Aug 31 • 2 min read

Every day, people are faced with a hundred and one choices that they seem to make on their own. What should they get for lunch today? How much should they tip the waiter? 

However, they may be getting a little help from companies when making these choices. 

For example, a restaurant’s online menu may sort items by popularity, as opposed to by price or nutritional value. Thus, a person may have been “nudged” toward a top bestselling choice that wasn’t necessarily cost-effective or nourishing. At checkout, a cash register may have had a 22% tip preselected, and the patron simply went with the default rather than considering other options.

This is called choice architecture, or structuring choices in a way to “nudge” consumers toward a particular direction. 

These nudges can be used to encourage consumers to make choices that benefit the company and its bottom line. But Crystal Reeck, assistant professor of marketing and supply chain management, asserts that this technique can help bridge choice disparities and inequities between people of lower and higher socioeconomic statuses (SESs). 

Due to systemic barriers to access, people of lower SES often do not have the same knowledge and experience that their higher SES counterparts are afforded. Their parents may have given them money in their childhood to practice financial literacy and money management, or they have had opportunities to get more advanced education courses in comparison to their lower SES peers. 

Additionally, the stress of being poor can take a mental toll, forcing people to think about what will help them survive in the here-and-now rather than thrive in the long term. All these factors can culminate in people of lower SES making less informed decisions due to their background, which may further exacerbate their financial situation. 

So where do nudges come in? Reeck’s paper, “Do Nudges Reduce Disparities? Choice Architecture Compensates for Low Consumer Knowledge,” shows that people of lower SES backgrounds, as well as those with less subject knowledge and comfort with numbers, are more influenced by nudges than their counterparts. 

Thus, nudges can be used to bridge the gap of choice disparities by guiding lower SES individuals toward more beneficial choices—choices that they might have made if they were given the same privileges as their counterparts. 

Marketers can implement this by considering the most optimal choice for disadvantaged consumers when using nudges. For example, they could make the default product size one with a lower cost-per-unit rather than one that is a more profitable or revenue-generating choice. 

Policymakers can also implement this strategy, as they often aim to create nudges that target broad sections of the population. In programs like health insurance enrollment, voter registration or school admissions, these nudges would likely yield greater results if they were instead tailored to lower SES audiences, as they are more affected by nudges than their higher SES counterparts. 

Center for Applied Research in Decision MakingConsumerismCrystal ReekEconomic InequalityMarketing and Supply Chain