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Sludge in action!

Updated: Mar 13, 2023

Sludge is a big deal. Sludge is all around us. Sludge is nuanced and occurs in our day to day economic life. Our purchases are especially subject to sludge behavior. It is the modern-day version of bait and switch. While "bait and switch" marketing tactics are illegal and generally enforced by the Federal Trade Commission, sludge is alive and well. It is the go-to tool in the marketers' toolbox to drive annuity-based revenue.

Sludge is very subtle. It starts as a consumer benefit. Busy people want ease and convenience. But today's ease and convenience may have a long-term price. Sludge will devolve into being a low-utility and wealth-eroding fixed payment.

The anatomy of sludge

1. - Sludge starts as an attractive benefit, such as: "We will set you up on auto payment so you do not have to be bothered paying a pesky bill!"

2. - Companies operationalize sludge with ingenious "speed bump" tactics. You are probably familiar with some of these annoying sludge situations:

  • Extending phone hold times to cancel a magazine subscription or make an insurance claim.

  • Obscuring gym membership cancel links on websites.

  • Masking key rates and terms on websites to make it harder to understand the economic impact of bank deposit account switching.

  • Burying additional product costs or risks in fine print disclosures when opening a new loan.

3. - The sludge situations are designed to add enough friction to a change process that the customer will delay the change. Marketers walk the fine line between:

  • Creating a mild friction that causes a consumer to delay, like "I'm too busy to manage this now, I'll come back to it later." - and later never comes.

- AND -

  • Causing so much friction that the consumer becomes angry and escalates to the point of reducing the economic value of the relationship.

4. - For retail organizations, statistically, these tactics work well. They add annuity revenue by maintaining customer payments beyond their optimal utility for that product or service.

In our article, "Budgeting like a stoic," we explore sludge in more detail... what it is and why it causes consumer harm.

Sludge is what behavioral economists call anything in a process that hinders people. It prevents people from doing the things they want to do and eventually reduces the consumer’s welfare.

Marketers know that sludge payments are very sticky as people are much less likely to cancel these payments because they lack salience. These payments are minimally noticeable. Sludge payments are a "boil the frog" marketing approach pursued by many consumer products and services companies.

A sludge-related issue relates to managing business channels. Digital channels are highly efficient. Stores and other in-person channels are more expensive for the company. Sometimes, multi-channel companies wish to price differently by channel to account for the costs. It may make financial sense, but differentiated channel strategies are at risk of creating channel customer confusion and a sludgy customer experience.

Sludge examples are provided next. I will periodically update them based on my experiences and observations. Please email me if you would like to add examples to the list! For privacy reasons, I will only include your first name.





Allstate Health Solutions

Life Association Plan auto-renewal - I set up a short-term med policy to bridge medical insurance plans. While the short-term benefits end in 30 days, there is a Life Association auto-renewal that will occur unless I cancel. The salesperson said, "Many people really like to keep this!"


Fios TV

I have a friend that pays $450 a month for Fios TV. I said - "Wow, y'all must watch TV alot!" He said, "Not really, since the kids left, we barely watch TV at all." What a great example. My friend is paying over $5k / year for almost nothing. This is sludge in action!



I bought a dental appliance to reduce my snoring and make my wife happy! Walgreens had the appliance listed online for significantly less than it was listed in the store. I happened to be driving near a Walgreens, so I went in to purchase it. I had to check out online to get the lower price. The cashier said their store policy is not to honor lower internet prices through their cash register, even though it is the same company. Wow - I got to experience channel conflict and sludge all at once! So I took the extra 5 minutes to stand in front of the cashier and other waiting customers with my phone in hand. I checked out online and achieved a lower price.


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