Episode BAM011: “Money Motivation and Re-framing the Decision to Pay”

By Posted in - Podcasts on December 26th, 2016 0 Comments

Brick and Motor Podcast, Bobby Cheeseman

Show Notes

We have thought for a long time that money is the number one motivator in getting people to do what we want them to. Pay them more and they will work harder and produce more. But really that’s an incredibly simplistic view of how we as human beings view labor.  If we think about body building for example, what is it that motivates someone to be a body builder? Is it the money they are paid to train and go from 160 lbs to 230lbs of lean muscle? No. Aspiring body builders don’t get paid to train until they have already achieved a certain size or status in the industry.  In fact most body builders agree you have to reach a certain size before you will be able to pick up any sponsors or you have to place first in several IFBB competitions before you can obtain an IFBB pro card.  These efforts come at an extreme cost and most body builders never reach that level.  Many sacrifice time with friends and family, put off saving for their future, and spend hours of their daily life in a gym.  They invest thousands of dollars into their bodies through supplements legal and illegal to reach the size they desire.  The process is painful.  They lift until it hurts, stretch until it hurts and then come back the next day and do it all over again.  Some even die from the stress on their body.   So if they aren’t being paid, and may never be paid and are having to pay a lot to achieve this goal, what’s driving them?  The answer is that people are motivated by several things and when it comes to hard tasks that take years to accomplish, money falls on its face as a motivator long term. They do it for status or importance, they do it to have purpose, for their life to have a meaning, to secure a role in the social structure of their world. They care about fight, the challenge, reaching the peak.   Along the path they experience depression, demotivation and all kinds of other base human emotions.  They question if they really want to keep going.  Is it really worth it? Will anyone care? Do I have what it takes? And you would think that after they reached the competition and achieved their goal, you would think they would say to themselves, no way I’ll do that again.  It was too painful, too hard and not worth it.  But they don’t.  After their body recovers, they keep going and do it all over again.  This tells us a lot about motivation and human nature.

Similarly when we think about why someone buys a car, money is a great motivation.  The car is a good deal compared to the market, or they need it to go to work and earn for their family. They need it to live their lives they built.   But after the initial purchase what keeps them paying their payment?  What makes them stop? And how can we fix it? The answer lies in the motivation.  What are the top reasons someone quits paying? Over bought, they didn’t realize they couldn’t handle the fluctuations in their budget and they ran out of money.  Insurance rates went up.  Lost a job.  Unforeseen life circumstances.  A family member gave them a car and now they don’t need the one they owe on.  And of course the number one reason is, the car broke down.  Probably the top two would be they lost a job or the car broke.  And you and I both know if the car is broke inside of  a buy here pay here finance situation, they aren’t paying.  So how do we get them to feel a greater sense of ownership over the situation? WE would probably all agree that an owner and a renter treat the house the car or whatever they are renting or buying with an ownership position differently.

We’ve figured out ways to solve some of these problems through texting notices, scheduled auto debits, phone notifications a day or two ahead of time, selling service contract and warranties.  But what else can we do to motivate the ones that just don’t pay.  There’s nothing wrong with the car, they just don’t want to pay.  How can we have our vehicle be more important in their life.  And what motivators should we use to accomplish this?

Dan Areilly from Duke University did an interesting experiment that he shared in a talk he gave at Ford’s annual confrence, Further with Ford.  He went to a slum in Kenya to do reaserch on how they could get people in impoverished situations to save for their future and their childrens future.  I would say that getting someone to save for the future is harder than getting someone to pay for a car they use.  Especially when the Kenyans make about $10 week.  They tried several things but settled on 8 different scenerios to try to give a good view of the way people see money and what motivates them.  First you have to understand the problem.  Short term lending or as we know it, Payday lending, is a problem in Kenya.  The interest rates accrue daily and with limited resources , most familys get into debt they will never recover from if they have and unforsene event happen.   Most family’s will have a goat or a cow or donkey that helps them work their field or provides milk for the family. This accounts for about 25% of their income.   If the animal gets sick, they have to buy medicine for the animal.  They dont have the extra money.   The animal may not be able to work for 2-3 weeks and thus the cycle begins.  They borrow money at about 10% interest a week and unless they pay it back quickly the interest overtakes them and they end up never being able to pay more than the minimum payment. So Dan and his team wanted to solve this problem.  The villagers couldn’t carry the money with them or they would spend it so they wanted it to be out of reach or not easy to get their hands on.  In Kenya cell phones are used like debit cards.  They teamed up wuth Impesa a payment processing company in Kenya.  And an investment bank that would create deposit acounts for them.  With this system they could text money into their account but if they wated it back, there was a stack of forms they had to fill out and they would have to ride the bus 2-3 hrs to town to go withdraw they money.  So these are the bariers to getting the money back.  It neede to be dificult or at least require more thougt and consideration before taking it out while at the same time it needed to be very easy to put it in.  In a ddition to that system they wanted to have several ways to encourage people to save.  So in the first scenrio , some people just got the savings system, no motivation other than the interest their account would make while on deposit.  In the second scenerio, they got the same system but they would also recieve a weekly text that would say, “try to save 100 schillings which is equal to 90 cents this week” .  Another group got the same text message but in this case it appeared to come from their children.  ” hey mom, hey dad , this is Johnny, try to save 100 schillings for us this week.”  Another group got a 10% match.  if they saved 10% at the end of the week, they would match it with another 10%.  Another group got a 20% match.  Another group got the same 20% match but they would start the week with the match but if the person didn’t save 20% they would take it back.  Another group was the same but at 10%. These were done under the idea of loss avertion.  Loss aversion is the idea that we as human beings multiply the loss of a thing to be twice as bad as gaining that same thing.     the last group had a coin/token that had on it marks that represented the 24 weeks of the experiment.  And each week they saved, they would mark the coin to show they had saved.  they asked that they put the coin somewhere it would be visible in their hut and each week they saved they would take a knife and scratch out the week that represented the week they saved.  So which of these examples do you think worked the best?

