Behavioral Economics

Progress – A Little Often Leads to A Lot

Ever notice that as a goal gets closer, you feel more motivated to cross the finish line? In behavioral economics, this is known as goal gradient theory, and one practical application of this theory is to take long-term goals and break them into a series of shorter-term goals. For example, take the long-term goal of saving for your kid’s college tuition. For most households, this seems like an impossible task, but if you break it down into annual or even quarterly savings goals, the task feels much more achievable. Progressive companies who understand this theory are shifting some employees’ goals from annual measurements to quarterly or even monthly goals. Far-away rewards are much less motivating than near-term ones.

What about goals that are harder to break down into smaller chunks? That’s where the interesting concept of “endowed progress effect” comes into play. The endowed progress effect is the idea that if you provide some type of artificial advancement toward a goal, a person will be more motivated to complete the goal (because they sense the goal is closer).

Researchers Joseph C. Nunes and Xavier Dreze tested this idea with loyalty cards for a car wash. Reward cards requiring eight purchases for a free car wash were handed out to some customers, and other customers received cards requiring ten purchases but with two of the spaces on the card already stamped. Each group needed to do eight more visits to get their free car wash. After nine months, 34% of the people with two free stamps had redeemed their cards versus 19% percent who had cards without the free stamps. And those with the two free stamps washed their cars more frequently and completed their “goal” faster than those without the two free stamps. This works because a “head start” toward the goal gives the impression that less work is required to complete the task.

So how are you putting these effects to work with your clients, members or employees? You need to consider how to shift the timeline of goals or give important tasks a head start to provide motivation and speed up completion.

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