The federal government has a marketing problem.

When the Biden administration expanded the Child Tax Credit in 2021 with direct cash payments of up to $3,600 to alleviate child poverty, millions of the most vulnerable families never received the automatic payments because they didn’t have a digital connection with the Internal Revenue Service through a previous income tax filing online. The burden was on those families to seek out the public benefit.

To boost awareness, the government launched a messaging campaign to let families know that up to $3,600 a year was waiting for them. But months later, millions of dollars were still unclaimed.

A new study led by Wharton marketing professor Wendy De La Rosa pinpoints the reason why so many Americans left money on the table: The large amount seemed like an abstraction because people don’t think about money on a yearly basis. Through a series of experiments, the researchers found that people were more likely to collect the money if it was conveyed as a monthly or weekly amount — $300 or $69 — similar to how they budget.

“This paper is a call to policymakers to say that how you communicate a message really matters, who you are communicating to really matters, and the goal of the communication really matters,” De La Rosa said. “All of that, at its core, is marketing. It’s figuring out how to best tell your message to your demographic.”

The paper is titled “Communicating Amounts in Terms of Commonly Used Budgeting Periods Increases Intentions to Claim Government Benefits,” and it was published last month in the journal Proceedings of the National Academy of Sciences or PNAS.

The co-authors are Abigail Sussman, marketing professor at the University of Chicago’s Booth School of Business; Eric Giannella, data science director at Code for America; and Maximilian Hell, senior data scientist at Code for America. The nonpartisan nonprofit, which creates tech-based solutions to help the government serve the public, set up and ran the experiments for the study.

“Our entire lives are not set up to think about our world on a yearly basis.”— Wendy De La Rosa

In the experiments, participants who were randomly selected from a list of people likely to be eligible for the Child Tax Credit were sent a personalized text message from Code for America that included their name, benefit amount, and a link to a website to begin the claiming process. The scholars conducted additional surveys to gauge participants’ perceptions about weekly, monthly, and yearly amounts. Across all the experiments, the results showed that breaking down the amounts into smaller numbers increased interest in claiming the benefit by 16% to 26%.

De La Rosa said there is a common-sense component to the findings because most people are paid weekly or monthly, which is also how they pay most of their bills — from rent and mortgages to car payments and groceries.

“Our entire lives are not set up to think about our world on a yearly basis,” she said. “People just don’t think about their financial lives in that way. If you give them the option of getting paid annually versus weekly, they overwhelmingly want to get paid monthly or weekly because it’s going to make them budget better.”

De La Rosa and Sussman said they were drawn to the topic because financial decision-making is a research focus for both of them. They are especially interested in improving the financial well-being of low- and middle-income people.

“It addresses an important question from a policy perspective with potential to impact lives for the better,” Sussman said. “Why aren’t more people taking up government benefits, and is there a way to help get benefits into the hands of people who need them?”

De La Rosa credits the Biden administration for trying to spread the word about the expanded Child Tax Credit and for making the payments automatic. But the automated payment system only worked for taxpayers who had already filed online.

“This is where financial inclusion comes into play,” De La Rosa said. “Now you have a system where the neediest of families have to exert the most effort to get what they deserve.”

The professors hope that government leaders view the study results as a revelation rather than a rebuke. In each experiment, there are takeaways that can help a host of agencies better market and communicate their programs and services through the right messaging. It’s about meeting people where they are, De La Rosa said.

“The immediate goal of the research is to help increase interest in claiming government benefits through more effective messaging,” Sussman added. “But, beyond considering describing amounts in weekly, monthly, or annual terms, I hope that policymakers will think more carefully about the day-to-day realities of managing money and how budget considerations may spill over into a range of daily decisions.”

“The immediate goal of the research is to help increase interest in claiming government benefits through more effective messaging.”— Abigail Sussman

Borrowing from Business Principles

With the help of big data, businesses are becoming savvier about their customers and constantly refining their messages to target just the right audience. De La Rosa said the government needs to learn how to do the same. In the private sector, smart marketing helps grow consumer spending. But in the public sector, smart marketing helps consumers help themselves.

“The government is the largest provider of services to its citizens. In order to increase trust, a sense of cohesion, and well-being, we have to have our government use all the tools of private business,” she said, pointing to the federal government’s mixed messaging during the height of the COVID-19 pandemic as an example of marketing gone wrong.

“It wasn’t a breakdown in the scientific information; it was a marketing breakdown,” she said. “We were unable as a nation to communicate the scientific advancement in a way that people would trust the information.”

Sussman thinks marketers could also learn a lesson or two from the paper’s findings. For example, 42% of the participants thought the monthly amount would make it seem like the government was giving away more money, compared with the yearly amount. Yet 78% said the monthly amount made them want to claim the benefit more than the yearly amount.

“It’s not clear to me that the business world has incorporated this finding. In many cases, the core consideration when describing dollar amounts comes down to asking whether a particular description seems more or less expensive to consumers,” Sussman said. “In our research, we find that the same amount can seem more relevant to a person’s life without coming across as more money.”

What’s Next

De La Rosa and Sussman are working together on another study related to spending behavior. The professors are examining the gap between low-cost, frequent purchases, like eating out at a restaurant, and high-cost, infrequent purchases, like buying a house or a car. While there’s plenty of research on small, frequent purchases, there is less scholarship on how those big decisions are made and their downstream consequences.

“When you ask people, what decisions do you ruminate the most on? It’s these infrequent, high-cost decisions,” De La Rosa said. “That’s where people feel most out of control.”