Financial incentives for weight loss: reward or punishment? Why it makes a difference…

Money talks, right?

It can be a powerful motivator, at least for some people.

But this motivation usually doesn’t last long. Money’s influence over our behavior soon dries up.

Such has become the standard line for weight loss programs. This week saw yet another study that found financial incentives to be ineffective at changing behavior.

Yet, this shouldn’t be shocking for any behavioral economist who knows that what drives people to do things over the long-term is typically intrinsic, like autonomy or mastery, not extrinsic, like, say, money. Sustainable behaviors are usually ones where a person derives some pleasure from the behavior itself rather than because of some external factor.

There’s a nuance to this though. Would it matter if the financial incentive is structured as a reward or a punishment?

Here’s what I mean.

In the study I reference above, participants enrolled in a workplace wellness programs and received a 5 percent weight-loss goal. They were then randomly assigned to one of four different groups: a control group with no financial incentive to lose weight, or to one of three weight loss programs each with a financial incentive valued at $550.

In other words, there was a reward in the form of $550. The participant gained something by attaining their goal.

Let’s look at this another way.

What if, instead of gaining $550 for losing weight, they had to pay $550 for not losing weight – a punishment instead of a reward.

Turns out, when people put their own money at stake and there’s the potential to lose it, they are more likely to achieve their weight loss goal.

This is known as “loss aversion.” It’s pretty simple. People tend to avoid losses instead of acquiring gains. In practical terms, this means that people who lose $550 will lose more satisfaction than those who gain satisfaction from making an extra 550 bucks.

A 2011 study applied the principle of loss aversion to nudge people to lose weight. Here’s what they did.

Participants had a goal of losing 24 pounds in 24 weeks. Those in the intervention arm of the study could contribute $0-$3.00 of their own funds to a deposit contract (basically a third party who held on to the money). Throughout the duration of the study, participants whose weight remained the same or decreased received their original deposit back plus a 1:1 match from the researchers. In other words, participants could earn $84 net per month by making a maximum $3.00 daily.

In this experiment, participants had a stake, they had their own money on the line. They feared losing it. And turns out, the group with the potential to lose money, demonstrated better results with losing weight. People tend to avoid losses instead of acquiring gains.

Why does all this matter?

Well, weight loss and workplace wellness programs use a lot of rewards: gift cards, reduced health insurance premiums, etc, etc. All of these in the name of trying to get people to change their behavior.

What if we need a little less carrot and a little more stick?


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