Coupons, sweepstakes, contests, rebates are promotion techniques for changing behavior. Short term, they can change the economic outlooks of brands and the customers who buy them. But we've never thought of promotion marketing tactics as a way to change the economic outlook of nations - until now.
Yes, Promotion Could Change Nations.
From the Harvard Business Review we learned about a real life promotion experiment run by Michigan credit unions. It offered "entrants" one entry to win $100, 000 for each $25 they saved. (That's $25 they kept for themselves and earned interest on, not "$25 they spent" or "$25 worth of product they purchased.")
Could this be the answer to some of the current U.S. economic woes?
• Because for the nation as a whole, more savings = less imported capital = more economic independence (from debt to China, for example).
• And less money devoted to debt service means more money for expanding businesses, hiring employees, buying houses and cars, and so forth.
The Save To Win program at eight Michigan credit unions attracted $8.6 million in incremental deposits from 11,600 savers in 11 months; Nineteen Michigan credit unions will participate in 2010. Among the 11,600 participants:
• 55% had no previous regular savings plan.
• 59% were lottery players.
• 64% had never used certificates of deposit before.
The program was developed by Harvard Business School professor Peter Tufano, who said: "Saving is really crucial now as the majority of Americans face insecurity about jobs, healthcare and their futures, and we were pleased to offer this easy and fun option to increase saving by credit union members."
All this is contrary to what we think we know about economics. Save To Win is like a lottery (even though you can't lose in Save To Win). And a lottery is a perfect example (we've always been told) of irresponsible economics. Some call it a "tax on stupidity." Yet in this case it works.
No, Promotion Is Not The Solution.
On the other hand, sometimes promotion is not the solution to economic woes.
This Forbes article reports on a New York City "sales promotion" that rewarded poor people with cash incentives for maintaining good habits - $25 to $150 for going to the dentist, staying on the job, opening a bank account and so forth. But after three years, Mayor Michael Bloomberg states that the program "doesn't work in every case." Only 10 percent of families had two dental visits per year, only 1 percent more had health insurance, and only 3 percent fewer used costly services like check cashing. Fewer participants held jobs in the first year, and cash rewards had little effect on school performance or attendance.
Go Figure
If my colleagues and I had seen this programs in the planning stage, some of might have predicted just the opposite: That Save To Win would fail, because of the uncertainty of getting a reward (no matter how large), and that the cash incentives for behavior would succeed, because they're a sure thing. But that's logical thinking, and people behave logically only some of the time.
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