Giving Customers a Nudge to Help Them Achieve their Goals

Sometimes What's Needed is a Nudge

In his NY Times' column on Wednesday, David Leonhardt describes the benefits of "nudging" your way towards doing the right thing for customers and making it the path of least resistance for people (employees and customers themselves) to do the right thing.

He uses three good stories.

First, he cites the improved patient outcomes from requiring that all patients on a ventilator be kept in a reclined sitting position, so that bacteria doesn't get from their stomaches into their lungs--a well-known cause of pneumonia. This is, as he calls it, a "nudge." It's a common sense practice that often gets forgotten by busy doctors and nurses who lower a bed in order to tend to a patient and forget to put it back up again. The nudge was to make raising the patient's bed standard operating procedure for all ventilator patients, instead of leaving it to chance. The result of instilling this practice? The incidence of ventilator-caused pneumonia has fallen 40% at the University of California San Francisco hospital, where Dr. Michael Gropper put this policy in place. Note that what Dr. Gropper did was pick ONE behavior with ONE metric to measure.

The second story he cites is that of helping parents select better schools for their kids by giving them one simple number in addition to all the other reams of information: The average of the math and reading scores for each school. The result is that more parents were able to choose better schools for their kids, rather than being paralyzed by the decision. Again, one metric.

The third story he relates is about serving food on smaller plates and in smaller drink containers--which lowers the obesity rates because people actually eat less. Smaller plates = smaller intake of food. A proven formula for successful dieting.

David combines this notion of a "nudge" - an easy to do practice that makes it the path of least resistance to do the right thing with the concept of "libertarian paternalism." Provide structures that enable people to do the right thing without taking away their freedom of choice.

Sometimes, doing the right thing for customers may require a touch of libertarian paternalism. That's the approach that Fidelity Investments has taken with its "Simple IRA" program - one of the products that Fidelity offers its corporate clients for their employees. The nudge is to make saving for an IRA a default option. The employee opts out if they don't want automatic contributions made. The "simple" part is that instead of requiring the customer to select among a plethora of investment options, Fidelity automatically places the investment in an age-appropriate-allocated portfolio. Of course, the customer can choose not to make the investment, or they can re-allocate their investments. But the fact that it's handled for them is the nudge that helps customers to the right thing - getting their money to
grow. The metric they track? How much money do I have in my IRA now?

So think about ways to combine a nudge and one simple metric in order to help customers meet their outcomes.