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November 15, 2010
Marketing Study Yields Lesson for Employee Benefits

Researchers at the University of Utah discovered something interesting: the closer we are to payday, the more likely we are to spend money. Seems like an obvious statement. But according to marketing professors Himanshu and Arul Mishra, this is actually a new thought. “Our findings are surprising because previous research has always considered preferences to be relatively stable, not changing much over time, said Himanshu Mishra. “We find that not only do preferences change during such a short duration – paycheck to paycheck, but also that they fluctuate between a promotion and a prevention focus.”

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Recently paid consumers tend to purchase items that make their lives better, according to the researchers, who refer to this kind of purchase as “promotion-focused.” As people get further away from a payday, their purchases lean more toward items that preserve their standard of living, or “prevention-focused.”

“As time goes by and your paycheck is almost spent, you want to maintain your status quo,” Himanshu Mishra says. These lessons are, of course, applicable to companies that market products. The study authors say companies would do well to advertise new products early in the month, when customers are more likely to have just been paid. However, products focused on prevention, like toothpaste, could benefit from a later launch.

Interesting, but how do these ideas affect you? As has been shown through other studies, marketing principles can be applied to employee benefits. Employers trying to promote certain employee programs may have greater success by timing their message appropriately.

For example, a company-wide exercise program would attract more participants closer to payday since it is promotion focused, with participants working toward improving their lifestyle. An eat-healthy initiative would be more successfully promoted further from payday since it is prevention-focused, with emphasis on avoiding certain foods in order to maintain good health. “Those messages will have more influence then, because people are more in that state of mind,” says Mishra.

Mishra says he believes the trends in this study could become even more pronounced as the current economic downturn continues, and a higher percentage of Americans find themselves living paycheck to paycheck. “We do believe that when people are more reliant on receipt of a paycheck, we will see a stronger effect emerging.”

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