Which nudges do businesses like? Managers’ attitudes towards nudges directed at their business or at their customers

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Abstract

Behaviorally informed interventions are growingly used to nudge consumers for various goals. While consumers are usually the target of nudges, businesses are involved in nudges in two manners: either they are the target of the nudges (i.e., government-to-business, or G2B nudges), or they serve as “nudging agents" on behalf of government regulation (i.e., government-to-business-to-consumer, or G2B2C nudges). Businesses’ support of nudges might be critical for nudges' success, but the perceptions of managers towards nudges have never been directly assessed. We surveyed owners and senior managers of small to medium-sized businesses and discovered an overall high level of support for nudges, and in particular for G2B nudges, as compared to G2B2C nudges. We also find variations between types of nudges and their domain. Specifically, the highest levels of support were found for reminders and for nudges that provide information, and for nudges that promote self-regulation. Lower levels of support were found for nudges that involve incentive design or enhanced consumer protections. Policy makers should thus consider the perceptions of business leaders (both as targets of nudges and as nudging agents) to ensure nudges' success.

Introduction

In the last decade, governments and public institutes have started using nudges - “soft” behavioral interventions designed to improve decisions by subtly altering the choice architecture in which decisions are made, without limiting people's choices, and without using significant incentives or mandates (Thaler and Sunstein, 2008). These nudges have been used to steer people's behavior in various contexts, such as health, education, personal finance or pro-social behaviors (e.g., Castleman and Page, 2015; Halpern, 2015; OECD, 2017; Sunstein, 2013). Previous research has found high levels of public support for various nudges, mostly if their purpose (e.g., promoting public health) is in consensus (Junghans et al., 2015; Pe'er et al., 2019; Reisch and Sunstein, 2016; Sunstein et al., 2018) and when they trigger deliberative (vs. non-deliberative) thinking (Felsen et al., 2013; Jung and Mellers, 2016; Osman et al., 2018; Sunstein, 2016). However, previous research focused exclusively on the attitudes of the people being nudged (consumers, citizens, employees) and hardly paid any attention to the perceptions of the agents delivering these nudges such as public or private organizations.

Some nudges are operated by governmental branches and authorities directly at the target consumers. For example, when sending reminders to voters (Rogers et al., 2017), nudges follow a direct path from government to consumers (or citizens, G2C). However, in many cases, government branches enlist other agents to apply the nudges. Typically, they do so by instituting regulations on businesses (e.g., retailers and marketers) to serve as their “nudging agents” (Baldwin, 2014). Such government-to-business-to-consumers (G2B2C) nudges can be found, for example, when governments try to reduce smoking by mandating cigarette distributors to present lurid graphics on cigarette packs (e.g., The Australian Government Department of Health and Ageing, 2012; Fong et al., 2009). Another example of a G2B2C nudge is governmental regulations on marketers as to how to display energy efficiency information of cars (Camilleri and Larrick, 2014). In these cases, the cooperation of the business agent is essential to the nudges’ success. Here, we explore businesses' perceptions of such policies, in which they are often forced to act as a “nudging agent” to promote a goal that they, as a business, might not have necessarily endorsed otherwise.

From policy makers' perspective, governmental ability to foster behavior changes by constituencies depends, to a considerable degree, on the trust that these constituencies have in the governmental policy (Marien and Hooghe, 2011; Tyler, 2006, 2006b). Because of that, trust in the policy being promoted is highly valued by policy-makers (e.g., Levi and Stoker, 2000). Such trust could be especially important in the context of nudges, as compared to command-and-control approaches, because nudges, by their very nature, cannot compel their targets to change their choices and behaviors (Thaler and Sunstein, 2008). It thus follows that business managers’ attitudes towards governmental nudges would affect their compliance with nudges, as well as their willingness to mediate nudges to consumers, thus – affecting the nudges' effectiveness. However, despite the societal potential in employing nudges and the crucial part that businesses play in nudging, no study to date has investigated the acceptability of nudges among the business sector.

Businesses can also be the target of nudges. For example, tax authorities can encourage businesses to pay their taxes on time by sending them reminders regarding upcoming payments. In addition to promoting traditional policy goals, governments can use nudges to ease the regulatory burden on businesses (OECD, 2017), a goal that is vigorously promoted in the last two decades by some governments (e.g., Office of Information and Regulatory Affairs, 1993; OECD, 1997, 2014; The White House, 2011). However, actual implementation of government-to-business (G2B) nudges is rare as compared to nudges directed at consumers. For example, after reviewing more than 100 case studies of governmental behavioral interventions (OECD, 2017), we found that less than 4% of these interventions were applied towards firms and that even for this small fraction, the majority were experiments, rather than actual policies. It is possible that the lack of knowledge on how businesses might perceive G2B nudges underpins governments' disinclination to use such nudges.

