The following was the presentation that I gave at the TGAS conference in Texas this spring. Highlighting some of the behavioral science principles that can be used to help improve your incentives and sales operations.

1. Behavioral Science:
tapping into our irrational drives
Kurt Nelson, PhD.

2. Family information
Hobbies-Activities
Work & Education
Describing Me
Work
ITT Financial (1990)
BI Worldwide (1992)
Lantern Group (1997)
Education
BS Economics/Marketing (1989)
MBA Marketing (1992)
PhD. I/O Psychology (2010)
Cabin
Travel
Rotary
Hiking
Change
Research
Skiing
I have a scientists’ fascination in trying
to understand why people behave the
way they do – combined with a business
mindset trying to figure out how to apply
those insights!
Kurt Nelson, PhD

3. Behavioral Science

4. Behavioral Science fuses…
Psychology, sociology, cognitive science
and behavioral economics to gain better a
understanding of human behavior and
decision making.

5. Well-defined preferences
Decisions are made to maximize
utility
Makes rational choices that drive
behaviors
Econ Human
Emotional
Decisions subject to biases, guilt,
fairness, social comparison
Gives in to temptation and whims (i.e.,
eats donuts vs carrots)

6. Behavioral Science
Principles

7. Goal gradient theory – Goal motivation increases as people move
closer to target. The closer you get to the target, the greater the
motivation is to achieve it.
Behavioral Economic Principles
Research: Buy 10 coffees – get one free!
10 coffee punch card
Average 15.6 days
12 coffee punch card
with 2 pre-punched
Average 12.7 days
Ran Kivetz, 2006
Illusionary goal progress – Goal motivation increases even when
the progress towards the goal is illusionary.

8. Applying Principles
Goal gradient theory
Illusionary goal progress

9. Behavioral Economic Principles
Loss aversion: People have a tendency to strongly prefer
avoiding losses compared to acquiring equivalent gains. In other
words, people tend to be more motivated to avoid losing $100 than
they are to win $100.
Value
Pleasure
Pain
GainLoss
Kahneman & Amos
The pain of a loss is 2x the
joy of a gain.

10. Behavioral Science Principles
Perceived Fairness – people are highly influenced by a sense of
fairness (or really perceived lack of fairness). This impacts both
behavior and attitude.
“Fairness seems a bit like air – its absence is a lot more noticeable than its
presence.”
Mathew Liebermann, PhD
Research: Ultimatum Game – 2 players split $10. One person makes offer
of split, the other decides yes or no to accept.
How much do you usually have offer for the 2nd person to accept?
≥$3

11. 11
If less than $3 shared – most reject offer
Frans deWall
Behavioral Science Principle
https://www.youtube.com/watch?v=lKhAd0Tyny0

12. Applying Principles
Loss Aversion
Fairness

13. Behavioral Economic Principles
Idiosyncratic fit – When we feel we have a unique advantage in a
program or that a program is tailored specifically to us we are more
motivated. This sense of unique fit to us fuels our desire to perform –
even if the requirements to achieve success are more difficult.
Low cost entry fee
MeanJoiningLikelihood(0-10)
6
5
4
3
2
High cost entry fee
Likelihood of Joining Credit Card Program
Ran Kivetz

14. Self Schema’s – Our behavior is impacted by AND impacts our self-
schema’s (schema’s are our beliefs about how we should behave and
think in certain circumstances).
Congruent Behavior – reinforces and is
reinforced by self-schema
Incongruent Behavior – creates angst to
stop behavior or reassess self-schema
Behavioral Science Principle

15. Applying Principles
Idiosyncratic Fit
Self-Schemas

16. Behavioral Economic Principles
Motivating uncertainty effect – Research shows that in many
instances, we are more motivated to reach a goal with an uncertain
reward than one with a fixed reward. Existing research suggests that
we prefer certainty over uncertainty when deciding if we should opt-in
for a goal. However, uncertainty is more powerful in boosting
motivation enroute to a goal.
Research: Drink a large amount of water in two minutes. Some people were told
they’d receive two dollars, guaranteed, if they completed the challenge. Others were
told they’d receive either one or two dollars, with outcome dictated by a coin toss.
$2
43%
Completed
$2 or $1
70%
Completed
Shen, Fisbach & Hsee

