Showing posts with label Nudges. Show all posts
Showing posts with label Nudges. Show all posts

Thursday, January 31, 2019

econlife - Six Facts About How Supermarkets Influence What We Buy by Elaine Schwartz


Like me, have you ever raced into your local market to get some milk and passed through produce and other aisles, grabbing some items you never realized you needed? One supermarket executive called it “building the basket” when they lure us to the rear of the store. (It is also true that if they didn’t move the milk from the truck to a back cooler, they would diminish refrigeration time and increase labor expense.)

But still, the store did nudge me to spend more money.

Six Facts About How Supermarkets Influence Us

1. Supermarket bars and restaurants affect our spending.

Yes, supermarkets are adding bars. Called a “superbarket” in Vox, grocery stores are inviting us to drink while we shop. For them, it’s a win-win. Groceries are low margin purchases but not booze. And after a drink or two, maybe, as we careen through the grocery aisle, we buy more. Whole Foods started it all in 2009. Then others copied. Similarly, Eater said we now have the “grocerant” where we can eat dinner too.

2. Music can impact how much we spend.

In one classic 1982 study, researchers observed the response to no music, slow tempo music, and fast tempo music. Keeping track of pace also, they hypothesized that the slower movements that responded to calmer music were accompanied by more shopping.

Taking the next step at a wine store, psychologists looked at whether the type of music made a difference. Discovering it did, they found that French music was correlated with French wine sales, And yes, German music increased the German wine purchases.

3. The size of our supermarket cart affects our purchases

Carts have gotten bigger. The supermarket cart was first invented (1937) by a retailer who wanted us to buy more than we could carry. More recently, stores have larger aisles, women working away from home who can visit the market less frequently, and stores like Costco that encourage bulk purchases. Whatever the reasons, journalists say that carts have tripled in size from 1975 to 2000. Others claim that Whole Foods doubled cart size between 2009 and 2011. However, the one statistic that seems most reliable indicates that when a researcher doubled cart size, customers bought 19% more.

4. Shelf layout influences our decisions.

Supermarkets have to decide who can occupy their prime “property.” Like beachfront homes, the supermarket checkout area is a coveted location. For the same reason, a separate display at the end of an aisle is a desirable spot. And, in a typical cooler, we would mostly see products from large multinationals. For example, Dreyer’s, Skinny Cow, Edy’s and Häagen-Daz are actually all Nestlé. Similarly Magnum, Ben & Jerry’s, Breyer’s, Klondike and Talenti are from Unilever. If the aisle had 24 doors, only two might lead to the generics and niche brands.

5. Product descriptions affect what we think we should buy.

At Trader Joe’s, a smaller U.S. grocery chain (owned by Germany-based Aldi), they care about their adjectives. Catering to a niche market of shoppers who want bargains and healthy food, they mostly name and sell their own brands. The label on some nuts could say Sea-salt-and-turbinado sugar-chocolate almonds while a chicken dish is spatchcocked lemon-rosemary chicken. That turbinado just refers to a certain type of sugar cane. But it sounds good.

6. Finally, it’s the choice dilemma.

Some stores like Trader Joe’s believe less is more. Typically they have only 3,000 or so SKUs–stock-keeping units–the number of items in a store. A normal supermarket has more than 35,000 SKUs.

According to Columbia professor Sheena Iyengar, less of a choice generates higher sales. However, the bigger chains give us much more.

Our Bottom Line: Nudges

Nobel Laureate Richard Thaler and his co-author Cass Sunstein tell us that we go through life influenced by nudges that shape our behavior. A behavioral economist calls the phenomenon choice architecture. Indeed, through sound, transport, language, choice, and placement, the “architecture” of the supermarket affects how much money we spend.

My sources and more: If you just listen to one podcast about supermarket behavior, I recommend this Freakonomics episode on Trader Joe’s. However, to read onward, you can look at Consumerist for cart size, this classic study for music, and Businessinsider for the wine study. Then Vox and Eater told me about grocery store bars and restaurants while NPR explained why the milk is in the back of the store.



Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Thursday, November 16, 2017

econlife - When Organ Donors Need More Than a Nudge by Elaine Schwartz


Economic research tells us that default options are powerful. Because they ask us to do nothing, we tend to select them. So, if the default retirement plan encourages the most saving, many of us wind up putting more aside. Or, if we are defaulted into a high co-pay health insurance plan, we take it.


But really, it is more complicated.

Where are we going? To a closer look at deceased organ donations.


Organ Donation Defaults


In France, deceased organ donation recently became the default.

People will automatically donate their organs when they die unless they actively “opt-out.” Reading Richard Thaler, most of us would say the nudge should work. And yes, when the law went into effect on January 1, 2017, only 150,000 out of a possible 66 million had signed the “refusal register.”

Similarly, with opt-in as the default, Spain has led the world with a 35.7 out of 1 million donation rate. But here is where it gets tricky. Looking further, you would discover that Portugal and Belgium’s donation rates are similar to the U.S. And yet, the former two countries have the “opt-in” default. Furthermore, when Australia (+41%) and the U.K. (+36%) successfully upped their 2009 deceased organ donation rates by 2014, they did not change their consent systems:


discussion_doc-_international_reform_programmes_docx


Our Bottom Line: Spillover


From a study on how to boost New Zealand’s deceased donor organ rate, I saw some of the behind-the-scenes issues. My takeaway was that increasing deceased organ donations has to involve institutional spillover.

Looking at Spain, Portugal, and Croatia, the New Zealand study said you need the following. (Some I directly quoted while others I summarized):
  • an appropriate legal, ethical, and governance framework
  • a national coordinating body
  • hospital-based donation specialists
  • specialist training
  • financial and media support
  • international best practices sharing

Where does this leave us? Sometimes a nudge is not enough.

My sources and more: For nudges generally, Richard Thaler (2017 economics Nobel laureate) talks about them in a Yale Insights article. More specifically, for organ donation, you might enjoy this NY Magazine article. But for the story behind the nudge, this New Zealand report from its Health Ministry has the best information.

Hazlegrove-6763_6bIdeal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Who Will Sacrifice Civil Liberties During a Pandemic? by Elaine Schwartz

  In a new NBER paper, a group of Harvard and Stanford scholars investigated how much of our civil liberties we would trade for better heal...