Understanding positive business: The good kind of nudge

February 14, 2017

Professor Scott Rick explains how marketing can help guide decision-making in a way that creates mutual benefit.

What is positive business? It’s the idea that businesses can and should create not just economic value, but also offer great places to work where employees are treated and paid well, be good neighbors and stewards of the environment, practice sound governance, and help solve the challenges of societies around the world.

How does that apply to marketing? For Michigan Ross Professor Scott Rick, it’s about making sure “nudges” engineered by marketers actually benefit a customer’s well-being as well as the company’s.

A nudge, in marketing, is a way to frame the decision environment for the customer to make a certain choice more likely. For example, if a store wants to sell more plain milk it can put chocolate milk in the back of the cooler, or give it one shelf facing, compared with six or seven for plain milk. The customer can still choose chocolate milk, but the placement favors plain milk.

“Nudges” by themselves, though, are agnostic. They can have positive and negative outcomes for the customer. Companies increasingly, says Rick, are studying the science of decision-making in search of the mutual win that benefits both the company and the customer.

Rick Scott

“There are a lot of opportunities out there to help consumers navigate certain decisions that will make them better off and the company better off,” says Rick, associate professor of marketing. “It’s not possible for every brand, but I see a lot of places where it can work.” You can learn more about this and other practical ways to apply positive business principles at the 2017 Positive Business Conference, where Rick will lead one of the workshops.

A prime example of this principle in action is Prudential’s new approach to retirement planning, says Rick. Prudential helps people build a picture of their future self (sometimes literally, using virtual reality) and shows them the kind of saving and investing they’ll need to support that future person.

“That is very much informed by decision research,” he says. The literal depiction of the future version of themselves may seem manipulative, but it’s tough to deny that people are better off saving and investing more for their retirement. So, the strategy is not just effective for Prudential, it’s moving customers to a better place for themselves.

“This is a huge area of opportunity because financial decisions are high stakes, complex, and people make mistakes with them all the time. This is a different approach — not a hard sell but a nudge that invites you to learn more about yourself.”

There’s also growing research on using nudges for more everyday decisions that can have positive outcomes. For example, cafeterias and restaurants can be designed in ways that make it easier to select healthy foods.

“There are ways to promote healthier items without taking away choices,” says Rick. “Instead of having ice cream right on the open shelf, it can be stocked in a freezer with a lid that must be opened. There are a number of principles like that which can be applied to almost any business, so I think it’s a good idea to be aware of the nuances. How are people making decisions? What messages are being conveyed by your packaging that you might not even realize? How are your competitors trying to nudge consumers? There’s more to consider than you might realize.”

This article originally appeared in Ross Thought In Action.