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incentive

in-SEN-tiv /ɪnˈsen.tɪv/

nounB2IELTSTOEFLGREGMAT

BusinessPsychology

A thing that motivates or encourages someone to do something; a payment or concession to stimulate greater output or investment.

In retail, it's a 'carrot' used to make you buy, like 'buy one get one free'.

The story behind the word. From the Latin 'incentivus', meaning 'setting the tune'. It comes from 'incanere' (to sing). Originally, it referred to the piper who played music to encourage soldiers or workers to keep their rhythm. It's the 'tune' that gets you moving!

Word relationships

inducement: Inducement is more formal and can sometimes imply a bribe or something slightly unethical.
stimulus: Stimulus is often used in a broader economic or biological context.

deterrent: A thing that discourages or is intended to discourage someone from doing something.

Commonly confused with

motivation: Motivation is the internal feeling; an incentive is the external thing that creates that feeling.

Word family

incentivize (verb): To provide someone with an incentive for doing something.

Collocations

financial incentive
powerful incentive
tax incentive

Example sentences

"The tax incentive encouraged investment in renewable energy." A news report on economic policy.
"Free shipping is a powerful incentive for customers to complete their online orders." A retail marketing strategy.

Memory hook

An 'incentive' is like 'in-scent-ive'—the smell of a prize that leads you forward. A reason to act.

When not to use

Don't use it for a simple price reduction that has no conditions attached.

Fun facts

Economists often say that 'people respond to incentives' as the most fundamental rule of human behavior.