Incentives are powerful tools that can lead to the adoption of new behaviours, fostering what is referred to as a “habitual stock” of behaviour. This concept posits that repeated actions, underpinned by rewards, can eventually transform into self-sustaining habits. For instance, when individuals receive rewards for visiting the gym, their external motivation is heightened, propelling them towards regular gym visits. Initially, the gym might be an unpleasant chore, but over time, as discomfort wanes and pleasure in the activity grows, the behaviour can solidify into a habit, persisting even when the rewards cease.

The effectiveness of such incentive-based approaches in promoting exercise is backed by empirical research. Studies demonstrate that, done correctly, incentives (monetary or others) increase initial gym attendance and lead to sustained exercise routines after the incentives are withdrawn. This shift is attributed to the formation of a habit, where the initial extrinsic motivation transitions into intrinsic motivation. But watch out—not all incentives are created equal, and the wrong incentive could backfire and reduce the desired activity.

Making exercise habitual

As a researcher who had extensively explored the potentially detrimental impact of incentives on intrinsic motivation, the idea of using incentives to encourage exercise was intriguing. The concept was further sparked by discussions on whether such strategies could be used without long-term negative effects, such as relying on rewards to motivate children to adopt new behaviours. This led to a field experiment where university students were paid to visit their campus gym for a month. The results were promising, showing a significant increase in gym attendance motivated by the incentives. More importantly, the increased attendance continued even after the monetary rewards ended, suggesting the development of an exercise habit.

However, not all behavioural changes are equally influenced by incentives. Simple, one-time behaviours may be easily modified with rewards, but ingrained habits typically require consistent effort over time. For instance, encouraging children to read might be straightforward, but fostering an ongoing enjoyment of reading is more complex and less likely to be influenced solely by rewards.

Further research, including follow-up studies, aimed to understand the long-term impact of incentives on exercise habits. These studies confirmed that while incentives can effectively kick-start gym attendance, the newly developed habits might wane without ongoing support, especially during extended breaks like school vacations.

What can increase the effectiveness of incentives?

One approach for increasing the effectiveness of incentives is the use of commitment devices. These mechanisms, which involve self-imposed penalties for failing to meet set goals, effectively extend the influence of initial incentives. For example, a person can commit to donate some money to a charity they do not like each time they miss a visit to the gym. By committing to continue exercising, individuals can reinforce their new habits, maintaining exercise routines even after the incentive period ends.

Social influences can also play a critical role in habit formation. Experiments have shown that people are more likely to engage in exercise when they are part of a network of friends who also participate. This social reinforcement can enhance the effectiveness of incentives and help sustain behaviour changes over time. Partnership in exercise can amplify the benefits of incentives. When individuals team up, each partner’s attendance can become contingent on the other’s, creating a shared commitment that significantly boosts the likelihood of consistent gym visits. This collaborative approach not only leverages financial incentives but also harnesses the motivational power of not wanting to let a partner down.

Another example of strategies that can increase the effectiveness of incentives is creating routines. When a person consistently follows a specific pattern of behaviour, they expend less mental effort in continuing that behaviour. Consider your own morning routine: it has likely become a streamlined process over the years due to its regularity. This creates a fluid mental association, making the routine increasingly automatic over time. While previous experiments have successfully used incentives to promote regular gym attendance, the structure of these incentives was relatively flexible—participants needed to visit the gym several times a week to receive financial rewards, but they were not bound to specific times for their workouts. This raises an interesting question: could establishing stricter routines, where gym attendance must occur within certain time frames, lead to more sustained exercise habits than the more flexible incentive models?

In summary, while incentives are a potent starter for new behaviours, their effectiveness can be significantly enhanced and prolonged through additional psychological and social mechanisms. Commitment devices, social networks, and partnerships are pivotal in transforming incentivised behaviours into enduring habits. When designing incentive programmes, it’s beneficial to incorporate these elements to maximise the sustainability of the desired behaviours.

Maybe most importantly, when you design an incentive scheme, make sure to test it first. Not all incentives are created equal, and what works in one case might be different than your current needs. Simply use some form of informative A/B testing as part of the introduction of your incentives.

This piece is based on Chapter 17 of ‘Mixed Signals: How Incentives Really Work’ authored by Professor Uri Gneezy.

Professor Uri Gneezy is the Epstein/Atkinson Endowed Chair in Behavioural Economics and Professor of Economics and Strategy at the Rady School of Management at the University of California, San Diego. His research focuses on putting behavioural economics to work in the real world and includes incentives-based interventions, behavioural health economics, gendered reaction to incentives, and how incentives affect deception and ethical behaviours. Professor Gneezy is currently a Visiting Professor at BISI where he will explore how to apply his expertise in behavioural health economics to enhance health outcomes in Singapore, with a specific focus on the role of incentives.