6 Ways to 'Nudge' Clients to Better Decisions.

Think most people make choices that are in their best interests most of the time? Think again.

40 years of social science research condensed and published this year by two University of Chicago professors in their book Nudge suggests that most of us are much more easily influenced than we’d like to believe or ever admit. Plus we’re busy and don’t have time to think deeply about all the choices we make.

While it’s easy to think that Richard Thaler and Cass Sunstein are not talking about you and me when they describe people as “somewhat mindless, passive decision makers,” consider:

a)  How many people still smoke

b) That over 60% of American adults are overweight

c) That 50% of marriages end in divorce (yet nearly 100% of newlyweds believe their marriage will not be one of them!)

d) That the average credit cardholder has 8.5 cards and the average household over $12,000 in debt on credit cards.

e) That 90-100% of small business owners think their business will succeed (when the failure rate is well over 50%)

f) That the personal savings rate for Americans in 2005 was negative for the first time since the 1932 and the Great Depression.

g) That the average American spends more time picking out a new tennis racket or TV set than deciding on their contribution rate and investment allocation on a retirement plan.

(By the way, if you’re in the financial services industry, some of these are great examples to use when commending your clients during Step 1 of the 6 Step conversation).

When do we make good decisions? When we have experience, good information, and prompt feedback. An easy example would be us trying a local Indian restaurant because it’s been recommended by a friend (good information). We get the experience from going and the feedback is whether we like the food or not. That bit is simple.

It gets harder with areas like your business, money, health, education and the environment where feedback is not prompt and the consequences are mostly long term (ex. sluggish business, nothing saved for retirement, heart problems, weak skills at a job, and smog).

What is nudging and how could it help you and your clients?

The authors argue that nudges are everywhere and can make a huge difference both good and bad. They advocate for ‘choice architects,’ people who are competent in their field and are truly unbiased to nudge people in ways that will enhance their lives without taking away their freedom of choice. Most of the people reading this are in a position to positively nudge clients. Now you know which areas most people struggle to make good decisions.

Thaler and Sunstein are wary of sales people: “Ordinary consumers are often novices in a world of experienced professionals trying to sell them something.” I can only leave that one up to you, the reader, not least because many of the companies I do referral programs for have many people in attendance who genuinely believe they put their clients’ needs first and I have no reason to doubt this.

When do people need a nudge?

a) We most need nudging when the effects of our decisions are delayed: “many of life’s choices are like practicing putting without being able to see where the balls end up.”

Think health, finances, environment, and education. Think your business!

What should you be doing more often to bring in new business?

What key decisions do your clients put off because they can’t see the end result? How can you nudge them better?

b) When we are being unrealistically optimistic:

We all tend to over-rate ourselves from our customer service to our driving and listening skills. Certain things we expect only to happen to others: a business going bust, getting fired from a job, having a heart attack or cancer, getting divorced, having a drinking problem, gay men getting AIDS, and older people getting in a car accident. Most smokers believe that they are LESS likely to be diagnosed with lung cancer and heart disease than nonsmokers, and there are the people who buy lottery tickets.

What are your clients unrealistically optimistic about?

With referrals I find most people dream of never having to ask because the phone will always be ringing. Sadly, this is most unusual.

c) We need nudging when we are stuck in a status quo and it’s not in our best interests to stay stuck:

People have a bias to stay with their current situation. Ever lost money because of an automatic payment on a subscription you forgot to stop?

d) A nudge matters when we won’t change out of fear we will lose something.

LOSING SOMETHING IS TWICE AS PAINFUL AS GAINING THAT SAME THING!

One reason why some people don’t ask for referrals is a fear that the current relationship with that client will be spoiled. This is VERY seldom rational but the fear is common. Now we know why.

Ironically, most people are losing a lot more business by not asking.

What are your clients afraid of losing?

e) Nudging is needed when making a difficult decision.

The authors consider forming and managing an investment portfolio to be challenging and recommend choice architecture and a few nudges. Why? Because those who don’t end up with something “similar to what might be expected if most of us tried to cut our own hair – a mess.”

6 ways you can nudge your clients:

1) Communicate with and educate them as often as possible.

They will feel better about their decisions, better about the direction they are heading in (important feedback), and better about YOU.

2) “Simply inform people about what other people are doing.” (Social proof)

This is more powerful than you might realize because most people like to conform. We “like to do what most people think it is right to do.”

Not long ago I put together a list of things that my most successful clients have done to get referrals. It is remarkable to see how much attention this gets from my new clients. The smart ones just start copying straight off this list. And why not? Do what other successful people have done and you’ll get the same results!

How can you send the same message to your clients?

3) Change the order of the most important questions you ask your clients (if this will help them make better decisions by their standards).

Sounds trivial? In one experiment, college students were asked: a) How happy are you? B) How often are you dating? Only 11% of them considered themselves happy. When the questions were reversed, 62% of the students considered themselves happy! Similar results have been found with married couples if the dating question is replaced by a lovemaking question.

Could some of your fact finding questions pack more punch if you put them in a different order?

4) Remind them of bad events (to offset unrealistic beliefs).

That people do die prematurely, get in car accidents, and succumb to alcohol, gambling, or depression. Maybe the new business owner should know his or her chances are less than 50%. You could do the same to any newlywed except you’d end up with a bloody nose or terminated friendship!

Is there a soft nudging way you can do that?

5) Make choices as easy as possible.

46 Medicare Part D choices for seniors and telling them to ask for help is not the way to go.

6) Ask your clients what they intend to do. A Yale study cited that when people are asked what their plan of action is they are 9 times more likely to do it than if you just give people the information. This may well be one reason why coaching programs work better than seminars!

How can you incorporate this into your client meetings? Which intentions of theirs can you ask them about?

This is why Step 6 of the referral conversation works well. It is the question: “When should I get back to you to see if they’re interested?” It gets the referral source to commit to an action and tell you what they’re going to do, rather than you telling them; “I’ll call you on Monday” which requires no intent on the referral source’s part.

Great: now what do you intend to do? Start by forwarding this on to others who would enjoy it. Go on – everyone else is doing it!