For many, saving money for retirement can be as challenging as losing weight. Both require sustained effort and new habits. Just as weight loss programs use group meetings and internet forums to create a culture of personal responsibility, the defined contribution industry is finding that peer influence can be highly effective at fighting procrastination—and encouraging long-term savings habits.
Peer influence is gaining momentum. The digital world is accentuating the power of peer influence. Social recommendations, customer advocacy, and word-of-mouth marketing are among today’s most powerful marketing tools. Consider:
- “Friends” influence buying – Nearly 68% of Facebook users say a Facebook friend’s recommendation would make them more likely to buy a product or visit a retailer.¹
- Gen Y/Millenials lead brand advocacy trend – Research finds that a third of those age 18 to 34 are making proactive recommendations.²
- Look at your own experience – How often do you read the peer reviews before buying online? How often do you select a restaurant based on a friend’s recommendation? Consider the popularity of Consumer Reports or Angie’s List.
DC Implications: Peer marketing techniques are efficient and cost-effective
While individual guidance and advice remain critical, DC plan providers and sponsors may be able to enhance participant outcomes by deploying successful peer marketing techniques.
- At 51%, financial services is among the top 12 categories for positive word-of-mouth conversations among U.S. internet users.³
- Experts are conducting new studies to evaluate the impact of peer information and groups on savings behavior.
- More avenues for sharing peer recommendations and implementing cost-effective advocacy programs are opening up. Key reasons: Digital services are playing an increasingly important role in participant communications and plans are considering social media for engagement.
Strategies and Tactics: Connect participants, improve outcomes
Consider how peer marketing techniques can be leveraged to create more successful DC plans.
Short-term tactics
1. Create a network of plan “brand advocates”— it starts at the top
Success ultimately depends on a sponsor’s top-down support and advocacy efforts. Start by crafting effective, shared messaging in cooperation with your advisor. Then, identify the influencers in your organizations who can serve as powerful word-of-mouth advocates.
2. Establish forums for sharing successful strategies and encouraging accountability
Include a participant testimonial portion within seminars and webinars conducted by plan providers. Hearing the ease with which their peers have successfully saved can be a game changer for attendees. Supplement these sessions with employee-driven, sponsor-supported forums where participants can share successful saving strategies.
3. Provide peer benchmarks
Consider showing plan participants how others within a similar demographic are doing in terms of saving and investing for retirement. Take care, however, to emphasize the importance of continual improvement over time.
¹ Morpace Omnibus Report, Morpace, April 2010.
² PostRelease survey conducted by Synovate, January 2010.
³ Keller Fay Group, “Unleashing the Power of Word of Mouth,” August 2010.
This article was originally published by T.Rowe Price: Power of Peer Influence: From Inertia to Action.