17. Behavioral Economic Principles
Anchoring – People use any information as a reference for
evaluating or estimating an unknown value or new information. When
anchoring, people base decisions on events or values known to them
(or that have been primed), even though these facts may have no
bearing on the actual event or value.
Research: Estimate the price of a wireless keyboard after writing down the last
two digits of your social security number – expressed as dollars (i.e., if your
SSN ended in 74, you would write down $74).
The top 20% bid an average of $56 for the cordless keyboard;
the bottom 20% bid an average of $16.
$56 $16
Top 20% Bottom 20%
Dan Ariely

18. Behavioral Economic Principles
Reference Point – What you expect to pay for something
changes the value that you receive - based on the price you pay.
If you expect to pay a higher amount than you do, the actual
pleasure you receive from the purchase goes up. The corollary is
also true.
Research: How much would you pay for a beer on a hot day at the beach?
Two options were presented as the only place to get beer: fancy hotel or run
down convenient store.
Same beer, same desire, but willing to pay two different prices.
NOTE – friend was going to get beer – so no value is associated with location.
$7.25 $4.10
Fancy Hotel Convenient Store
$
$
Richard Thaler

19. Applying Principles
Motivating Uncertainty
Anchoring
Reference Point

20. Behavioral Economic Principles
Say/Do problem – What we say motivates us and what actually
motivates us are often different. When we “say” what motivates us –
we rationalize and need to ensure alignment with social norms and
self identity (e.g., injunctive vs descriptive norms).
“Choice and the decision to take action are separate psychological
transactions.”
Scott Jeffrey, Ph.D.
Group Survey
“I would prefer to receive the cash value of
the prize rather than the prize itself”
Strongly Disagree Strongly Agree
9% 9%
18%
13% 13%
36%
Cash Non-Monetary
14%
39%
Actual Performance Lift

21. Behavioral Science Principles
Hedonic motivation – hedonic (luxurious) awards are more
motivating than equivalent cash or other rewards. These types of
awards do not result in “indulgence guilt”, they fulfill our desire for
pleasure, and are perceived as being more valuable than their
economic cost.

22. Applying Principles
Say/Do Problem
Hedonic Motivation
vs

23. Behavioral Economic Principles
Decoy effect – Preferences for items change when a third option that
is asymmetrically dominated (closer to one option than the other) is
presented.
Research: Economist magazine subscription costs?
$59 Digital
Only
16%
0%
84%
68%
32%
3 Options
$125 Print
Only
$125 Print
& Digital
$59 Digital
Only
$125 Print
& Digital
2 Options
Dan Ariely

24. Behavioral Economic Principles
Percent that registered before deadline
Framing – People react differently to a particular choice or option
based on how it is presented (e.g., loss or gain, certainty or uncertain,
etc…).
Penalty
93%
67%
Discount
Research: Framing of early registration discount as a penalty or discount?

25. Behavioral Economic Principles
Choice Architecture – the design of different ways that choices can
be made to people and the impact that design has on decisions and
subsequent behavior (e.g., opt-in vs. default behavior / easy vs. hard).
A more subtle way of choice architecture? Blue versus Grey.

26. Applying Principles
Decoy Effect
Framing
Choice Architecture

27. Behavioral Economic Principles
Social proof (the bandwagon effect) – Tendency of people to
assume the actions of others reflect the correct behavior in a given
situation. People are more likely to take action or behave in a
specific manner if they see others doing the same thing.
A
B
C
Research: Which line matches the test line?
75% of participants
conformed to the majority
view at least once, even
when it was clearly incorrect.
Solomon Asch
Test Line

28. Behavioral Science Principles
Cognitive Overload – Our short-term memory can only process a
limited amount of information. Too much information in too short of
period results in information being discarded and memory/processing
shutting down.
Research: How information is presented can have significant impact on
comprehension, processing and retention.

