The Role of Incentive Salience in Habit Formation

Leslie K. John; Katherine L. Milkman; Francesca  Gino; Bradford  Tuckfield; Luca  Foschini

Working Paper | HBS Working Paper Series | 2016

The Role of Incentive Salience in Habit Formation

by Leslie K. John, Katherine L. Milkman, Francesca Gino, Bradford Tuckfield and Luca Foschini

Abstract

Incentives can be powerful in motivating people to change their behavior, from working harder on tasks to engaging in healthier habits. Recent research has examined the residual effects of incentives: by altering behavior, incentives can cause participants to form habits that persist after the original behavior-altering incentives are removed. We conducted a field experiment with users of a pedometer-tracking app to examine whether the salience of incentives would affect their ability to produce habit formation in this context. We offered incentives to all participants and experimentally varied the salience of the incentives (i.e., whether participants received regular announcements about the incentives). Salient incentives produced significantly more behavior change and more lasting exercise habits than incentives presented without significant marketing. Through a difference-in-differences analysis comparing those in our experiment with a similar population, we show that the difference between offering no incentives at all and offering incentives that are not made salient is actually undetectable, whereas the difference between offering salient incentives and incentives that receive minimal marketing is quite stark. We discuss implications for research on incentives, habit formation, and exercise.

Keywords: Motivation and Incentives; Behavior;

Language: English

Format: Print

41 pages

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Citation:

John, Leslie K., Katherine L. Milkman, Francesca Gino, Bradford Tuckfield, and Luca Foschini. "The Role of Incentive Salience in Habit Formation." Harvard Business School Working Paper, No. 16-090, February 2016.

Email mking@hbs.edu for a courtesy copy.

The case describes a program that CVS Health recently implemented to improve medication adherence, an important problem from a societal, public policy, and firm perspective. A test of the program, costing hundreds of thousands of dollars to implement, increased the proportion of adherent customers by 1.4 percentage points. Students are asked to quantify the system-wide economic benefit of this improvement and draw upon insights from behavioral science to examine approaches for boosting medication adherence.

Email mking@hbs.edu for a courtesy copy.

By the time Dan Doctoroff, CEO of Sidewalk Labs, began hosting a Reddit “Ask Me Anything” session in January 2018, he had only nine months remaining to convince the people of Toronto, their government representatives, and presumably his parent company Alphabet, Inc., that Sidewalk Labs’ plan to construct “the first truly 21st-century city” on the Canadian city’s waterfront was a sound one. Along with much excitement and optimism, strains of concern had emerged since Doctoroff and partners first announced their intentions for a city “built from the internet up” in Toronto’s Quayside district. As Doctoroff prepared for yet another milestone in a year of planning and community engagement, it was almost certain that of the many questions headed his way, digital privacy would be among them.

In their commentary, Wilson & Stolarz-Fantino argue that specific design features of our research mean that it cannot have policy implications and that researchers “need to consider profit maximization in menu design or studies are likely to suggest ill-informed implementations.” In this reply, we respond to the specific critiques of our work with empirical data and conceptual arguments. We agree with Wilson and Stolarz-Fantino that researchers seeking to understand a policy’s influence on consumers should test predictions about which strategies firms will likely use when implementing a policy. Research, however, that demonstrates the effectiveness (or lack thereof) of an intervention even without perfectly predicting a firm’s response still has enormous value for setting policy.

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The Role of Incentive Salience in Habit Formation

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