benefits . Insurance companies need to have a clear description of their products and creation of awareness to individuals of true exposure to risk , how the insurance products can protect them and their loved ones , how solvent and trustworthy the insurance companies are , or how claims are handled . The nudge strategies should address consumers ' perception of insurance as a cost rather than as a benefit .
Nudging in Retirement Planning
Given our current financial constraints and the human tendency to value the present over the future , there is a need to find innovative ways to communicate with employees about saving for the future . According to research by retirement benefit schemes , very few people would maintain their current lifestyle upon retirement . Undoubtedly , without proper planning , we will end up being burdens to our children and society at large .
There are several retirement schemes in the market , but uptake of the solutions is exceptionally low . Not all employers have a guaranteed scheme for their employees and the amount being contributed is negligent . While the country ’ s saving culture is wanting , we can apply nudge theory in retirement planning by reframing pensions as investments rather than as savings . This way , it may be possible to encourage people to take up the schemes more , a simple framing would greatly aid how the message is interpreted . When information is simplified , it is easily taken up e . g ., by retirement age of 60 , KES 500 saved at age 30 could be worth KES 2,000 .
Final Thoughts
In the final analysis , the Nudge theory is a fascinating concept that can significantly improve marketing performance as well as other intervention policies in other sectors . The premise of the theory is to minimize resistance and confrontation , which commonly arise from more forceful ' directing ' and autocratic methods of ' changing ' people / behavior . It is quite clear a lot should be done on messaging for nudges to work .
Nudging is based on the principle that customers are not rational . Their decisions are influenced by their emotions , surroundings , experience and so on . Consequently , providing the information is not enough to influence them to take the ' right ' decisions , i . e ., those that will benefit them in the short and long term . The most famous example is cigarettes : information campaigns alone have not been enough to curb their use .
Nudging favors soft tactics : it does not force , decree , or prohibit . It does not entail any penalty , reward , or financial repercussions . The individual is still completely free to choose .
Between a carrot and a stick , the Nudge offers a third option and the use of it should be done ethically .
Geoffrey Sirumba is a Brand and Marketing Practitioner , currently working as the Head of Marketing at Metropol Corporation Limited . You can reach him via email at : Geoffsirumba @ gmail . com or @ geoffsirumba on Twitter .