How nudge marketing and machine learning intersect

Have You Heard of Nudge Theory?

Do you control your thoughts? For most people, the instinctive answer is “yes.” But while we perceive control over our thoughts, psychology suggests otherwise. 

Indeed, in 2017, Richard Thaler received the Nobel Prize in economics for his work on “nudge theory,” which purports that outside influences can profoundly manipulate the human mind.

Thaler proved that the mind operates with inherent limitations and biases. People do not always act rationally, contradicting the rational, selfish model of psychology on which economists have historically based predictions.

Thaler’s findings confirm what businesses already assume: people (consumers) are prone to suggestion, and the savvy salesman or — with modern tech — artificial intelligence (AI) can capitalize on that inclination.

Marketers and Nudge Theory

You can probably find “nudge marketing” at your nearest car dealership or 99 Cent Store. It’s no coincidence that the rates in these shops often end in -99. People are more likely to pay $10.99 than $11.00 for the same item because ending a price with -99 “nudges” the mind to understand it as significantly cheaper.

Still skeptical? There are other examples of nudge marketing all around us. For instance, consider a blockbuster movie. Watch carefully, and you might catch the main character using a Macbook or sipping Coke. This is an example of product placement: a practice in which businesses pay for their products to appear on-screen. It’s an effective tactic — in fact, Reese’s Pieces sales increased by 65% after they appeared in ET. More nudge marketing.

Machine Learning: a Force Multiplier for Nudge Theory

Strategies like product placement and smart pricing will raise the likelihood of a purchase, and that effect grows more potent with each additional “nudge.” By nature, nudge marketing is a probability game. 

So, how can you “nudge” the odds in your favor? 

As a solution to this question, businesses are turning to machine learning. 

Machine learning algorithms analyze data and return patterns, such as those found in human behavior. Using this ability, AI can intake a consumer’s data and determine which nudge marketing tactics will most affect them. For example, consider Amazon’s recommendation algorithm. It analyzes factors like location, past purchases, and recent searches to determine what ads will “nudge” consumers toward a purchase.

Are you interested in unlocking the power of machine learning for for nudge marketing or perhaps in another area of your business? Synaptiq can help you develop and implement affordable AI. Learn more here, or contact us for an appointment.

Additional Reading

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