize Your CX

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Vital for 2021: Digital Nudging Will Revolutionize Your CX

 As we all interact more online than we ever have before, digital experiences are becoming an essential part of your CX. Like a physical experience, digital experiences should center around customers and focus on what they want so you can get what you want, customer-driven growth. However, there is also nothing wrong with giving people a little Digital Nudge in the right direction. 

 Nudging is a term developed by Nobel-prize-winning economist Richard Thaler and Cass Sunstein, a professor at Harvard Law School who has worked a lot with governments. A Nudge supports the premise that the way you present choices tips the scales towards a particular option. In other words, the way you perceive the choices makes it more likely for you to choose one over another. Nudging capitalizes on this and helps you move people toward the option you want them to choose. 

 It is essential to note that with Nudging you are never taking away people's choices or forcing them into anything. However, by setting up the choice situation in a particular way, you nudge them towards a specific outcome. Many of the Behavioral Science principles fall under Nudging, things like Framing Effects, Choice Architecture, or Context Effects. 

Digital Nudging builds on this idea, but for Customer Experiences online. It requires an organization to create an experience online that nudges people to make the right decisions or make some decisions that will drive value for the company. 

 We talked about Digital Nudges on a recent podcast, and it is one of the things we look for when we review a Customer Experience. Our service called an Experience Health Check allows us to examine the digital experience for the nudges you have built into it and whether they are moving people to your organization's most valuable decisions. This exercise is essential because sometimes the nudges don't do that. Sometimes they can go in the wrong direction. Digital experiences provide tremendous opportunities for including nudges and making them happen successfully.

The Power of Scarcity

 The nudges we use on digital experiences are the same things I talk about with physical experiences. For example, creating Scarcity online can motivate people to act more quickly. As you might recall from a podcast we did with Professor Kelly Goldsmith from Vanderbilt University, Scarcity is the idea that something available now will not be around in the future. It could be that it is a special price that expires at midnight or, as has been the case in 2020, the availability of toilet rolls anywhere. 

 Amazon is excellent at creating Scarcity. Their Lightning Deals are a perfect example. Lightning Deals are promotions that Amazon has a limited amount of items available for a short time at a low price. The other day, I decided to buy a drill on a Lightning Deal. So, I put it in the cart and four hours later tried to buy it, and lo and behold; it was gone. I was so disappointed that I missed out on the deal that I resolved to act quickly next time. 

 There are a couple of reasons I felt this way. First, it's painful to lose out on a deal like that. However, we also are motivated to value items more when there is a limited amount of them. Scarcity works in physical experiences in many of the same principles, but the tactics are different. Having a limited time offer on a loss leader is an example. The old days of "Black Friday" mobs show you how that type of Scarcity works. However, you can do a similar thing online without the masses—and on the fly. 

 You can even create Scarcity where there is none easily online. For example, airlines will often send a prompt that "only three more seats at this price!" But that doesn't mean that is all the seats available. The airline determines what to charge for each seat; they could have all the seats left on the plane at that price if they wanted to (and they were available). So, it may be a true statement that there are only three left at this price, but the airline could change the price and make more available at that price, or the next price tier up could be one or two dollars different. But the fact that we feel like it's constrained, it's limited in terms of time or number, motivates us. It nudges us towards purchase.

 Another example of Scarcity is on eBay. I saw something online that I was interested in and noticed that eBay was telling me that 20 people were watching it. It made me think that if I wanted to buy it, I had to hurry because I would lose it to one of them. 

How Social Proof Drives Purchases

 The eBay example is a nice transition from Scarcity to our next Digital Nudge concept. Social Proof is another motivator for purchase. Social proof is the idea that when more people like something, that's a value signal. If 20 other people are also interested in watching the item you are interested in on eBay, then it must be great or at least a great deal. If you see there's a long line to a particular coffee shop, then you think, "oh, that must be the best coffee shop if people are willing to wait for it." Social proofing works in all contexts, but it can be challenging to pull off in the real world, whereas online, it's easier. By revealing accurate information to customers about the item—through reviews, ratings, or number of watchers, to name a few— you can create value.

 Reviews are a vital part of social proofing. For example, if you see that thousands or even hundreds of people have reviewed the item and given an average rating of 4.5, it tells you it is a quality item. The crowd, in this case, is probably not wrong about it. Sharing reviews is way more comfortable online than in person, which is another advantage the digital experience has. 

However, the digital experience also has some disadvantages. In particular, it isn't easy to scale. I recently bought solar lights for the garden. I thought they would be large lights, about 4 inches across or so. However, they were much smaller, about ? of an inch. I am sure if I had taken more time to read the description, it would have told me the bulbs' size. But I didn't, and now, I have to send them back, which leads to a poor experience. 

Anchoring, Extremeness Aversion, and the Decoy Effect

 A volunteer organization called the Royal National Lifeboat Institute (RNLI) handles the UK's lifeboats. Volunteers save people from drowning from ships that are in trouble. I admire this group and wanted to donate to their efforts, so I went to the website. 

 When I arrived at the donation page, I saw options to donate ￡150, ￡50, ￡20, or you could fill in an amount. This design is an excellent example of the concept of Anchoring, which describes how we start with something, usually a number, and adjust from there. So, if the anchor is a number representing price, as it was in this case, we will tweak from a higher point than if the anchoring number had been lower. So, in RNLI, the ￡150 was the anchor, and I modified my original thought to donate ￡15 to a higher amount.

 Also, another principle is at work here: Extremeness Aversion. People do not like to choose the highest or lowest options and instead choose moderate possibilities in the middle. So, if your choices are A, B, C, then most people would choose B. In the RNLI example, Extremeness Aversion is why most people probably choose the ￡50 option.

