Down With Carrots And Sticks
In his recent book, Drive, author Daniel Pink delves into decades of research about what motivates people and exposes a large discrepancy between what the social sciences have revealed as most effective and the practices actually used by most businesses. Companies still use financial rewards and punitive measures, also known as carrots and sticks, as they attempt to coax the best performance out of their employees, even though research proves this is not the best approach. In fact, it may be the very worst thing to do, as many studies show that these approaches will dampen performance on the types of complex tasks and problem-solving that are so necessary for most non-manufacturing jobs in the modern economy.
Now, you can hardly blame companies for their confusion. While almost forty years of research proves that carrots and sticks aren’t motivating, most people will tell you that salary is an incredibly important consideration in making their employment choices and in staying with an employer. Everyone believes that it matters because it’s the right answer to say that it does. Only a fool would say anything different, we think! But Pink cites study after study and example after example that illustrate very persuasively that this is not the case.
Price Is Another Motivator We Often Misunderstand
My purpose in writing, however, is not to talk about employee compensation. While the implications of Pink’s work for how companies motivate their workers are obvious, I’ve been thinking about this idea on a totally different level. Just as we believe far too often that pay is what best motivates employees, much of the business world also tends to overestimate the importance of price in motivating consumers, and some of Pink’s arguments are helping me to consider this old finding in a new way.
Saying you want a higher salary is the “right answer,” when it comes to compensation, and in the same way, saying that you want a lower price is the right answer when it comes to buying goods and services. We’ve seen this for a long time in our work at Brandtrust®, and we know it’s because neither situation is really about dollars and cents, but rather about how each of these circumstances make you feel.
Autonomy, Mastery and Purpose
Pink establishes the argument that giving people autonomy, mastery and purpose are much more important to coaxing out their best performance than money, once certain base levels of fairness vs. their peers and their industry are satisfied. We’ve consistently seen the same phenomenon in the way consumers make purchasing and brand decisions. People need to see that products and services are worth the price being charged for them and that they have the same access to a fair price as others. But once those baseline conditions are met, we see all kinds of irrational consumer choices where the market leader is not the lowest priced entrant in most categories, even when product quality is equal, and where purely rational and economic analyses just don’t explain purchasing behavior. In other words, the market data tells us that price alone isn’t the critical motivation behind most consumer decisions. (See our earlier blog post for more on the topic of pricing.)
Irrational Exuberance
Consumers don’t act rationally. They make purchasing decisions based on how those decisions make them feel. If I need to save money when buying my children’s back-to-school clothes, I might go to Target and not K-Mart because I feel my children will be more stylish and I am being savvy, rather than cheap. Even if I don’t need to save money on new school clothes, I might still go to Target because I feel clever for spending less money to buy such cute things for the tikes to wear. On the other hand, I might also buy them a few things at a specialty store in town that is much higher priced. I tell myself it’s because I want better quality for certain items but it’s really because I like being able to shop there.
Perhaps using a mix of shopping strategies makes me feel more in control (that sounds like autonomy). Some people love to buy at thrift and re-sale shops because they feel as though they’ve used specialized skills to hunt out a bargain. It’s certainly why I love excavating for fabulous deals at stores that others find to be too much work, like TJ Maxx or Marshall’s (mastery, anyone?). And I have friends who buy all organic food at stores like Whole Foods, though they know it costs more, while my family uses the supermarket chain that donates a percentage of our purchases to our kids’ school (those both sound like purpose, for sure!).
All of this behavior is definitely not very rational, but it is completely in tune with the idea that I am motivated by how my purchases make me feel. I sense that the underlying motivations behind consumer decisions such as these correspond to Pink’s categories of autonomy, mastery and purpose, or at the very least, that there’s a great deal of overlap.
