BMBW Forum: Health and Well-being

High-powered variable compensation schemes can have adverse mental health effects on frontline sales staff

In the first study, titled “Variable Compensation and Salesperson Health,” authors Habel, Alavi and Linsenmayer explore the impact of variable compensation schemes on the mental and physical health of salespeople. This study was inspired by the growing burnout crisis occurring in Sales teams: 70% of salespeople are found to regularly experience symptoms of burnout in their daily lives due to the pressure to meet ever-growing sales targets. Habel quoted one participant who encapsulated the pressure to sell: “I have to sell, bring money in the door – if I don’t people might lose their jobs. I might lose my job.” Typically, this stress is exacerbated through the use of variable compensation plans – where only a small portion of the salary is fixed, and the remainder varies month to month depending on the individual’s achievements of their sales targets. Logically, this method benefits both the company and the individual: by promising a salesperson compensation share, corporates can motivate them to work harder, in turn improving overall sales performance. However, this model also entails considerable financial uncertainty for salespeople, which can induce stress, burnout and cause other health problems. The research team wanted to test the proposition that there is a ‘dark side’ of variable compensation schemes: could the negative impacts on staff cause issues so detrimental that they decreased overall performance?

 The authors conducted 3 studies to test this proposition. First, they had the unique opportunity to observe an incentive change in a large company. The company amended the compensation in one division from a high-powered variable compensation model, in which 80% of compensation was variable, to a majority fixed model, where only 20% would be variable.  As conventional theory might suggest, sales performance decreased after the incentive change. However, the data also supported the assumption that variable compensation models may affect employee health as the number of sick days taken decreased after the change. This indicates a trade-off between sales performance and health – although the effect of variable compensation schemes on performance is positive, health detriments may impair the positive effects of the scheme. In subsequent studies, the authors found that variable compensation schemes only afflicted mental health in specific circumstances, such as when the level of variability in compensation was above a 30-40% threshold. They also found that certain populations of salespeople were not as afflicted by higher variability and showed no association between increased stress and variable compensation models, such as salespeople with highly stable performance, experienced salespeople, or those embedded in high performing teams or close relationships with leadership.

This has the following implications: first, sales managers have a responsibility to lookout for the potentially harmful effects of variable compensation models in employees. They should also look to empower employees with the social resources to address burnout, and where possible, should consider tailoring compensation plans to individual needs and preferences. Moreover, in screening potential candidates, they should look for the skills and ability to prevent against the harmful influence of variable compensation. Habel also cautioned that as more industries – such as medicine, journalism and academics – increasingly utilize variable compensation schemes, we must ask ourselves what the potentially dangerous health effects are for workers, and how this may affect their quality of work.

Implementing smoke-free restrictions is the most effective counter-marketing tactic to dilute brand strength of big tobacco

Counter-marketing is increasingly used to reduce the consumption of goods that we now recognize are ‘bad’ for us – such as cigarettes. In their study “Investigating the Effects of Excise Taxes, Public Usage Restrictions, and Anti-Smoking Ads across Cigarette Brands”, authors Wang, Lewis and Singh asked whether the counter-marketing mix employed to reduce smoking had a symmetric effect across tobacco brands and explored some of the supply and demand factors shaping these effects. Excise taxes, ‘smoke-free’ restrictions in public and anti-smoking advertisement campaigns were employed as counter-marketing tactics to curb smoking: between 2006-2010 in the USA, there were consistent increases in excises taxes on cigarettes – the largest being a 39c Federal increase in mid-2009 – smoke-free restrictions were widely implemented and anti-smoking ads ran periodically. As a result, we saw average consumption rates halve from 20 packs per month at the beginning of the period, to 10 packs per month in 2010. Despite this dramatic decrease in consumption, the authors found that over the same period, Marlboro’s market share actually increased in each state – prompting them to ask why big tobacco fared better in the face of counter-marketing than their competitors.

On the supply side, the research team asked whether a $1 increase in excise pricing translated into a $1 increase in cigarette pricing – by performing regression analysis with the weekly brand-specific cigarette prices and tax rates, and controlling for brand, store and year, they found that this varied across brands. Marlboro had the lowest pass-through rate, meaning that for every $1 tax increase per pack, they only tacked 92c onto the price per pack – their other competitors ranged between 94c – $1.10 price increases per pack over the same time. The team hypothesized that strong brands (such as Marlboro) have deeper pockets and can absorb the excise increase by cutting their margins to avoid losing significant sales volumes. Pricing is often determined jointly by brands and retailers – in this case, retailers may also be incentivized to reduce pass-through for category leaders to avoid losing overall volume. On the supply side, strong brands are more resilient to tax hikes – one of the more effective methods of counter-marketing.

