“Nudge Theory” and How to use it in your Real Estate Practice
Richard Thaler, the father of “nudge theory”, has been awarded the Nobel Economic Prize for 2017. His concept is a relatively simple idea that overturns decades of economic theory assumptions. For years, economic theory was built on the assumption that people act in their own financial self-interest. Well research has shown that we do not. Most times we do not act to increase the value we receive but choose the way of least resistance.
Given a choice to make a decision that will increase our net worth but to act on it is relatively more difficult than to choose another course that will work against us but is easier to implement, most people will choose the easier way. Difficult to believe but we all intuitively know this to be true. Persons will choose to eat a fast food meal than choose to cook a heather meal even if cooking the meal is cheaper and healthier.
Nudge Theory is a subtle policy shift that encourages people to make decisions that are in their broad self-interest. It’s about making it easier for them to make a certain decision. “By knowing how people think, we can make it easier for them to choose what is best for them, their families and society.”
Using it in your Real Estate Practice
This theory is applicable to your Real Estate practice. The easier you make things for persons, by removing the hurdles and obstacles, the quicker they are inclined to choose a particular course of action. For example, handling much of the work in selecting the property, arranging the financing, completing the paperwork, selecting furnishing, assisting in the moving, the more persons are inclined to choose this option, even if it requires a higher fee.
This implies that in today’s stress filling living, persons are looking for “turnkey” service, and they are willing to pay for such a service. The challenge is to offer a “nudge service” and still make a profit.
Start “Nudging” by exploring the following idea starters:
- understand how clients think, make decisions and behave,
- help clients improve their thinking and decisions,
- manage change of all sorts, and
- identify and modify existing unhelpful influence on clients.