Less than a week ago, the 2017 Nobel prize in economics was awarded to Richard Thaler for his contributions to the field of behaviour economics, more specifically for the development of the ‘nudge’ theory. The field of behaviour economics focuses on the prime assumption of traditional economics – that humans always make rational decisions and proposes the contradictory, that people make irrational decisions all the time. Thaler’s nudge theory suggested the idea that small incentives, such as tweaking the working of tax demands can influence people’s response. Applications of the theory can be seen in how by changing the wording of tax reminder letters could lead to increases in HMRC takings in Britain. Notably, Thaler previously commented on how Brexit illustrates how British voters went for an economically irrational choice due to incentives from elites and the mainstream media.

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As a blend of economics and psychology, behaviour economics provides insights that could be applied to marketing strategies. Loss aversion is the mentality where consumers are more willing to avoid loss than pursue gains. Gift with purchase is a strategy that utilizes loss aversion, as consumers will be more willing to avoid the loss of a free gift than to gain the savings brought by discounts. While insights gained from behaviour economics doesn’t necessarily help a brand build its value proposition or reputation, it can help some brands win the active consideration stage of the consumer decision journey. Ultimately, by utilizing the insights from behaviour economics, the effectiveness of marketing strategies could be augmented.

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