The authors also explored demand, building a structural model to study the various effects of the three counter-marketing tactics and considered a) whether participants bought cigarettes; b) which brand or set of brands they bought; and c) how many packs of each brand they bought. They found that when the maximum restriction of 100% tax increase was applied, strong brands would remain resilient to taxes due to lower pass-through rates – supporting their finding that excise pricing is the least effective way to reduce consumption of strong brands. However, strong brands experienced more vulnerability when maximum smoke-free restrictions were applied. When we remove the ability to consume the product in public venues, we remove the value of the brand. Strong brands are therefore more affected by implementation of smoke-free venues, where the power of brand associations are lost when the visual element of smoking is removed. Through this study, the authors demonstrate how different components of the counter-marketing mix tackle different parts of the issue – but urge policy makers to consider the strength of market-leader brands within each.  

This study aimed to almost ‘reverse-engineer’ CRM and remove the possibility of the brand acting as a badge, despite the resilience afforded by lower price sensitivity, and has implications for policy, consumer welfare and brand management – within cigarettes and more widely. Lewis highlights that this study can be applicable to many ‘vice’ goods, providing guidance both in terms of policy nudges, but also to brand managers of these goods. Although this study was undertaken on cigarettes, there is a growing list of categories that may find themselves subject to counter-marketing in future – such as fast food, gambling or firearms – but the applicability of the findings in this study to such disparate categories remains to be seen.  

Leveraging behavioral informed messaging and simplifying processes can directly increase organ donor registrations

In the third study, “Increasing Organ Donor Registrations with Behavioral Interventions: A Field Experiment”, authors Robitaille, Mazar, Tsai, Haviv and Hardy, sought to understand how they could increase organ donor registrations within the current prompted ‘opt-in’ system dominant across the US and Canada. There is an undeniable need for organ donation: in the US, there are currently 107,000 people on the waitlist, another name is added every 9 minutes, and more tragically, 17 individuals die every day waiting. Canada’s numbers are equally alarming: with over 4,400 people on the waitlist, and 1,600 added annually, over 250 individuals will die waiting for a transplant each year. Prior research has found that changing the policy defaults to an ‘opt-out’ system does not necessarily result in more transplants, and that the financial and administrative burden of implementing a new system can be overwhelming. The authors therefore asked the question: how can we increase the number of donations within the current system?

In North America, the typical process to register as an organ donor is during driver’s registration at the DMV. Here, individuals will often need to wait to be seen. Once called, they will be asked a myriad of questions related to licensing, in the middle of which the customer service agent will ask if they would like to be an organ donor. If yes, the individual is then handed a lengthy form to fill in to complete registration. The research team looked at both process and promotional elements to improve this system. From a process perspective, they hypothesized it would make more sense to give people the forms and materials as they enter for two reasons: a) they can review these as they wait; and b) they could intercept individuals at the time of decision-making. The team also simplified the paperwork, condensing the registration form into a half-page and printing it on card stock, so it could be completed anywhere. On the promotional side, the authors knew there was a large intention-action gap in this space: 90% of Americans support organ donation, but only 60% were registered; in Canada, 90% support donation, 81% say they are willing to register – but only 32% of people are actually registered. Was it possible to motivate individuals to register by providing them with information or reciprocal altruism prompts and close the intention-action gap?  

The team tested 5 conditions: 1) a ‘control condition’ – new simplified form on arrival; 2) new simplified form on arrival with brochure; 3) new simplified form on arrival with the nudge statement “if you needed a transplant, would you have one”; 4) new simplified form on arrival with the nudge statement “how would you feel if you or someone you loved needed a transplant and couldn’t get one” and 5) new simplified form on arrival with the nudge statement “how do you think people feel when they, or someone they love, need a transplant and can’t get one.” In partnership with the government in Ontario, the authors chose one of the larger, more demographically representative service centres in the area to test these different conditions and measured the number of new donor registrations on any given day. Compared to the standard process, all 4 of the team’s interventions improved organ donor registrations. Above and beyond the control condition, they found that the reciprocal altruism nudge “if you needed a transplant, would you have one” was the best performing, increasing new organ donor registrations by 80% (from 4.1% in the control to 7.4%).

