Netflix and 401(k) participation… right off the bat, you’re probably wondering: what the heck do these have to do with each other?
Well, as the 10,000+ companies who failed IRS nondiscrimination testing in 2017** would probably tell you, most employees would rather spend a couple hours bingeing on Netflix than enrolling in the 401(k).
It’s a frustrating problem, really. Most employees know that saving for retirement is important. But when it comes time to enroll, they figure they have more pressing matters – like catching the Stranger Things season finale, or wondering why Michael Scott from The Office can’t get no respect.
But what if we flipped the script? What if we analyzed Netflix’s technology, decoded exactly what they were doing to enthrall their audience, and then applied these same techniques to the 401(k)?
Now, I’d be crazy to suggest that we could make joining the 401(k) as enticing as a 4-hour comedy-special bonanza, but we could at least help drive your participation rate through the roof.
So without further ado, let’s explore 3 Netflix-inspired hacks you can use to ignite your 401(k) participation in 2020.
401(k) Participation Hack #1: Reaching Your Employees on Mobile
Netflix is beginning to make huge investments in mobile. And it’s easy to see why.
According to the Pew Research Center, 17% of American adults – roughly 41 million people – depend entirely on their smartphones for internet access. Most are young or low-income adults – a population which is very difficult to enroll in the 401(k). If you’re struggling with participation, this portion of your workforce could be a big reason why.
This can be a tough nut to crack, but a mobile-first communication strategy might be the answer. Let’s look at an example.
For our clients, driving participation starts with a mobile-first onboarding experience. The minute an employee becomes eligible, they receive notifications via email, snail mail, and most importantly, text message. These alerts direct employees to our friendly virtual advisor who explains the plan in simple English (or Spanish).All of this works perfectly on a mobile device, so employees can quickly enroll at home, on-the-go, or even before the start of an epic Netflix marathon.
One client of ours – a hotel chain – was able to boost their participation rate 10X using this onboarding experience.
While you may not have your own virtual advisor, you do have a cell phone. Start incorporating text messages into your enrollment communications. You may find it a very promising start to a mobile-first 401(k) strategy.
401(k) Participation Hack #2: Making Personalized Recommendations for Employees
Personalization is arguably one of Netflix’s most powerful hacks. It’s also incredibly effective at driving 401(k) plan participation. I’ll explain how.
Imagine, in a moment of boredom, you’re checking email. You’re scrolling through the spam and tedium when suddenly you see an email from Netflix. It’s a recommendation for a new show – a comic take on the whole dark-age Viking craze that seems to have swept through TV.
And that really gets you. You love Vikings. You’ve watched every show and documentary you can get your hands on, and now Netflix has just served up another one right on your mobile device.
Next thing you know, 8 hours have gone by, and you’re sprawled out on the couch with 3 empty bags of popcorn and several cans of Dr. Pepper piled on the table (definitely not being autobiographical here).
See what happened there? Netflix got you by serving you a recommendation based on your interests.
Now, what if your 401(k) did something similar?
Using an integration between your payroll system and 401(k) provider, your 401(k) could build a detailed financial profile on each employee that accounts for their age, marital status, income, and of course, their status with the 401(k). Then, it can serve them specific 401(k) recommendations based on their unique financial situations.
Not enrolled in the 401(k) yet? Here’s how much you could have by the time you retire if you join now. Want to start saving?
By showing a projection based on their actual financial data, these communications can inspire employees to participate. Once they’re inspired, there’s just one more thing to do, which brings me to our 3rd and final hack.
401(k) Participation Hack #3: Making It Easy for Employees to Take Action
As the product designers at Netflix know, in order to get someone to take the action you want, you have to make it super easy. If it’s not super easy, they’ll have to be very motivated.
BJ Fogg, the founder and director of the Stanford Behavior Design Lab, demonstrates this phenomenon with this fancy graph:
It’s this phenomenon that Netflix takes advantage of to get you to binge. You see, at the end of each episode, you have the choice of either turning off the TV, finding something else to watch, or waiting a few seconds for the next episode to start playing. Which of the three would you choose? If you’re anything like me, you’d probably choose the easiest.
This same exact principle can do wonders for your 401(k) participation.
Building on the previous hacks, imagine your employee is on their mobile device. They suddenly get an email or a text message with a highly-personalized 401(k) recommendation – an invitation to slightly bump their savings rate to hit the annual IRS maximum. They’ve been meaning to talk to HR about this for awhile, but just haven’t gotten around to it. Now, they’ve got this personalized email with a big blue button at the bottom that says “Max Me Out.” They click the button, and voila! The system automatically updates their savings rate in both payroll and the recordkeeper without the employee or the HR team having to do anything.
Pretty nifty, right? One of our clients – a technology company – actually used this hack to great effect. Just 5 months from starting it, they managed to increase their participation rate by 14%.***
So take it as a lesson: if you want employees to join the 401(k), make it super easy.
And there you have it – 3 Netflix-inspired hacks to ignite your 401(k) participation in 2020.
Now, we’ll admit - getting employees to participate in the 401(k) is a little harder than getting them to spiral into a Netflix binge. But consider this: using these 3 hacks, all it takes is a single click to send an employee on a lifelong binge of retirement saving. And who wouldn’t like that? The employees gains confidence about securing their financial future, while you get to kick back and watch your 401(k) participation rate go through the roof.
*Netflix, and the Netflix logo, are the property of Netflix, Inc.
**Based on Form 5500 from 2017
***Based on the increase in one client’s actual participation rate on the ForUsAll platform before and after 1:1 communications were implemented, from January to May 2019.