First the addition of a savings mechanism by itself increased their success rate wonderfuly.  Just having a way to save increased the saving behaviour.

In the second scenerio, Adding just a plain text helped.  Just a reminder was helpful.  Adding the text from kids increased the participation even more.   Ten percent at the end of the week, helped more.  20 % at the end of the week, just like 10%.  No difference.  More money didn’t matter. !0% at the beginning of the week helped some more.  20% at the beginning of the week, no difference.  Just like 10%.  The kids scnerio were just like the 10 and 20 % at the beginning of the week so just adding the kid motivation helped just like paying them ahead of time.  How do you think the coin did? It was a big surprise.  It doubled savings compared to everything else.  And the question is why? Why do you think this mechanism changed the behavior better than anything else? Involvement is one theory. Actually having to scratch the wek off. Seeing progess was another.  Whats funny is that they tried to get the coins back from the people but they had a hard time getting them. People loved them. Streaks wer another answer.  When you start a thing you want to keep it going.  Seeing the days marked off on the calendar etc.  The pleasure of checking something off a to do list.  another was others seeing the progress.  The family could see it so the person doing the saving could garner some sort of intangible praise or appreciatin fom the family.  The good feelings of doing something good for the family.

In another study they did on college savings accounts was that they showed that kids with collage savings accounts that had been opened for them performed better in school by about 20% than kids without them.  Now why do you think this is? Are the kids just smarter? Do the parents just have good genes? No.  The answer is in the xpectation.  Kids with collage savings account perform bettter because the parents expect more.  They have plans for their children to go to collage.  It’s expected that they perform well.  These kids get tutoring, afterschool programs, sports involvement, boy scout, girl scouts.  The behaviour and performance of the kids is improved because the behaviour of the parents is improved.

Motivation is about using all the leverage available to get someone to do what you want them to.

Look to the counterintuitive and creative answer first before inputting a monetary solution.

There are two ways to motivate. In psychology they are basically referred to as Carrots or sticks.

You either entice them with a carrot to get them to do what you want them to do or you beat them with a stick to make them do it. A carrot example would be 20% off your next purchase. And the stick would be if you don’t pay your payment there will be a late fee. Both of these are effective solutions in the right context.

My dad must have thought I hated carrots because he always seemed to want to apply the stick more than the carrot solution.  In fact i remember one very clear stick solution he used when I informed him that it was ridiculous for me to use an electric weed eater to trim the drainage ditch in our yard.  of course my logic was simple.  The ditch was about 300 feet long and our lot was bout two acres.  I shared with him that It made much more sense to own gas weed eater that wouldn’t require the user to stretch four extension cords from our house to the edge of the ditch to make sure it was all trimmed properly. After I explained my solution with a little frustration in my voice, my dad responded calmly, “Ok, you don’t have to use the electric weed eater any more.”   A weird feeling of excitement and fear came over me.  You see, I had made this argument before about other inconsistencies I had noticed about the way in which he requested my chores be accomplished and I had never seen the man react so calmly after I had spoken my peace.  The next thing he said was, “Come with me.” So reluctantly I followed him into the house and into the kitchen where he opened a drawer, reached in and pulled out the new tool he suggested I use to finish the trimming.  I don’t know if you know how long it takes to trim a ditch with a pair of Fiskar brand scissors but I’ll tell you it takes about 6 hours. My process of course included some moments of talking to god about what dad was making me do and what exactly I thought about it.  Maybe someone in a better frame of mind than I would only take 5 and half.

You have to study how the person interacts with the product , the problems they have and the problems you have and then discover if this really is a carrot or stick type problem.

