Nudge Theory Is Now More Prevalent

For those of us from a certain generation the words ‘Nudge, nudge…’ will undoubtedly be followed by ‘…wink, wink, say no more…’ as we conjure up images of Eric Idle and a bemused Terry Jones in their famous Monty Python sketch.

However, from a psychology point of view ‘nudge’ means something rather different and, in my opinion, could be vital in getting the changes we want to see in the home buying and selling process.

‘Nudge theory’ is not exactly new but has become more prevalent in recent years, particularly in Governmental circles given the high-profile part it played in David Cameron’s Government with one of his strategic advisors, Steve Hilton, presiding over its ‘Nudge Unit’.

Essentially, and according to Thaler and Sunstein back in 2008, a nudge is ‘any aspect of the choice architecture that alters peoples’ behaviour in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting the fruit at eye level counts as a nudge. Banning junk food does not.’

In a way, nudging uses a number of methods to encourage people to adopt new processes. We’re not insisting that people do something, or stopping them doing it, but we’re trying to move them in a direction where they end up doing it naturally.

In a way, we can show the method by pointing out the opposite. For example, Jamie Oliver’s laudable attempts to ban Turkey Twizzlers, and what he deemed to be ‘junk food’, from school canteens was partially successful but it was hardly ‘nudging’ people/schools/Government along to a point of long-term change. He was able to take some people with him, particularly some parents, but others were less enamoured with such a blanket approach and decided that if their kids wanted a burger then they were quite happy to pass it through the school fence to them.

So, what are the more successful ‘nudge’ practices and how might we be able to utilise them within our home buying/selling process?

These are a few which caught my imagination:

  • Loss aversion – fear of loss is a strong human driver. In experiments people were more likely to go to greater lengths to protect what they already had than they were to acquire it in the first place. Think of the last time you knocked over your pint…I bet you felt worse about spilling it than the pleasure you had in buying it.

In home moving encouraging sellers to complete information upfront or buyers to get a decision in principle before making an offer might be delivered by getting people to think about how they would feel if their sale fell through. For example, by providing the property information upfront and appointing your conveyancer when marketing your property then your sale is up to 50% less likely to fall through.

  • Norming – creating what feels like the normal behaviour to someone. For example, if you were going to Starbucks and asked for a flat white and that drink automatically came with semi-skimmed milk you would probably be very happy and after a few weeks might find your belt becoming looser because there are 100 calories less in semi-skimmed than full fat milk. As the norm is now semi-skimmed, you would have to specifically ask for an unhealthier version and are less likely to do that.

If a seller went into an estate agent and was told that to market their property the next step was to complete the property information form and instruct a conveyancer, they probably would not think twice about doing it.

  • Positive enforcement – for example, using statistics in terms of the positive rather than the negative. Imagine how you feel when your surgeon tells you that 90% people recover well after the procedure she is offering you, rather than 10 out of hundred people die.

So, in the home moving process it’s worth noting that 90% of searches would be in date at exchange if they were ordered at the point the property is listed; rather than 10% of searches go out of date before exchange when ordered at listing.

  • Commitment – even just filling in a form increases your commitment. Part of the sales protocol launched by NAEA in February was an Offer Declaration Form. Just by asking buyers to complete the details of their offer in writing, they were able to demonstrate a higher level of commitment to the transaction and buyers were more likely to have checked their financial position first.

As will be readily obvious, this ‘nudging’ – particularly in our sector – has to be presented to the consumer because it’s highly unlikely that they are going to ask to do these things themselves. If presented as a way to save money, or as the norm, or as likely to give a more positive outcome, or likely to benefit everyone, then they are much more likely to be accepted.

In a very true sense, we are the architects of the change we want to deliver because it is via property professionals that we’ll be able to ensure the consumer is ‘nudged’ along to do the thing in their best interest.

Those who have been through the purchase/sales process before may well see a difference but it is likely to be a much more positive one – so rather than perhaps dreading the experience based on what happened before, should they do it again, it won’t seem like a process to be feared. And of course, this becoming the norm means we’ll be able to continue looking for future and further ‘nudges’ which will make the whole system more efficient and far less stressful.

This ability to change the system of how we purchase and sell homes is, with Government and regulator support, and by utilising technology, within our own hands. Nudging consumers in the right direction can deliver a much better customer experience and more positive home moving process for all.

Today's Conveyancer