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Financial Planning > Behavioral Finance

To Get Workers to Save, Think Like a Retailer

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Want to get workers to save more and make positive behavioral changes? Take a cue from major retailers and offer a rewards program.

Liz Davidson, CEO and founder of Financial Finesse, and Linda Robertson, a financial planner for the firm, made the suggestion on a webcast Wednesday.

Rewards trigger the release of dopamine and can motivate behavior, Robertson said. “Retailers have successfully discovered this,” she said, pointing to frequent flier miles, coupons and special sales as examples of how retailers trigger dopamine releases in individuals.

Davidson noted that dopamine is what contributes to habit development and addiction. As a habit forms — whether a bad one, like gambling, or a good one, like saving — and dopamine is released, the individual needs more to get the same feeling.

“While the habit center is small and deeply embedded in the brain, it’s incredibly powerful. If you can get the reward center triggered enough times, you’re ultimately transitioning something from a positive behavior to a positive habit, and a habit is something that’s painful not to follow through on,” Davidson said.

To apply those principles to a financial wellness program, employers should establish a program that is ongoing. “I guarantee every single retailer has ongoing meetings to figure out how to make their customers lifetime customers,” Davidson said. They want customers to come back often; similarly, employees should be saving often, she said. “That’s what you need to do with education. You need to make it ongoing and self-reinforcing so that employees are using it habitually.”

Employers should also offer rewards and incentives for good behaviors. Davidson referred to retailers that use punch cards to reward a customer with a free item after so many visits.

Multiple channels are also important for reaching employees. It’s very rare for a retailer to advertise on one channel only. “When we hear a message multiple times, it sinks in in a deeper way and in way that is more likely for us to take action than when we hear it in one medium,” Davidson said.

Davidson and Robertson illustrated an example of a process that incorporates these principles. An employer can offer an online wellness center where employees can take a wellness assessment. Once they do so, it unlocks access to a workshop or webcast where the employee can get even more help. Once they complete the webcast, they can gain access to one-on-one advice from an advisor.

“It’s appealing to our desire as humans to earn things: to earn the free miles, to earn the free coffee because you’ve been there six times already,” Davidson explained. “It appeals to our reward center because you are being rewarded each time you complete a task; it appeals to the need to hear information and be exposed to messages across multiple channels, which is much more powerful for retention and behavioral change than using the same channel.”

She noted that while it may seem intuitive to think that making employees work for these benefits will result in fewer employees actually taking them, “it actually enhances utilization as opposed to having all these services widely available because it motivates people to actually take these steps.”

Davidson said that in firms where they’ve set up a rewards- or earning-based system, the majority of employees have gone through it. “It’s the same psychology of gaming, where you have levels and people get very invested in making it to the next level.” Anybody who has played Candy Crush probably understands that psychology.


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