The reminder email that works as well as a $2,500 bonus, and where it stops

Once the researchers looked at total impact rather than impact per dollar, price-based tools usually won, because a tax or subsidy can be scaled in a way a reminder campaign cannot. In the energy market, the best achievable tax produced roughly seven times the total benefit of the best achievable nudge, even though the nudge remained the more efficient dollar at the margin. Price tools also out-totaled nudges, by smaller margins, for flu vaccine subsidies, water pricing, and alcohol taxes.

There is one notable exception: cigarettes. There, the paper finds nudges deliver more total benefit than a cigarette tax even before cost is factored in ($104 versus $69 per smoker per year) — the one market in the sample where the cheap tool wins outright, not just per dollar spent. A separate, and separately useful, finding: when the researchers account for the fact that actual US cigarette taxes are already close to the level they calculate as economically optimal, they find that piling more nudging on top of today’s real-world tax rate can actually reduce welfare, because it pushes consumption below the optimum and erodes existing tax revenue. It’s a useful caution against assuming more nudging is always better: once a lever has already captured most of the available gain, adding another one can do more harm than good.

What this means for a benefits budget

The lesson isn’t to abandon incentive dollars, or to over-invest in them either. It’s to be clear-eyed about which job a nudge is being asked to do.

If the goal is moving the willing-but-forgetful majority — employees who intend to get a flu shot, or would use a benefit if they remembered it existed — a free or low-cost nudge is very likely the more efficient tool, and this data says it isn’t close. If the goal is a genuinely ambitious participation target, expect a reminder campaign alone to fall short, and budget a real incentive for the group it won’t reach on its own.

One further wrinkle worth planning around: the paper finds that stacking a nudge on top of an already well-sized incentive buys very little extra, largely because the people who respond to reminders and the people who respond to money tend to overlap. Rather than deploying every available tool on a wellness goal at once, the more efficient approach the data supports is choosing the tool sized to the ambition, similar to the case for tracking ROI carefully rather than assuming more programming always means more return.