AI, Behavioural Economics And Marketing Converge

Exploring the evolution of intelligent nudges

In a recent post, we explained the emerging field of intelligent nudging. Nudge theory has been popularised through the works of Richard Thaler et al, yet in reality nudge techniques have been a part of human society for hundreds of years. Thanks to AI, nudge techniques are getting smarter and smarter. At the moment, intelligent nudging is in the very early stages of development. But, according to Jez Groom, founder and Chief Choice Architect at Cowry Consulting, AI has catalysed a new breed of nudge. Companies won’t just send alerts and campaigns – they’ll be able to work out which are the most effective, and why. In time, algorithms will take care of the whole process. But what needs to happen to make this a reality?

More knowledgeable nudges

So, where is intelligent nudging today, and what comes next?

“Today, nudging is quite an analogue practice where humans use their behavioural science knowledge to design interactions and then test variants of them,” says Groom. “What I think we will get to is principles or exemplars of nudges that are programmed into algorithms, and the algorithm will generate and test the creative work itself. There are a lot of nuances of language and design, but that could get us to a more deeper understanding.”

For Groom, true intelligent nudging will be achieved when ‘the three Cs’ – content, context and contact – are brought together within algorithms. Content refers to the type of nudge, context considers the type of customer, the time of day, and other variable factors, and contact describes how and when the nudge is delivered. In the long run, this could lead to more in depth, personal marketing campaigns that are based on an individual’s nudge profiles.

“Algorithms may be able to create a profile for you to work out which nudges are most likely to influence your behaviour, and then every time you arrive at that site it will dynamically render a bespoke page for you. Essentially you will have dynamically rendered, mass personalised experiences based on your particular nudge profile. That will change over time, dependent on context.”

A question of resources

While intelligent nudging is generally thought of as a marketing technique, businesses like Humu are using it to improve employee satisfaction too. Humu sends texts to workers to encourage them to make small behavioural changes which are geared towards improving their happiness levels. In many ways, the popularity of personal devices has widened the understanding of a customer’s context, and made it easier to contact them. But, says Groom, this can place constraints on content.

“There are certain types of nudges that maybe work better on mobile. Even simple things like texts can be very effective. Assuming people are happy to share data, you can understand where they are and what they might be doing. The context part of the equation can be a lot easier. It’s old tech, but it can be powerful,” he explains. “Sometimes, you are constrained by what you can design for a mobile environment. From a content perspective it presents some challenges. How do you lay out a table of pricing, for example, for mobile? It’s not as easy as when you have a bigger screen.”

Despite various access channels, only major companies have the wealth of data needed to make informed changes to nudges.

“You need mass investment, scale, and data capability. If it’s going to come from anywhere, it will come from some of the big platforms.”

This is also why academia has struggled to make progress in the field of behavioural science – they just don’t have the data. That said, Groom is hopeful that businesses will feed back to academics.

It all begins with behaviour

Cowry Consulting works with a host of globally renowned companies, including ecommerce Goliath Amazon. While businesses may have recognised the benefits of behavioural data, Groom says that the majority of companies aren’t aware of intelligent nudging.

“I’d say that 95 per cent of people haven’t heard of behavioural economics or nudging. We haven’t heard anyone say they are in a position where they’d like to move into intelligent nudging and AI solutions,” he says. “I think most organisations are at a point where they are starting to get interested in behavioural economics. One of the worst things you can do with something like intelligent nudging is make it a big and complex thing because people don’t fully understand it. It’s about taking some measured steps.”

One industry with particular potential for intelligent nudging is healthcare. After three years of focusing on financial services and retail, Cowry is moving into the sector.

“There’s been a lot of nudge theory and behavioural science within health. We’re working with a diabetes prevention service, for example. People will be nudged either in the early stages of their life to prevent disease, or if they have a particular condition they will be nudged to help manage it. We’re already starting to see smart pill dispensers reminding you when to take medication.”

The ethics of intelligent nudging

“For us to have a sustainable business and work with sustainable businesses, the ethical consideration is at the front of our minds,” says Groom. “There are a number of ethical considerations we need to be aware of. I remember talking about facial recognition in marketing, and asking is it appropriate to use an interactive billboard to show a bar of chocolate to someone who looks sad? I don’t think it is.”

As nudges get smarter, they will become more intrusive. Target audiences, whether they be employees or customers, could be alienated by overly enthusiastic nudging campaigns that overstep the mark, either by volume or specificity. It’s hard enough to protect personal information in the digital world, and nudging could be seen as an impingement on privacy. When content, context and contact come together within intelligent algorithms, businesses will need to set up perimeters to avoid noxious nudging.

Even though most businesses are yet to consider the benefits of intelligent nudging, behavioural economics is becoming more influential. Understanding behavioural economics is a step towards artificially intelligent nudges. Groom expects intelligent nudging to increase in importance over the next couple of years, as companies look for a return on their AI investments.

“The concept of intelligent nudging is not brand new, but now it is more sophisticated with AI and data analytics. With the acceleration of investment in AI, and a steady stream of talent, we have moved beyond traditional CRM systems. It’s still early days, but it’s going at pace.”

The convergence of AI and behavioural economics offer opportunities not least marketing, but beyond selling into measurable and positive societal change – potentially benefiting areas such as health and care, crime, and education – all while encouraging the emergence of new business opportunities.

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