Organ donation rates in some countries are much higher than in others. Neighboring countries with similar cultures can have dramatically different levels of organ donation. For example, organ donation rates in Germany are at 12%, while in neighboring Austria it is almost 100%. Are Germans less altruistic than Austrians? While one might come to this conclusion, a paper by Dan Goldstein and Eric Johnson published in Science Magazine provided an elegant answer to this observation. The dramatic difference in organ donation rates could merely result from different defaults.
Germany’s citizens as a default are opted out, meaning that they proactively have to choose to donate, while in Austria people are default opted-in, so they have to actively express their wish not to participate in the organ donation programs. People as a general rule do not change defaults and that results in dramatically different rates of organ donation.
Designing a “nudge”, which gets the desired behavior from people has been used effectively in policy by governments in the UK and Singapore among others. The UK has a team called the Behavioral Insights Team often called the Nudge unit. This idea has been adopted by policy makers in different countries and increasingly by businesses.
A recent incident of the use of nudges by a large retail bank in India has made the news for the wrong reasons. HDFC Bank decided to use a nudge to impose quarterly premium charges on its customers. There was of course a way to opt out of this service in the email the bank sent to its customers about the new service. If customers opted out, the bank would not charge the premium service fee. This is an elegant application of the defaults idea. People do not change their defaults and hence the bank would earn a nice hefty sum of money as service charge with just an email.
All would have been well but for one vigilant PR professional in India – Karthik Srinivasan who chose to take on the bank for these charges. He started what he called the “Twitter Satyagraha”. Satyagraha was a term that was popularized by Mahatma Gandhi as a means to pressure the British to leave the country. The term loosely translates as “insistence on truth”.
These tweets have gone viral and his activism has gathered momentum. He has been tweeting for over three months at the time of writing. Although the bank was silent initially, his persistence has provoked them to react. From the legal standpoint, the bank provided customers with the option to opt-out. But Karthik is convinced that it is still not fair for the bank to impose these charges by default.
This turn of events points to the dangers of adopting a behavioral research findings without understanding all the ramifications of doing so. While nudges might give organizations their preferred outcomes, the consequences when they benefit at the expense of customers can be dangerous for public perception.
Nudges should not be used as a way to hoodwink customers in order to capture value at their expense. When used well in a manner that can create value for all stakeholders, a nudge can indeed be a powerful tool to change behaviors. Organizations therefore need to think about value creation first and then use nudges wisely.
Jay Narayanan is Professor of Organizational Behavior and Leadership at IMD. He teaches in the Orchestrating Winning Performance program & the Breakthrough Program for Senior Executives.