nudge don’t shove – how to change behaviour

Nobel prize winning behavioural economic theory and the utility industry are not often mentioned together, but new ideas are always welcomed when they cut costs, increase productivity and help customers make better choices. For utilities that can’t simply cut off supply or use aggressive pricing tools there is a need to be subtle and sophisticated about how to encourage behavioural change, perhaps even making customers and employees think it is their own idea. In this article we will show how it is possible to encourage users to make little changes that end up having a big impact.

Prof. Richard Thaler, explains in his best-selling book Nudge that although people regularly make poor decisions they can be ‘nudged’ into making better choices. So how could this work for the utility companies? Here are just a few ideas:

Customer Billing

Customer Billing is a perfect target for ‘nudge’ theory. With the very real possibility of an increase in defaulted bill payments due to rising interest rates or Brexit related slowdown in the economy, utility companies need to act quickly to help customers before they get in to financial distress.

By analysing billing payment data to spot trends in late payments, it is possible to create targeted ‘nudges’ for vulnerable customers. Combine this with locational payment trends (e.g. similar sized households in this area, or if a large employer has made redundancies) and/or credit history data, a model could be built to predict which customers are at risk of financial difficulty. At risk customers could then be ‘nudged’ into seeking help with an early intervention. The ‘nudge’ could then take the form of a personalised letter outlining the help available supported by statistics such as “X% of customers Y-months late on payment get in distress, we are here to help”. In this way, vulnerable customers can be offered help and are nudged before debt becomes a problem and costly debt collection is avoided.

Demand reduction

The power industry has been successfully experimenting with nudging customers to reduce consumption and the rise of smart heating controls like Nest which ‘learn’ the usage of each house and its occupants and adjusts the temperature accordingly has had a huge effect in reducing usage. The water industry could borrow some of these tactics: how about comparing metered households with their neighbours to inspire a bit of competition? For example, “Did you know the neighbours in your street pay an average of £x less for their water due to lower consumption”.

Another interesting example is an experimental collaboration between Plymouth Council and Plymouth University where local residents are shown thermal images of their own houses highlighting how much energy is escaping through poor insulation. By tailoring the images in the letters to each specific household the study is ‘nudging’ the householder into making a change based on their specific circumstances rather than a general warning about lack of insulation.

Nudge Management

Looking inside the many offices of utility companies, nudge management techniques can be useful to encourage greater productivity across an organisation. Instigating a ‘no meeting’ day across a company is a perfect way to allow workers to think deeply about the task in hand without the distraction of constant meetings eating into the work day. If meetings are taking over, how about making the default meeting time 30 minutes instead of 60, cutting down unnecessary and lengthy sessions. Taken further, for non-customer facing workers why not limit or slow down email delivery during a certain period in the day so workers can concentrate rather than feel they have to respond immediately to incoming email.

Where to begin

The best thing about nudges is that they tend to be very cheap, very low risk and have very good Return on Investment. But while nudges look easy, the most effective ones are the product of meticulous, methodological design. A successful nudge campaign will be the result of careful examination of the context in which people currently make decisions, an understanding of the details and triggers of choices, plus knowing what has and hasn’t worked in the past.

Encourage creative thinking when scoping your solutions and then rigorously test, measure and evaluate what works in the real world. The nudge design team often need a degree of protection from the cut and thrust of operational delivery which is why David Cameron invited the infamous Nudge Unit (Behavioural Insights Team) to work across UK government with a long-term mandate and cross-party support.

In our view, getting the benefit of nudges will require executive sponsorship and dedicated teams to really drive sustainable behaviour change. That doesn’t necessarily mean going it alone, however, the application of nudge theory is ripe for collaboration. Think nudge not shove – gently does it.

This article first appeared in Utility Week on 8th June, 2018.

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