“If all your friends jumped into a lake, would you?” How many have heard some variation of this parental warning against peer pressure?
The fact is, communities, nations and entire societies have used social norming — aka, peer pressure — to create and maintain a common set of shared values. Think of it as bullying on a much grander (and much more socially acceptable) scale. For all the badmouthing of “bullying,” it remains the most effective way to motivate behavior.
Robert Cialdini calls it “social proof.” It's a sense that the more people do something, the more acceptable it becomes. His research focused on an infamous example of behavioral modification that failed.
In attempting to reduce theft, Petrified Forest National Park officials posted a sign that read “Your heritage is being vandalized every day by theft losses of petrified wood of 14 tons a year, mostly a small piece at a time.” The wording backfired. Not only did the sign suggest it was socially acceptable to steal wood (after all, 14 tons are stolen every year), but it also told the reader exactly how to do it (“a small piece at a time”).
It isn't about how to eliminate peer pressure, but how to make positive use of it. In the case of the Petrified Forest, Cialdini reframed the discussion. He changed the signs to read: “Please don't remove the petrified wood from the park, in order to preserve the natural state of the Petrified Forest.” By changed the social norm from “stealing” to “preserving,” he used a subtle form of peer pressure to induce good behavior.
If we've learned anything from behavioral finance research, it's that attaining a comfortable retirement has more to do with good behavior than making astute investment decisions.
Any number of tools, tricks and techniques have been employed to attempt to increase employee saving. With more people in defined contribution plans, it's critical that we engage in systematic ways to “nudge” people towards proper behavior.
One such method is called “social norms marketing” or peer-pressure. You might be surprised by the results of an experiment to test the effectiveness of this method.
Peer pressure is like sales leader boards. If you're not at the top, the leaderboard motivates you to work harder to move up in the standings. If you are at the top, you're motivated to stay ahead of whoever is nipping at your heels.
Except it doesn't work that way when it comes to retirement saving. Behavioral finance researchers found that the group of employees they thought would be most likely influenced by peer pressure actually became less likely when exposed to peer pressure. And in the other groups, peer pressure had no significant impact at all.
Sometimes it's as helpful to know what doesn't work as it is to know what does work. Many behavioral strategies may work to push people into making beneficial decisions, but it doesn't appear that peer pressure is one of them.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
