Learning from the lab: Using social norms to change saving and spending behaviors
- Interventions
- Social norms
- Experiment Type
- Lab Learning
- Goals
- Spend less
- Outcomes
- Increase short-term savings
- Focus Areas
- Lab Research
- Behavioral Concepts
- Framing Descriptive social norms
What Happened
It is unclear. In saving frame, when given social comparisons, they anticipated higher savings success. In spending frame, people who were told others spend a little less then them actually backfired, leading to less savings tips taken. Although, this was only tested as a survey and desired to find intent to save. There is a need and desire to test a similar experiment in the field where actual spendings/ savings can take place.
Lessons Learned
Seems like social comparisons could be an effective strategy to reduce fast-food consumption when the prompt is framed as savings. Also, if framed as spending, seems that it may less effective to compare people to those who spend a little less than them, as this may backfire and lead to the person to select fewer savings tips.
Background
Many industries compare one person’s behavior to their peers to encourage or discourage specific behaviors. For instance, showing people that they use more energy than their neighbors can lead to a significant decrease in energy usage in subsequent months. In the financial domain, many institutions have used these ‘social norms’ as a means to increase retirement savings: telling individuals what others like them are saving can increase the individuals’ savings rates to be closer to their peers’. However, sometimes peer comparisons in retirement savings can also backfire, as shown in research by Beshears et al. While there is academic research and evidence from the field that using social norms can change behavior, and that increased similarity between people and their peers increases the effect of the social norms, there is still a gap in our understanding of what specific social comparisons influence behavior.
To investigate this, we ran an online study with different social norm aspects regarding spending and saving habits and asked people about their anticipated use of specific tips to help decrease fast-food spending and increase their savings. Here, we examined whether comparing people on location, age, or income (people who live in the same zip code, are the same age, and earn the same amount of money, respectively) and behavior (save a little or a lot more; spend a little or a lot less) affects how people predict they would change their saving and spending behaviors.
Key Insights
In this study, we tested whether different aspects of comparisons to peers will influence the number of saving and spending habits people predict they would use. For example, will people be more willing to try new habits if they are told that they are more similar in age and income compared to similar in location? Will people be more willing to try new habits if their peers spend a lot less than they do, compared to a little less than they do? Here, we explored the following key questions:
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Do any specific social comparisons affect predicted saving and spending behavior more than others?
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Does increased similarity (more comparisons) increase the number of saving and spending behaviors compared to decreased similarity (fewer comparisons)?
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Are people more willing to take up behaviors if their peers save a lot more/spend a lot less compared to if their peers save a little more/spend a little less?
Experiment
We ran an online study across approximately 3,500 people in which participants were told to imagine that they had recently downloaded a new mobile phone app that was designed to help them manage their money, and give tips on how to spend less/save more. The study also told them that the app is very popular across the US and already has over one million users.
Participants were then randomized to one of 14 conditions that compared their financial behavior to their peers or to a control condition that didn’t have any social comparison. The treatment conditions varied by social comparison (all of the seven permutations of age, income, and location), distance from desired behavior ($27/$257 from specific save/spend behavior), and frame (spend or save).
Participants were then given a number of different tips to save money or reduce spending, and asked to select all of the ones they would try in the following week, and predict how successful they would be at increasing their savings or decreasing their spending.
Results
We examined whether the type and number of social comparison aspects affected the number of tips people predicted they would use and their anticipated success at increasing their savings or decreasing their spending.
In the saving frame, we found no effect of the type or number of social comparisons or of the distance in comparison (your peers were very different or only a little different from you) on the number of tips people predicted they would try. We did find a significant effect of the number of social comparisons and the distance on predicted success in saving more: people who were given a social comparison predicted they would be more successful than those who were not given any comparison (in the control group).
In the spending frame, we found no effect of the type or number of social comparisons on the number of tips people predicted they would try. However, there was an effect of the distance in comparison (your peers were very different or only a little different from you): people who were told that their peers only spent a little less than them selected fewer savings tips than both the control and the group who were told their peers spend a lot less than they do. We did not find any effect on predicted success of curbing spending behaviors.
Because this was an online research study involving hypothetical behaviors, we hope to implement social norms references in our field research to establish whether different comparisons and distances affect real-world spending and saving behavior.