‘Payday Proximity’ Means Employee Benefit Takeup

August 30, 2010 (PLANSPONSOR.com) – Employers struggling with anemic takeup rates for workplace benefits programs may just need to pick the right time to announce it, a new academic study suggests.

A University of Utah news release said that was one conclusion of research into the effects on consumer behavior of “payday proximity” – how far away in time one is in relation to the last payday.  According to the news release, University of Utah marketing professors Himanshu and Arul Mishra found that “payday proximity” changes consumer motives, response to messages, and purchase behavior.

According to the announcement, consumers react most readily to “promotion-focused” buying messages for products and services that make their lives better but more readily accept “prevention-focused” messages for items preserving their current living standard once time has passed since the last payroll.

So, word of a companywide exercise program would attract more participants closer to payday since it is promotion focused, with participants working toward improving their lifestyle.  On the other hand, an eat-healthy initiative would be more successfully promoted further from payday since it is prevention-focused with emphasis on avoiding certain foods to maintain a lifestyle.

“Our findings are surprising because previous research has always considered preferences to be relatively stable, not changing much over time,” said Himanshu Mishra, in the news release. “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.”

‘Aspired to’ and ‘Ought to’ Purchases 

The study was done in two segments.  In the first, 61 participants – all with full-time jobs – were asked to document their buying choices over a month-long period, categorizing purchases as things they “aspired” to buy or “ought” to buy.  In the second segment, they asked 152 participants to choose between a series of identically priced and sized products. The snack choice, for example, was chocolate cake (promotion focused) or fruit salad (prevention focused).

According to the news release, the researchers found that the proportion of “aspired” products declined and the proportion of “ought” products increased as participants got further away from their paychecks.  The team also demonstrated that these results were not related to declining checking account balances during the month or to product prices.

Although participants ranged in age from 21 to 45, their ages made no discernable difference, Mishra says. Similarly irrelevant were family size and the presence of children.

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