Only One Left at this Price! The Effects of Nudging on Consumer Behavior
Overview: In a new paper, “The Effects of Pressure and Self-Assurance Nudges on Product Purchases and Returns in Online Retailing: Evidence from a Randomized Field Experiment,” NYU Stern Professor Anindya Ghose, Heeseung Andrew Lee (University of Texas), Kihwan Nam (Dongguk University), and Wonseok Oh (Korea Advanced Institute of Science and Technology) study the economic effects of two categories of nudges on consumers’ purchase and return behaviors. The categories are “self-assurance” or “good” nudges (e.g. “Check out the perfect size for you”), and “pressure-based” or “bad” nudges (e.g. “Only x products left”).
Why study this now: Most of the existing research about the effects of nudges in online retail shopping has been focused on bad nudges. Furthermore, these studies only focus on the impact of nudges on sales, without considering product returns. This omission leaves out an important part of the purchase cycle, especially considering that 30% of products purchased online are returned.
This study takes into account those product returns while studying the effectiveness of both good and bad nudges in tandem, thereby creating a more complete picture of how these nudging messages impact consumer decisions.
What the researchers found: In the field experiment, the researchers partnered with one of the largest fashion retailers in Asia and randomly assigned various nudge messages to nearly 6,000 customers who accessed a specific product detail page. They found that:
- Although bad nudges can lead to slightly higher sales, eventually they result in high product returns
- Good nudges result in both high sales and few product returns
- When adjusted for returns, good nudges are as successful as bad nudges at driving sales
Key insight: “Pressure-driven interventions may be ‘tempting,’ as they can increase short-term sales, but they eventually exact a price in the long run,” said the authors. “We encourage digital marketers to apply well-intentioned nudges because these campaigns render the digital marketplace a healthier and more efficient environment.”