T R E N D   L I N E

August 12, 2010


Firm Overview
Client List
Health Care Expertise
More Articles
Case Studies
Quarterly Newsletter
About Nolan
The Robert E. Nolan Company is an operations and technology consulting firm specializing in the health care industry. For 35 years, we have helped clients redesign processes and apply technology to improve service, quality, productivity, and costs.

Our staff members are all senior industry experts with 15+ years in the industry. Visit www.renolan.com to for health care articles, white papers, and client success stories.

The Fine Art of "Nudging"

Merit Smith
Vice President & Director, Health Care Practice

A topic much discussed in recent months—especially around health care reform—is the "nudge." What is a nudge? Many organizations state their rules for their customers with detail and clarity. Other organizations give default options; an organization can communicate clear and concise rules or nudge their customers in the hoped-for direction.

Once you know about the nudge concept, you become aware that it is everywhere. You'll see that we are swimming in a sea of subtle (and not-so subtle) nudges. Some are honest nudges; some, not so much.

An industry that represents some of the best and worst of services are airline providers. A good example of a nudge in the airline industry is the check-in process. You can stand in line at the airport and interact with a random human and receive a random service experience, then stand in another line to receive a random security and transportation experience. Or utilize one of two nudges provided as an alternative:

  • Print your boarding pass at home or office and go directly to the TSA line-you win and so does the airline.
  • Go directly to the kiosk for a random technology encounter (avoiding the random human service experience), and you both win again.

In this case, the choices allow the customer to match their needs—such as an extra bag or resolving an issue with a connecting flight—with the airline's service capability.

Another less-known nudge the airline hopes their customers will take is a somewhat dishonest one. If you would like to change your assigned seat, you may select the kiosk over human intervention. However, the kiosk is programmed to offer an opportunity to buy an upgrade before it offers one of the 16 open seats. You may end up paying more for a better seat that would have been free at the ticket counter.

Insurance companies are fertile ground for nudge observation. They offer products to the public with bewildering and complex rules to accommodate a wide range of demographic and personal issues. This complexity contributes to service failure and distrust. Some insurers have become clever about nudging and call it "product design." In most cases, it helps reduce product complexity and buyers make a more rational, understandable purchase.

Unfortunately, not all insurance company nudging is good, and so we arrive at "Hobson's Choice." I don't know who Hobson was, but you encounter him when in a situation where no option is offered, however the proposal can be refused. But many of us have experienced the health care equivalent of Hobson's Choice without an option or any practical way to refuse what is offered. (We will be seeing fewer of these situations now that the national public policy has changed.)

Overall, nudging is good. I believe service organizations should think about and include the tactic in their design of service. Four useful key points are:

  • Honest nudges only, please. Use nudges that don't manipulate. An honest nudge clearly communicates client choices that benefit both parties.
  • Nudge to improve service by increasing ease of use for low-complexity interactions or high-frequency users. Also, nudge to help reduce product complexity at point of selection. Use a simple nudge to show potential buyers what others are purchasing.
  • Nudging to lower service costs may compromise the customer experience. Many nudges seem to involve removing humans from points of decision and service. A human may be needed to explain your nudge to maintain a favorable service experience.
  • Pilot test your nudge before committing to it.

As always, if you have an idea about nudging, drop me a line. I'd love to hear from you.

Email Marketing by