Robitaille opines that in many situations, the problem is not only a simple lack of knowledge. If knowledge was the key barrier for registrations, then we would expect the brochure to be the biggest driver of increased registrations. Instead, targeting the intention-action gap is critical and by providing the right promotional message at the right time, we can make a difference overcoming the barriers of inaction. Intercepting customers at the right time was also important – the team used a brochure that was widely available in Ontario, but found it to significantly increase registrations when given at the time people were filling in the form. This study also shows that it is imperative to make things easy – by giving people a shorter form and more time, they had the chance to engage with materials. Moreover, this circumvented any differences potentially caused by customer service representatives. In terms of better world outcomes, the team saw a direct increase in organ donor registrations which could be scaled across Ontario or North America more widely. Further research is required to test how important each individual component of the intervention was (e.g. using card stock, whether using both brochures and nudge statements would have an even larger effect), and to understand the psychological process driving decisions, particularly as we know that intention and action do not align in this context.

Using a ‘humans as machines’ association to promote healthy eating can backfire on target populations

In a study inspired by the increasing use of visuals comparing the human body to machines to encourage healthier food choices, authors Weihrauch and Huang explore the effects of such representations, finding that such stimuli can have detrimental effects because they trigger expectations to act rational “like a machine” deemed impossible to meet by many consumers. In their work “Portraying Humans as Machines to Promote Health: Unintended Risks, Mechanisms, and Solutions”, the authors observe that showing the human body as a machine is commonly used in health & food education, and in food marketing – citing education materials by National Geographic (“The Human Machine”), or campaigns by Centrum claiming that their supplements “power the human machine” as examples. The authors posit that consumers are often exposed to this visual when policymakers want to communicate that humans, in behaving more like machines, are more rational and unemotional, hopefully reducing impulsive or emotionally-charged unhealthy eating choices. If we give humans the cue that they can or should behave more like machines, does this translate into better choices?

The answer – it depends. First, the research team found empirical evidence to support the link between humans looking more machine-like and being expected to behave more machine-like. This is in line with prior research showing that the reverse mechanism works in anthropomorphism (where we expect machines that look more human to behave with more human-like traits). Secondly, the team found that this expectation only translates to better food choices for certain consumer segments. Exposure to this stimulus had the intended, positive effect for the population of people with high eating self-efficacy, who are generally already good at making healthy food choices. If you are someone who is already confident in making healthy choices, and you are presented with a trigger to behave machine-like and rationally towards food, you believe you can meet that expectation, and it can have a motivating effect for you – working exactly as policymakers intended. However, if you are low in self-efficacy and you are exposed to the rational machine-like decision-maker prompt, you might feel like you cannot meet this unrealistic expectation – leading to a backfire effect for target populations. The backfire effect is likely caused by mechanisms previously observed in food research: it can damage self-esteem by applying expectations on populations that we know cannot meet them, potentially causing them to respond to low self-esteem with emotional eating; it can also trigger aggression towards themselves for ‘failing,’ or to the person exposing them to the expectation that they feel unable to meet. This aggression can also be a reactant, causing consumers to turn to emotional eating or comfort food.

The authors tested this across a number of study types, such as online and in-person experiments and field studies, across the UK, US and the Netherlands. The key finding was that the ‘humans as machines’ stimulus to encourage healthier food choices only benefitted a portion of the population, and for many segments – especially those low in self-efficacy – it can have a detrimental effect, potentially leading to unhealthier choices where consumers feel they cannot meet expectations.  The authors ring a cautionary bell to policy-makers hoping to improve public health by utilizing this association – the segment who needs the most help is not the segment they are reaching, and this messaging should be used with care. However, the study did show signs of hope: the team found that with certain added interventions, we can bolster one’s self-perception that one can meet the expectation of the messaging. The team also identified the following emerging research questions:

  • How might this apply in different domains, such as financial decision-making, or other areas where machine-like traits (being unemotional, rational and cold) may not be beneficial (i.e., social behavior, charitable giving)?
  • When humans look more like machines, i.e., wearing technological products like exoskeletons, are others more likely to objectify them/treat them like machines?

Further detail on each study:

The Better Marketing for a Better World (BMBW) initiative has been established as a collaboration between Professor Rajesh Chandy, Professor Gita Johar from Columbia Business School, Professor Christine Moorman from Fuqua School of Business and Professor John Roberts, Professor at the University of New South Wales, Sydney Australia.  The aim of the BMBW initiative is to build community and support the development and dissemination of knowledge on how marketing can improve lives, sustain livelihoods, strengthen societies and benefit the world at large. There is natural synergy with the aspirations of BMBW and the Wheeler Institute, and therefore under the guidance of Rajesh Chandy the Wheeler Institute has taken a significant role in supporting the launch of the BMBW initiative ( Going forward members of the Wheeler Institute team will undertake a secretariat role in support of the BMBW initiative developing its operational frameworks related to organising forums, facilitating training, and maintaining online resources.

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