29. Applying Principles
Social Proof
Cognitive Load

30. Summary of Principles
• Goal Gradient Theory
• Illusionary Goal Progress
• Loss Aversion
• Endowment Effect
• Fairness Principle
• Idiosyncratic Fit
• Self-Schema’s
• Motivating Uncertainty Effect
• Anchoring
• Reference Point
• Say – Do Gap
• Decoy Effect
• Hedonic Motivation
• Choice Architecture / Framing
• Social Proof

31. Implications for reward professionals
Incentive Design
• Set milestone goals
• Incorporate fast start programs
• Leverage loss aversion
• Focus on fairness
• Customize to individuals
• Utilize lotteries (after their enrolled)
• Anchor desired performance
• Enhance with hedonic motivators
Incentive Communication
• Frame communications accordingly
– Gain vs. Loss
– Normative vs. Descriptive
– Present vs. Future
• Graphically drive behaviors
• Use testimonials/numbers to drive
social proof
• Communicate optimal performance
to anchor it in
• Add in decoy option

32. Warning!
If people feel that they are being
manipulated they will revolt!
If you can do something, doesn’t always
mean you should.

33. Motivational Theories

34. Extrinsic Intrinsic
External & Internal
Locus of motivation

35. Maslow
Hierarchy of Needs
Physiological Needs
Air, Water, Food, Sleep, etc.
Safety Needs
Shelter, Job, Retirement, etc…
Love & Belonging
Family, Friends, Partners
Self
Esteem
Freedom, Dignity,
Achievement

36. McClelland
Needs Based
N-Ach
- Need for
achievement
N-Pow
- Need for
authority and
power
N-Affil
- Need for
affiliation
People tend to fall into one of three types of personalities – each
driven by different needs (but we shift between all of them)

37. Locke & Latham
Goal Setting Model
Set Goals
- Specific
- Measureable
- Challenging
Goal
Commitment
- Belief that goal is
attainable
- Worth the effort
Action Planning
- Have the skill and
knowledge
- Timeline
Goals drive significant motivation. Effective goals have three main
components.

38. Deci & Ryan
Self Determination Theory
Autonomy
Urge to be causal
agents of one's own
life and act in
harmony with one's
integrated self
Competence
Seek to control the
outcome and
experience mastery
Relatedness
Need to interact, be
connected to, and
experience caring for
others
SDT

39. The Four Drive
Model of Employee
Motivation
Lawrence & Nohria, 2002

40. 4 Drive
Model
of Employee
Motivation
Acquire & Achieve
Driven to acquire things,
resources, pleasures and status
Bond & Belong
Driven to create positive
relationships, engage, and “fit in”
Create & Challenge
Driven to attain mastery, learn,
improve and create
Define & Defend
Driven to defend status, ideas,
relationships and define purpose
Based off of Nohria and Lawrence

41. 4-DRIVE MODEL OF MOTIVATION APPLICATION
Acquire & Achieve: Driven to acquire things, resources,
pleasures and status.
 Establish very clear link between performance and reward; utilize
achievement components – such as status, recognition, special
privileges
 Use hedonic rewards
 Ensure timely payout of rewards
 Individualize rewards as much as possible

42. 4-DRIVE MODEL OF MOTIVATION APPLICATION
Bond & Belong: Driven to create positive relationships, engage,
and “fit in.”
 Reward team efforts or performance
 Utilize peer-to-peer recognition components
 Create team contests
 Utilize manager discretionary budgets for team based awards and
events
 Understand need to bond with others and try not to have other
incentive elements that contradict this

43. 4-DRIVE MODEL OF MOTIVATION APPLICATION
Create & Challenge: Driven to attain mastery, learn, improve and
create.
• Set achievable but realistic stretch goals
• Provide opportunities for individuals to choose own goals
• Build in learning/educational thresholds for earnings
• Create cross-training opportunities

44. 4-DRIVE MODEL OF MOTIVATION APPLICATION
Define & Defend: Driven to defend status, ideas, relationships
and define purpose.
 Relate incentives to corporate mission and vision
 Communication focus on big picture connections and why
 Be transparent with information (both good and bad) to foster trust
and pride
 Provide specific contests/awards that focus on larger purpose goal
of company
 Include customer testimonials in your communications

45. THANK YOU!
Kurt Nelson, PhD.
kurt@lanterngroup.com
www.linkedin.com/in/kurtwnelson