Science of Motivating Consumer Behavior – Kogod Now
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Kogod Now / Practitioner Perspective  / Science of Motivating Consumer Behavior

Science of Motivating Consumer Behavior

In 2005, my wife Tobie and I set out for a 10-month, 27,000-mile drive from the northern tip of Alaska to Ushuaia, Argentina. We saw vast and expansive seas, beautiful glaciers and rainforests, but also devastation caused by pervasive commercialism.

Motivated to do something to help the environment, I linked up with my college friend Alex Laskey, who had spent several years as a campaign manager and strategist. We wanted to use our experience in technology and policy to create a company that would benefit both the environment and society, but was different from the numerous other renewable and cleantech companies starting up at the time.

We discussed a variety of ideas, but kept coming back to the one area we thought had the greatest potential: energy efficiency. Or, simply put, motivating consumers to use less power—a task easier said than done.

That same year, we came across a study from the renowned behavioral scientist Robert Cialdini. He set out to answer the question “What motivates behavior change?” after California was forced to implement rolling blackouts to alleviate excessive demand on the power supply in the early 2000s.

Cialdini and his students ran a series of field tests during one hot summer. Every week, the students would leave door hangers on homes, each with one of four different messages printed on it:

  • The first said, “Turn off your AC and turn on a fan—you can save money.”
  • The second said, “Turn off your AC and turn on a fan—you can save the environment.”
  • The third said, “Turn off your AC and turn on your fan—it’s your civic duty.”
  • The fourth said, “4 in 10 of your neighbors turned off their AC and turned on a fan.”

After three weeks, the students analyzed the homes’ energy use and found that the first three messages had zero impact on consumption. In fact, some of the homes actually started using more energy.

However, homes that received the fourth door hanger used, on average, 6 percent less electricity than the control group.

What Cialdini found is counter to the general perception that money or environmental concerns have an impact on consumption. What actually motivates consumers is the fourth door hanger: normative comparisons.

The discovery of the impact of social norms was a catalyst for the creation of Opower.
Normative comparisons motivate behavioral change because, like other tools such as goal setting, usage ranking, and historical usage comparisons, they tap into humans’ innate competitiveness.

By the Numbers

Having seen the power of behavioral science on energy usage, Alex and I then came across three numbers that shaped what would become Opower: 400, 90, and 7.

  • • 400—the amount of money, in billions, wasted every year through inefficiency.
  • • 90—the percentage of Americans who think saving energy is a good idea.
  • • 7—the number of minutes Americans spend each year thinking about their energy consumption, according to Accenture.

We realized there was a significant gap between the portion of people who want to do something to save money and energy and the amount of time they spend thinking about energy use.

Using these constraints and working with Cialdini, who became our chief scientist, we utilize the best behavioral science to create a model that engages and motivates customers. By giving them insights and information about their energy consumption, in customer-friendly and targeted ways, consumer behavior can be changed.

We created our first product, the Home Energy Report, in 2007. The report combined normative messaging with personalized tips for saving energy and money. That year, we signed our first utility partner, Sacramento, CA’s Municipal Utility District, and set out to prove our concept would work.

Compare and Contrast

The Opower platform is designed to deliver better information to customers in a way that not only informs, but also motivates customers to take action.

Opower collects energy use data from the utility and merges it with third-party data to create individual customer profiles, then uses it to accurately compare customers to similar homes in their neighborhood.

We have found that the average customer is unfamiliar with—and uninterested in—complex graphs of his energy use. Instead, he cares primarily about the answers to two questions: “How am I using energy?” and “What can I do to save energy and money?”

Knowing that households are more likely to take efficient actions their neighbors have already committed to, Opower rates the popularity of efficiency tips by noting the number of people in the service territory who have committed to specific efficiency actions.

We also include “loss language” in our tips and recommendations, encouraging customers to feel they are missing an opportunity to save if they turn down the tip or recommendation.

The most popular actions reported by energy report recipients, such as adjusting thermostats and unplugging appliances, are common sense, easy to do, and universally applicable. The potential for behavioral energy efficiency comes from a subtle shift in customers’ mindset, eventually making a simple action as second nature as placing a can in the recycling bin.

Big Data

We also realized early on that to truly scale this business, we needed a software platform that could transform the vast analytics potential of the utility industry into information that was actionable for consumers. Utilities manage massive amounts of data for each of their customers.

We developed a platform that analyzes energy and third-party data, derives insight from that data, and determines how best to deliver that insight. The data we receive from our utility partners is supplemented with third-party demographic data, program participation data, and other third-party data to create a comprehensive customer profile. From these profiles, we derive actionable insights for each customer.

Our analytics engine processes data from more than 50 million homes and analyzes 96 billion meter reads every year, making us one of the largest stores of energy data in the world.

Look Ahead

Behavioral science could be applied to a number of other industries, including education and health care. Currently, the majority of health care spending goes toward better medicine, facilities, and doctors—but it’s small things that really make an impact on health, such as exercising, not smoking, and eating healthy. There is a huge potential to change the way people think about and act on their health through behavioral norms and comparisons.

Behavioral science and normative comparison tap into our greatest resource—our people—in order to create lasting and significant change. As a company, we hope our impact will continue to grow and we will continue to make better use of the limited resources we have on this planet. KN

As CEO, Daniel Yates is responsible for the vision, strategy, and leadership of Opower, which he co-founded with Alex Laskey in 2007. Under his leadership, Opower has become one of the fastest growing enterprise software-as-a-service companies in the world. Previously, Yates was founder and CEO of Edusoft, an educational software company that provided assessment platforms to US public-school districts. He sold the 150-person, $20 million company to publisher Houghton Mifflin in 2004. Dan received his BA in Computer Science, summa cum laude, Phi Beta Kappa, from Harvard.

Opower works with more than 80 utility partners in six countries, including the US, the UK, France, and Australia. It has proved that providing better information to customers can drive savings—an average of 1.5-3.5 percent—while substantially improving customers’ satisfaction with their utility. To date, it has saved more than two terawatt hours of energy, enough to power a city the size of Sacramento, CA, and has saved customers more than $220.

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