Despite their scarcity, there could be many opportunities for using G2B nudges in various domains of the business life. For example, governmental agencies can provide businesses with reminders about concrete duties and deadlines, such as upcoming deadlines for financial reporting, or alerts before a new regulation goes into effect. Additionally, governments can get businesses to pre-commit in order to increase compliance (e.g., adhere to safety rules as part of a licensing procedure or set pre-defined goals for energy or water conservation) or otherwise promote pro-social causes (e.g., United Nations Environment Programme, 2018). Governmental agencies could also use social norms (e.g., Allcott, 2011) to promote positive practices such as energy efficiency and waste reduction. Each of these nudges may be differently accepted by decision makers. For example, it was found that people better accept nudges that trigger a reasoned and deliberative thinking (e.g., reminders) than those ones that operate through fast and non-deliberative decision-making processes, such as changing the default option or framing options in losses vs. gains modes (Sunstein, 2016). Thus, we shall also explore the attitudes of business managers towards nudges that are directed at them (G2B nudges) in order to provide an empirical basis that might promote the informed use of behavioral policies towards businesses.

The attitudes of business owners and managers towards nudges (specifically, G2B and G2B2C ones) cannot be directly inferred from findings about the general public's attitudes towards those nudges, for several reasons. First, in the case of G2B2C nudges, where consumers are mostly the nudges' beneficiaries (whether gaining personal or societal benefits), businesses usually serve as unrewarded agents that may even incur costs due to their role. For example, while lurid graphics on cigarette packs can make consumers healthier and help them save money (Hoek et al., 2011), they hamper tobacco firms’ profitability and hurt their public image. Similarly, defaulting employees to specific pension funds might not always be aligned with the investment companies’ interests. This asymmetry is related to a second difference that may affect attitudes towards most G2B2C nudges. Consumers, as targets of governmental nudging, maintain their freedom of choice (e.g., they can decide to ignore a social norms nudge targeted at lowering their electricity consumption). In contrast, businesses' role as nudging intermediaries is typically not at their discretion. Lastly, following the findings that people are more supportive of pro-self nudges as compared with pro-social ones (Hagman et al., 2015; Jung and Mellers, 2016), this tendency might be more pronounced among business managers, because self-serving preferences are sometimes perceived as more legitimate when coming from organizations than from individuals (Haran, 2013; Haran et al., 2016).

Because businesses are often used as nudging agents, and because business managers might react differently to nudges than consumers do, it is highly important to understand how business managers perceive governmental nudges. The objective of the current work is to fill this gap in the literature about attitudes towards nudges and to explore the attitudes of business owners and managers towards G2B and G2B2C nudges, as well as potential factors that can affect these attitudes. Our general premise is that because of the inherent differences between G2B and G2B2C nudges, coupled with the findings showing people's preference for self-serving nudges (Hagman et al., 2015; Jung and Mellers, 2016), business owners and managers would support G2B (pro-self) nudges more than G2B2C (pro-social) ones.

Section snippets

Participants

We sampled our respondents from a database of about 12,000 organizations in the retail and service business in Israel, and collected a random sample consisting of businesses of very small to medium size, which include 1–100 employees each (10 respondents reported that their business had more than 100 employees but were not excluded from the study). Our sample matched the Israeli retail and service market of these sizes, based on geographic location and number of employees. In total, we

Results

As can be seen in Table 1, most of the 13 proposed policies were supported (given a rating of 4 or 5) by the majority of respondents, with nine interventions rated significantly above the scale's midpoint of 3. Four out of these nine items were supported by more than 80% of the respondents. The least favorable policy (distancing impulse shopping products from check-out cashiers) was rated 2.8 (SD = 1.41) and was supported by only 28.8% of the respondents. Only two nudges - this nudge and the

Discussion

The current study sheds first light on attitudes of business leaders towards nudges, including cases in which the government uses businesses as its nudging agents. Such knowledge can be important for policy makers and regulators that need to select the right policy tools for promoting certain goals. First, business leaders' attitudes towards policy tools can affect their compliance with these policies - research on compliance has shown the huge advantages of voluntary compliance by regulatees

Declaration of Competing Interest

None.

Acknowledgments

This paper is based on research funded by the Israel Democracy Institute. We thank Geo-Cartography Knowledge Group for their services in data collection. We also wish to thank Daphna Aviram-Nitzan, Omer Selivansky, Limor Sahar-Inbar, Hilla Schupak and Nurit Hod for their helpful comments.

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