Incentives matter. Incentives includes all sorts of benefits economic and non-economic (some of which are often more powerful). One of the most powerful incentives, for instance, is social status.

If incentives are altered, then choices and subsequent behaviour of individuals change. It means that one way of driving change or creating desired outcomes for a new strategy is either to modify the incentives directly or else to alter the subjective evaluation of the payoffs and hence the choices made.

Having said that, it is easier said than done. Thinking about incentives, require us to understand the organizational/societal context. It requires robust analysis to make sense of areas that at first impression have nothing to do with economics as it is generally understood.

Tropicana, used this insight to start a smart campaign in the US. If you brought a Tropicana juice carton and keyed in the carton number on the company website, the company will preserve a hundred square feet of rainforest on your behalf!

A hundred square feet seems like a lot of area for a person living New York, Singapore or Mumbai. It is a size of the dining room in a city apartment, or a bedroom for family in a Mumbai slum. In congested cities a hundred square feet land comes at a significant cost (cost of say $300 in a distant Mumbai suburb). Even after a great degree of discounting, the urban Tropicana customer could estimate the forest land price at around 10-20 dollars.

For a ‘green’ customer, who values conservation saving a dining room worth of rain forest looks like a big deal!  It is far more powerful incentive than giving a 10% price-off or any other boring monetary promotion.

In India, however, this incentive may not work as most customers are not really ‘green’. While saving a bedroom worth of rain forest will evoke interest, it is not really something that will fire anybody’s imagination (in India’s defence  let me say that ‘green’ issues have started getting some attention, esp. from our youth).

Designing incentives to motivate an organization to adopt a new system or implement a new strategy is necessary. However a deep understanding of how the incentives will be perceived by different functions, divisions and teams is critical to making it work. The Tropicana example compels us to look beyond monetary benefits and latch onto more compelling social/moral benefits.