My wife Lorraine and I often use this principle when we make home improvements. We always get three quotes. We never go with the most expensive or the least, but instead, choose the one in the middle. 

 The Decoy Effect is also influencing things on the RNLI website. The Decoy Effect explains how customer behavior changes when they go from having two choices to three. Moreover, that third option encourages people to spend more. In my RNLI example, the suggested amounts included ￡150, ￡50, or ￡20. I don't know how many people choose the ￡150 option over the other two. However, the high amount that ￡150 proposes makes the ￡50 look like a relative bargain. So, many people who might have chosen ￡20 or another amount they filled in themselves might gravitate toward that ￡50 option instead. In other words, the Decoy Effect represents the idea that sometimes you include an opportunity in a set that you don't expect people to choose. However, the presence of that unchosen option can nudge them towards one of the other (more lucrative) opportunities. 

 It is also important to note that there are at least these three things happening in this example. It proves the point I often make that there's more than one thing happening at any given time. All of these concepts in the Behavioral Sciences can lead to influences on customer behavior. So it would be best to consider all the ideas working in any given offering you present to your customers. 

Testing, Testing, Testing

 One thing I love about dealing in the digital space is you can measure everything. You can also test stuff at a low cost—a massive advantage over the physical experience world.

 For example, in preparation for our podcast, I asked my partner to look at the RNLI website to see the numbers for himself. Something fascinating occurred when we did. My podcast partner saw the options I described, but my screen showed the fourth option at ￡200. It might mean that they put cookies on my machine, which prompted the site to load the fourth (higher) option. 

 It also might mean that the RNLI was testing what worked with someone like me. RNLI wants to know where they are going to get the most donations. Perhaps they learned it was returning people, which, by this point, I was. It could be since I had been on the site three or four times already that they thought (hoped) my donation would be more substantial.  

The Value of the Evaluability Heuristic

 Another important concept from Behavioral Science is the idea of the Evaluability Heuristic. Popularized by Christopher Hsee from the University of Chicago, the concept describes how people will choose an easier to evaluate attribute when faced with a decision that is difficult, complicated, or highly technical. When something is easy to evaluate, people tend to make it more critical in the decision making process. For example, people sometimes choose a political candidate based on whether they would like to have a beer with them because following their stances on all the issues is too complicated (or, these days, disappointing). 

 A few months ago, I bought an uninterruptible power supply because our home in Florida gets blackouts because of lightning and all that type of stuff. I know bugger-all about uninterruptible power supplies. So, when I went to Amazon to choose one, I was gobsmacked by the technical detail presented to me. However, I could understand how long the power supply would last in an outage. So I used that to make my choice. 

 (To my point earlier about several things going on at once, I was also using Social Proof. I saw which ones people bought and what they said about them.)

  It is essential to consider how your customers are going to make a decision. What are their criteria? What do they need to know, and what do they need to be explained to them? In the uninterruptible power supply situation, electronic specifications about the amps and the voltage may objectively be more critical. But what chance do most of us have in evaluating those criteria? Instead, we focus on what we can evaluate, which, in my case, was how long it would last. 

 Of course, I'm part of only one market segment for uninterruptible power supply customers. There may be other market segments where the technical details are the more critical details, and the customers understand why the amps, voltage, and whatnot are essential. They will use this information to make that judgment.

The Surprising Significance of Framing Effects 

 Finally, you could use Framing Effects as a Digital Nudge. Framing Effects describe how the way you communicate facts changes your customers' perception of them. 

 Framing isn't marketing, but it does pertain to how you word your message. The words you use affect framing. For example, if your goal is to create trust with your customers, the words you use should communicate you are trustworthy. 

 Framing can also affect the information you emphasize. Let's consider how auto dealers communicate fuel economy. Sometimes they tell you that the car gets 25 miles to the gallon. Other times they promote that the vehicle is best-in-class for fuel economy without disclosing the actual number. Those are equal pieces of information framed in different ways.

So, What Should You Do with All of This Information?

 Behavioral Science concepts play out all the time in a digital experience. If you understand what you're doing with them, you can create Digital Nudges to influence your customers to decide that will drive value for you.

 Sometimes, people get a little uncomfortable talking about Nudging and behavioral science because they think it is manipulative. However, you already created your digital experience to nudge people in specific ways. The question is whether you're doing it deliberately or not. So, have you figured out what those nudges are and what they're driving people to do? 

 The other significant opportunity here is around testing. The results are often surprising and evocative about how these small changes show significant effects on customer behavior. So, throw the kitchen sink at your digital experience. Don't just use one Digital Nudge. Use them all. People are distracted, and they don't pay attention. They probably won't process information thoroughly. So, give yourself maximum opportunity by layering all these insights on top of each other. 

 Testing is always useful because nothing works all of the time for everyone. (This area is also where segmentation comes in because you can design different experiences for the segments with various nudges built-in. ) Test it and see if customers are doing the right thing where you want them to do it. Over time, you will know what works and what doesn't and under what conditions. These insights develop better hypotheses. However, it would help if you also recognized that everything should be a hypothesis all the time. Nothing's settled. So throw the kitchen sink at it, really layer these things, and test, test, test.

 Most digital experiences are not deliberate. Most of those experiences have been designed without thought to customer emotions and behavioral science and how you can nudge people along. Those nudges are already there, Nudging people all over the place. However, you want them Nudging people in the right direction. 

The question becomes, do you know which direction your Digital Nudges are sending customers, or do you leave it up to chance? 

To find out more about this fascinating subject and how to revolutionize your CX join Julia Lee and I on a webinar sponsored by Airkit on January 21st. Register here.

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