Digital nudges as conversion enhancers in profit-oriented and non-profit oriented digital business models

Abstract

The growing use of digital technologies between consumers and businesses has led to a shift of transactions from an offline context into the online world. These developments have disrupted entire industries, including music, travel, accommodation, and financial services, and created new value pools. A great extent of the value creation can be attributed to profit-oriented business models, as shown by the growing valuation of large platform operators (e.g., Airbnb and Uber). At the same time, significant value is unlocked in non-profit oriented business models such as in the context of non-commercial online sharing economy platforms or the digital government space. However, the online space also brought new challenges to digital platform operators, such as greater rivalry resulting from increasing transparency. As the Internet has largely removed the barriers to information access, website visitors have been enabled to shop around and gather plenty of information before committing to a binding transaction. Therefore, converting visitors to actual customers or users remains a critical task, both for profit-oriented and non-profit oriented digital business model operators, as they need to ensure value is truly captured. Previous research in the Information Systems (IS) space around conversion rate optimization in digital business models has primarily focused on the concept of perceived benefits and associated costs when engaging in a particular transaction. While benefits are often related to the product or service, costs are frequently associated with the lack of trust in the digital platform or website operator due to potential misuse of personal information. In addition to the cost-benefit perspective, website design features have been shown to influence user behavior in both profit-oriented and non-profit oriented digital business models. While the intention of certain design feature elements such as banners or ads is directly visible to users, some design elements are aimed at influencing customer behavior inconspicuously – without the users' notice. The use of visual user interface elements to subtly influence consumer behavior in digital decision environments by leveraging psychological biases are called digital nudges. The literature on digital nudging shows promising results in driving conversion rates in digital business models. However, the use of digital nudges has been mainly limited to research in profit-oriented digital business models. At the same time, traditional, non-digital nudges have been mainly researched in the non-profit oriented context, especially in the government space, which simultaneously represents the origin of nudging theory. By assessing digital nudges in both non-profit and profit-oriented digital business models, three studies attempt to close this gap. The first study investigates the effect of prosociality nudges on conversion rates on a fictional non-profit oriented online sharing economy platform. Results show that while prosociality increases conversion likelihood, excessive prosociality may also reduce the transaction likelihood. The second study shows how two separately framed communication arguments – one promotion-focus argument conveying convenience and a prevention-focus argument aiming to reduce privacy concerns – increase online verification conversion rate in a fictional profit-oriented digital carsharing platform if data supports the claims. While the prevention-focus claim is stronger than the promotion-focus claim if data is added, the prevention-focus claim's conversion rate without data is weaker than no claim. The third study is positioned in the non-profit oriented e-government space, leveraging social proof cues and default options as nudges to increase the adoption rate of electronic identification (eID). Both nudges increase eID adoption, but default options are a double-edged sword. They simultaneously fuel privacy concerns towards the government, which attenuates the effect of the default option on eID adoption. These concerns can be mitigated by adding social proof cues. This thesis contributes to our understanding of how digital nudges may be applied to increase conversion rates within profit-oriented and non-profit oriented digital business models. Specifically, this study demonstrates that digital nudges designed to leverage stability biases and perception biases may be used to increase conversion rates in both profit-oriented and non-profit oriented digital business models. The aforementioned first and third study have contributed to a better understanding of how digital nudges may enhance user conversion in non-profit oriented organizations by leveraging the emotional bias and status quo bias to increase conversion. These studies also provided insights on the combined effect of social proof cues and default options on conversion rates: While default options may be used to increase conversion rates, they are ambidextrous as they increase privacy concerns. However, this can be mitigated by adding social proof cues. The second study contributed to a better understanding of how framing and loss aversion can be leveraged to increase conversion rate in profit-oriented business models. Additionally, this study provided some insights into combining theory on communication arguments with third-party assurance seals as supporting data to enhance the effect of nudges further. From a practical point of view, digital business model operators may leverage these findings to redesign their website by employing digital nudges to drive conversion rates and thus increase profitability.