For example in the uk their  public transit system was trying to solve a problem of overloaded trains at rush hour.  They had underground trains and overground trains available but they couldn’t get anyone to use the overground trains. They thought it was because the trains were a part of the old rail system and people just preferred to use the new rail system. So what did the engineers charged with solving the problem do? They approached the problem as a numbers problem.  x number of trains, x number of passengers using the trains between 5-8 am and 4-6pm.  solve for x.   So They figured out how to increase the number of scheduled trains. That’s a numbers solution. It didn’t work. Then someone had the good sense to call a marketing company and ask them how THEY could solve the problem of people not using the old train line. So they looked at the problem and then one of the creative marketers asked, ” where is the map of the trains located?  ”   You see they had one map of the underground train and a separate map of the above ground train. The problem wasn’t that people didn’t want to use the overground train.   it was that it wasn’t on the underground map. People didn’t know it was available. They weren’t aware that it would take them to the same destination as the underground train.  By laying the two maps on top of each other and letting people know that both were available for use and would serve the same function, the usage went up 400% in the space of four weeks and the problem of overcrowding was solved. And they did it all without spending the enormous amount of money and without creating a logistical nightmare that the engineers had proposed to increase frequency of the trains.

The marketing solution cost a fraction of the engineering solution and took less time. The way to come up with these solutions is to look at the problem from a different angle. An engineers  perspective is always to solve the problem with equations.  The numbers solution never steps back and takes a look at the experience.  Because experience can’t be measured.  The math is too hard and most times people can’t explain why they do what they do.

The point here is that there are extraordinary problems that can be solved with tiny interventions that are simply just brain hacks.

Our logical minds try to solve problems of objective reality when we should be trying to solve the problem of perspective. How someone sees what we’re selling.

A large portion of the success of the Dyson  vacuum is attributed not to its superior suction power but to the clear canister that collects the dirt. The fact that you can see your progress immediately as you perform the labor it lends to the effort vs reward system we all have in our minds. Probably that portion of the development of the vacuum came from its grandfather the rainbow carpet cleaner that had a water collection system where you could almost immediately see the dirt being collected in the canister. The fact someone can see the progress as they are performing the labor, it makes the labor somehow more worth the effort.

Cognitive Reframing according to wikipedia is defined as, is a psychological technique that consists of identifying and then disputing irrational or maladaptive thoughts. Reframing is a way of viewing and experiencing events, ideas, concepts and emotions to find more positive alternatives.  If you can reframe a perceptually negative thing as a positive. You can essentially manufacture happiness where despair or distain previously existed.

I’ll tell you a story of how this took place in a real world scenario.  King Fredrick the 2nd of Prussia had a problem in the 1700’s.  He had a food shortage in the land.  He had people going hungry and he was looking for ways to solve the problem.  HE had heard of this amazing food in south america called the potato.  So he brought it to Prussia and began to grow it.  It flourished in the soil.  He began to share it with his people and the people, being resentful towards their king for his oppression, refused to eat it.  He tried everything to entice them to eat it and still no participation.   They would rather starve than eat what the king commanded them to.  So instead of using force to solve the problem, he backed away and thought of another solution.  He deemed the potato a royal food and said that only royalty could consume it.  He collected all the potatoes and put them in the royal garden and posted guards around it to guard it day and night.  But he gave secret instructions to the guards not to guard it too well.  If you know anything about peasant life in Prussia in the 1700’s you know one thing.  Anything worth guarding is worth stealing.  The result was that it piqued the interest of the peasants, they stole the potatoes from the royal garden and began a massive underground market for the potato throughout Prussia.  What King Fredrick had done was essentially rebranded the potato. He took something no one wanted and created intangible value with it and got the outcome he wanted.

So what lesson can we learn from the potato king?

For instance , people making their payment. Instead of simply taking their payment and giving them a receipt , give them a countdown number that shows their remaining number of payments until they own the car. 23 payments to go. 22 payments to go.  21 payments to go. Or show them a % of ownership example. You now own 23% of your car. Giving someone a sense of reinforced ownership or a countdown clock to being finished with payments will help with the pain of paying. Or including a smiley face on their receipt.  The effect of a smiley face on our mood and the things related to it by association increases our perceptual experience with that thing.  Think of the teacher that would stamp a smiley face on your book report when you were in school after she graded it.  How did that make you feel? What level of happiness did you have when that happened? and what are your feelings about that teacher even today? Those emotions never leave us and this doesn’t only work with children.  It works on you and I every day.  Words of encouragement and appreciation and yes smiley faces are cheap or free and they go further than beating someone with a stick.  Large corporations like GOOGLE know this and have the resources to employ what they call chief experience officer.  They measure how people act and react with their products and services that the company puts out. Maybe we don’t have the resources to employ someone full time but maybe it’s time we make the effort to do this ourselves.   We want better payers.  We want better buyers.  So maybe we should start looking harder at what motivates them so we can stop spending so much money and time on skip tracing, repossession agents and floor plan fees when the people don’t do what they agreed in the beginning to do.  We will retain more of our hard earned money and we will have a better customer experience which will inevitably lead to more referrals and more sales.  Maybe for us to get what we want we need to give more thought to how to serve our customer better.

Next week we’ll talk about the pain of paying.  How our customer interacts in their life with the bills they have to pay and where we are on that list of importance.

As always I want to leave you with a blessing because I sincerely believe that we all can work to learn from each other and grow and if we choose to do it, we’ll make our industry better because we will be better people.  So may the road rise up to meet you, may the wind always be at your back.  May the sun shine warm upon your face and the rain fall soft upon your fields.  And until we meet again may God hold you in the palm of his hand.

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