Utilities Provide 4 Lessons in Consumer Behavior Change

The latest heat wave (did you know that the 12-month period ending in June 2012 was the warmest since record-keeping began in 1895?) brings not just bad news about withering crops and the melting Greenland ice sheet, but also some good news. First, it seems to have helped convince more Americans that global temperatures are indeed rising – Bloomberg reported that in a poll taken earlier this month 70 percent of respondents said they think the climate is changing, compared with 65 percent in March. Second, it provides utilities a greater incentive to be more creative when looking for ideas on how to get consumers to conserve energy.

And creative they are, with innovative tactics that implement basic behavioral economics principles. It might be surprising to find utilities at the forefront of the search for the holy grail of the green space – changing customer behavior, but nevertheless they seem to be doing a good job according to some examples the New York Times provided lately. On second thought, it might not be that surprising – it’s not just the willingness to avoid blackouts in the summer, but also state mandates that encourage more energy conservation and the recognition that in terms of cost-benefit, utilities are better off with customers conserving energy rather than wasting it.

This recognition has been translated lately into a growing list of actions that provide not just utilities, but every industry looking to change customer behavior with valuable lessons. Here are four of them:

Make it easy – One of the main obstacles utilities try to overcome is the “hassle factor.” A great example comes from the U.K. - behavioral economist Richard Thaler wrote in a piece on the New York Times about an experiment the government did there to learn what would motivate homeowners to install insulation their attics. Homeowners were given two options to choose from - either a group discount offer a-la Groupon or an attic cleanup program provided at the supplier’s cost.

In the second option, Thaler explains, a crew come to your home, clear your attic so you can go through your belongings while they install the insulation, and then not only they put back the things you want to keep, but they also take everything else and either discard or donate it to charity. The first trial found that people were three times more likely to go for this “make it easy” option than the first one, and Thaler reports it is now being used more widely.

Another example is the growing use of apps that makes energy conversation so much easier. ConEd, for example, together with ThinkEco launched CoolNYC, an energy-monitoring initiative helping thousands of New Yorkers control their window air conditioners through smartphone apps and the web.

Make it fun – Electricity is a boring thing and energy conservation, let’s face it, can be even more boring. To change it utilities try to add more humor to their messages, making saving energy look like a fun activity for all the family. The best example comes from Duke Energy that created a series of funny videos featuring a fictitious girl named Shannon (aka bossy pants) who provides her family, the Powers, energy-saving advice, such as using a clothesline instead of a dryer or showers instead of baths. The messages aren’t new, but the tone is certainly different.

Make it a contest – The authors of the paper The Evolutionary Bases for Sustainable Behavior: Implications for Marketing, Policy, and Social Entrepreneurship explain that humans have evolved to be more motivated by relative rather than absolute status, which means that encouraging people to compete on pro-environmental outcomes can motivate individuals to adopt more sustainable practices. Opower is applying this approach, enabling people to compete with their friends and family on Facebook to see who uses less energy through a special app it created with the Natural Resources Defense Council.

Reward consumers – Apparently not only Recyclebank thinks about using its successful coupon model in the energy sector. Some utilities already do it with companies like C3, which run customer reward programs for them. The engagement model, as C3 calls it, awards participants points for every kilowatt-hour less in electricity they use each month compared with the year before they joined. Just like with Recyclebank, points can be redeemed for discounts at both national and local stores.

While it might be too soon to determine which lesson is more important, it looks like the most effective approach is to combine several of them, making energy savings easy, fun, social and rewarding. Look for examples at SimpleEnergy that works with utilities, “leveraging leading behavioral science and game mechanics delivered on the technology platforms people use most – social networks, web, email, and mobile.” Consumers, for example, compete on Facebook with one another to save more energy. Results are made public and winners get prizes. The company reports that during a summer 2011 pilot program, the average consumer saved 20 percent and top users saved 40-50 percent compared to the previous year.

I bet that if we could only make the solutions to all of our environmental problems look like fun games, our problems would probably be over.

[Image credit: Opower]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business and new product development.