How to prevent profits from tainting behavioural nudges

Policymakers may have been the first to grasp the potential of ‘nudges’ as a cheap way to promote positive behaviour, but the corporate world was quick to follow suit. 

This has created an added challenge for those designing nudge interventions. 

For many businesses, it is no longer enough for initiatives to nudge individuals towards behaviours that benefit them and their peers, such as losing weight or reducing their carbon footprint. 

They also need nudges to generate a profit. A good example of this is ‘shrinkflation’. Cadbury has reduced the size of its family bars and multi-pack snacks so they contain less calories, cutting its own costs in the process. 

Companies may well view this as a win-win situation that delivers positive results for themselves, their consumers, and society more generally. The profit they generate as a by-product of the intervention ensures the company can afford to keep operating and nudging to create greater social benefit in future. 

But what if customers see things differently?

How profits can compromise purpose

Introducing profit into the equation potentially carries some risk for the nudger. There is some surprising evidence that this might be the case from another area involving prosocial behaviour – charity. 

When an act of altruism is associated with self-interested behaviour, research shows it can be viewed in a less favourable light. It can even be seen more negatively than an act of pure self-interest that offers no social benefit. 

For example, several studies have suggested that rewarding blood donors could change the way the service is seen by the public. Most notably, some people voiced concerns that paying donors could dissuade them from disclosing any diseases, potentially lowering the quality of blood available for transfusion. 

Adding an element of personal gain appears to taint our positive perception of the selfless behaviour. 

This matters for a number of reasons. Many nudges combine prosocial intentions with profit. If the latter is viewed negatively, those tainted interventions might damage the reputation – and consequently the performance – of the nudging organisation. That might dissuade it from nudging altogether, with the loss of any prosocial benefit. 

In addition to this, interventions that create a negative impression of nudging might undermine support for the practice more widely, eroding its effectiveness as a force for social good. 

To examine this problem further, we devised a set of experiments that centred on the meals that a university provided to its students. 

We began with two common types of nudge: one where healthy meals were the default choice unless students filled out a form in advance, requesting something different; the other where healthy meals were listed first on the menu. We created three versions of the scenario for each nudge – prosocial only, prosocial plus profit, and profit only.

The first made it clear that the nudge was purely prosocial, motivated by a moral obligation to ensure that students ate healthily. The second detailed both the prosocial and financial benefits – that the healthy meals cost less to provide, reducing operating costs and allowing increased salaries for admin staff. 

The third made it clear that the nudge initiative was intended solely to reduce costs, motivated by the university’s duty to use resources efficiently. 

We then repeated these experiments using the same scenario but introduced a new element – deception. This allowed us to investigate the findings of previous research, which suggested that scepticism over the motives behind a seemingly prosocial activity may have a bearing on how they are viewed and the impact they have. 

In the version of the scenario that combined prosocial and profit-driven motives, the university emphasised its duty to encourage students to eat healthily. However, it was clear in the details we provided to students that the financial benefit to the university – in the form of reducing costs and increased salaries – was the only real objective. 

Nearly 5,000 participants scored their support for different versions of the nudging scenario on a seven-point scale that ranged from 'not at all' to 'very much'.

Our results were encouraging. Unlike previous research on altruism, we found no evidence for a strong tainting effect. Nudges that created a social benefit were always perceived more positively than those that were solely born of self-interest. 

There was a degree of tainting. Interventions that produced a profit as well as a social benefit were viewed less positively than those that only produced social benefits. But they still received good overall support. 

However, the tainting effect was amplified when people knew that an organisation was being deceptive about its reasons for using a nudge. In these cases, the negative impact of the deception cancelled out the positive impact of providing a social benefit.

How to maintain support for nudges

The important lesson is that people care about the way that nudges are designed and communicated to them. 

They notice whether a nudge is purely prosocial or has an element of self-interest, and whether an organisation is being honest about the motive behind an intervention. Furthermore, their perception of a nudge may range from strongly positive to overwhelmingly negative as a result. 

People need to be satisfied that an organisation’s motives for nudging are good in order to judge that organisation positively. 

Consequently, policymakers and organisations need to be aware that the way they design and communicate a nudge intervention is likely to affect people's perception of it – and their response to it. 

Honesty appears to be the best policy. Managers and policymakers should be transparent about their motives when implementing nudges and avoid creating an impression that they are being deceptive. 

If a nudge creates gains for the organisation doing the nudging, as well as a social benefit, then it is better to be open about the situation, rather than trying to play down or conceal the benefits to the organisation. 

By giving customers all the information and trusting them to reach a fair conclusion, an open approach to nudging really can create a win-win scenario for businesses and society alike.

Daniel Read is Professor of Behavioural Sciencel. He teaches Behavioural Science for the Manager and Negotiation Theory and Practice on the Global Online MBA and Executive MBA.

Andrea Isoni is Professor of Behavioural Science and teaches Foundations of Data Analysis for Management on the BSc Management and BSc International Management.

Despoina Alempaki is Associate Professor of Behavioural Science and lectures on Strategic Games: Thinking rationally about business, policy, and real life on the BSc Management, BSc International Management, and BSc Accounting and Finance.

Learn more about Behavioural Science in Consumers and Markets with a four-day Postgraduate Award at WBS London at The Shard.

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