5 Effective nudging techniques to grow your consumer lending business
Five powerful nudging techniques to enhance conversion rates for online consumer lending businesses. The techniques explored include anchoring, tunnelling, social proof, multistep forms, and powerful copy. By incorporating these techniques, lenders and banks can guide customers towards informed decisions, simplify the application process, build trust, and optimize their website’s performance, resulting in improved conversion rates and a better user experience.
Understanding nudging in consumer lending
As an online lender or bank, you want to do everything possible to encourage potential customers to take the plunge and apply for a loan. What if you could nudge them in the right direction without being pushy? In a previous article, we explored the concept of nudging in consumer lending and its role in responsible lending. Below, we discuss 5 popular techniques of how you can incorporate nudging into your site, providing examples and practical advice for each.
As a refresher, nudging is a behavioural economics concept coined by Nobel prize-winner Richard Thaler that aims to influence people’s decisions by providing subtle cues. In the digital world, nudging can guide users to take a desired action, such as filling out forms or clicking on buttons.
Incorporating nudging techniques can improve conversion rates and increase revenue, so it may well be worth adding one or several of these techniques to improve your consumer lending site if you have not already done so. We will explore 5 specific techniques to incorporate nudging into your site: anchoring, tunnelling, social proof, multistep forms, and powerful copy. Let’s dive into the specific techniques.
1. Anchoring for your consumer lending site
Anchoring is a powerful technique used to influence decision-making by providing a reference or starting point for the customer. The idea is that by presenting an anchor, such as an example loan amount or a typical loan statistic, customers can more easily evaluate the options presented to them. This is because it reduces the cognitive load on the decision-making process and makes it easier for customers to progress.
In the world of consumer lending, anchoring can be very effective. Customers want to feel like they’re getting a good deal or saving money, and anchoring can help provide that sense of relative value by having a number to compare to.
Even the way terms are worded can have an impact on the chances of success: researchers found that borrowers were more likely to accept higher interest rates on loans when the rate was a round number (e.g., 7% rather than 6.97%). The data suggests that the round number serves as an anchor, making the higher rate seem more reasonable, even though it actually cost slightly more to the customer.
Here are some ways to incorporate anchoring into your lending website:
- Providing an example loan amount to give customers a starting point for their own loan request
- Giving statistics on typical or average loan amounts to help customers understand what other borrowers are choosing
- Showing loan rates from competitors, and showing how yours compare and any advantages you can provide
By incorporating anchoring into your website, you can guide customers towards choosing the best loan for their needs, while also increasing conversion rates.
2. Tunnelling for your consumer lending site
- Removing links that lead users away from the application process, to ensure they remain focused.
- Simplifying text and colours to draw attention to important elements.
- Simple and clear instructions on each page of the application process to reduce cognitive load and help focus on the task at hand.
3. Social proof for your consumer lending site
- Share testimonials and reviews from other customers. Include specific details and statistics that highlight the benefits of your products or services, for example, “This loan helped me pay off my credit card debt and save over $500 in interest charges.”
- Use “most popular” tags or badges to highlight products most likely to meet customers’ needs
- Incorporate social proof into your marketing campaigns by featuring user-generated content or testimonials in your ads or email newsletters. This can help build trust and credibility with potential customers who may be sceptical of traditional advertising.
- Add social media links to encourage customers to share your content or products on their social networks. This also helps increase brand visibility and credibility.
4. Multistep forms for your consumer lending site
- Breaking up the loan application into multiple steps, with each step focusing on a specific set of information
- Adding a progress bar or step tracker to help users understand where they are in the process and how much more they have to complete
- Providing clear instructions and guidance for each step to make it easier for users to understand what information is required
- Testing and optimizing the form layout and design to ensure a smooth and user-friendly experience.
5. Powerful copy for your consumer lending site
- Use clear and concise language that is easy to understand
- Add reassuring notes to address common concerns that users may have, such as worries about security or privacy
- Use a strong call-to-action to encourage users to complete the application
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How you can incorporate nudging into your consumer lending site
Take a look at your website and research which areas cause the most friction on your site, and consider if any of the above 5 techniques can increase conversion rates. For example, if you find potential customers frequently abandon an application at the same stage in the process, see if there are any nudging techniques you can use to simplify the process. Or if users get hung up on the pricing page, you can add techniques such as anchoring or different types of social proof to the page.
Additionally, A/B testing can be a really useful way to determine how to incorporate nudging to your site and discover where small changes can have the biggest impact. Utilising beta testing and other tools such as Naktergal’s end-to-end testing can help you fine-tune your approach and achieve optimal results. With the above 5 techniques in your arsenal, together with a thorough testing strategy, you can make a big improvement to your website’s performance while providing a better experience for your customers. It’s a win all round.