A Jewish Mother in Your Cell Phone

The ability to blast messages to large numbers of people at very little cost has been a boon to marketers, although it is frequently inefficient and always annoying. The overwhelming majority of customers brush off the pitches, reminders, come-ons, exhortations—Subscribe to our magazine! Stop Nancy Pelosi! Buy gold!—that arrive via e-mail and text message. Like older forms of direct marketing (telemarketing, direct mail), texting and e-mails are a low-percentage business. (Story continued below...)

But one kind of electronic mass marketing is proving to be surprisingly effective in influencing consumer behavior. It's not the aggressive pitches to persuade people to buy something they didn't know they wanted (Fly to Buffalo in January for $39 round-trip!). Rather, it's affectionate nags and nudges that encourage people to do more of the things they're interested in doing and know they should be doing. Think of it as your Jewish mother, on your mobile. (Click here to follow Daniel Gross)

Exhibit A: savings. We all know, and have been taught, that it's good to save more money rather than less. If you poll Americans, they'd say they want to save more rather than less. But there are all sorts of reasons why we don't: Savings requires a constant trade-off between gratification today and gratification tomorrow. But a study by four Ivy League economists—Dean Karlan of Yale, Sendhil Mullainathan and Margaret McConnell of Harvard, and Jonathan Zinman of Dartmouth—has shown that gentle text-based nagging can induce people to save more. As part of a study, they worked with banks in the emerging markets of Bolivia, Peru, and the Philippines. When people opened accounts and encouraged to commit to saving certain amounts, the banks randomly assigned some customers to receive reminders via text. Some notes reminded customers that they had focused on a particular goal, others reminded savers that there were incentives for saving (like higher interest rates), and some did both. The conclusion: "Individuals who received monthly reminders saved 6 percent more than individuals who did not. They were also 3 percent more likely to reach their savings goals by the end of the savings program." The most effective form of messaging was one that reminded people both that they needed to save in order to reach a personal goal and that there were incentives for doing so. Such nudges boosted savings by nearly 16 percent.

That may not sound like much. But for financial institutions, the use of something extremely cheap—like sending text messages—to boost deposits by even a few percentage points would be an extremely effective form of marketing. And if such cues were to prove effective over time, thanks to the miracle of compound interest, individuals who save more will amass much larger nest eggs. As Zinman notes, we should focus as much on the recipients as we should on the message. "A key difference between the texts sent by the banks in our study and most advertising is that the texts were consistent with our subjects' intentions." These people had already committed to saving and wanted to do it. Simple electronic reminders encouraged people to make good on the commitments they had made.

Something similar is happening with prescription drugs. As with saving money, taking medicine is an activity that people know is good for them. And they know that the failure to take medicine is quite bad for them. But one of the mysteries—and great frustrations—of the medical-industrial complex has been patient compliance, or more accurately patient noncompliance. As this report from McKesson indicates, an alarming number of patients simply fail to take the pills they've purchased. In one survey, of those who don't take pills they're supposed to, 79 percent said they simply forgot. Aside from leading to tens of billions of dollars in lost revenue annually, patient noncompliance complicates clinical trials and leads to problems for those who have chronic conditions. For a shocking number of people, self-preservation or the admonishment from a spouse—"Did you take your Lipitor today? And since you just ate a bacon cheeseburger, shouldn't you take two?"—simply doesn't work.

Here, too, texting may make a difference. A Financial Times article (registration required) reported that pharmaceutical giant Novartis is partnering with Proteus Biomedical, a medical technology firm. The big idea: implant receivers in people's shoulders and then embed chips into pills, which, after ingested, send out reminders via text message to take the next one. "Joe Jimenez, head of pharmaceuticals at Novartis, said tests using the system—which broadcasts from the 'chip in the pill' to a receiver on the shoulder—on 20 patients using Diovan, a drug to lower blood pressure, had boosted 'compliance' with prescriptions from 30 per cent to 80 per cent after six months." Plenty of companies are developing similar applications, such as MedPrompt and iReminder, which delivers "dosing reminders" by phone, text, or e-mail.

In theory, such reminders—to save money, to take your medications—shouldn't be necessary. But they are. One could imagine other applications: texts to children at school to see if they've eaten vegetables at lunch or washed their hands, reminders to college students to do their laundry or call their mother.
 
Come on, call your mother.

Daniel Gross is also the author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation and Pop!: Why Bubbles Are Great For The Economy.

© 2009