by Tom Scaramellino, Efficiency 2.0
Conventional approaches to residential energy savings often flaunt new technologies, and they’ve been successful. Nevertheless, their effectiveness likely has hit a ceiling.
Take, for example, compact fluorescent lightbulb (CFL) giveaways and appliance rebates. CFLs are becoming a norm, efficiency standards continue to tighten and customers seek increased flexibility.
The remaining savings will not come solely from clever technologies but from incisively designed, behavior-based customer engagement strategies that place customers at the center of the efficiency process. This type of customer engagement applies targeted messages and creative incentives to individual utility customers and affordably realizes long-term energy savings.
The question for many of these programs is not whether they work, but can they scale. Residential efficiency programs that rely on in-home hardware can be expensive and unwieldy. Programs that rely on opt-out strategies through direct mail can reach a large population but cannot deliver deep energy savings.
Western Massachusetts Electric Co. (WMECo) and Efficiency 2.0 recently partnered to design and administer Western Mass Saves, a behavior-based energy efficiency pilot program. Western Mass Saves demonstrates how such a program can scale for the broadest, deepest energy savings. Using direct and community marketing and a robust website and rewards program, Western Mass Saves leverages psychosocial and financial incentives to achieve utilitywide energy savings.
Engagement Over Understanding
Long-term energy behavior change stems from deep customer engagement. Engagement does not equate to customers’ knowing or being interested in energy use. Engagement is action: Do the customers change their behavior in the desired way? It doesn’t matter whether customers know their British thermal units from their joules if they use less energy.
Behavior is the key to unlocking massive savings. Western Mass Saves increased customer engagement through direct and community marketing to manage peak loads.
The program provides each customer personalized savings recommendations based on energy use, then supplies regular feedback plus rewards for savings to drive continuous engagement at unprecedented scales.
The power of opt in. Approaches to influence utility customers’ behavior generally fall into two categories: opt out and opt in. In the former, customers may receive unsolicited direct mail; their only option is to opt out. In the latter, they actively seek access, opting in to tools such as Web-based dashboards and rewards programs. Opt-in approaches result in the deepest engagement and energy savings. Western Mass Saves uses opt-in and opt-out tools to harvest the deepest, broadest savings.
The program also uses direct mail and community marketing, which provide immediate benefits and can entice a wide audience to opt in online. To date, direct mail ushered in roughly 40 percent of the participation base for Western Mass Saves.
The remainder comes from community marketing, mostly on-the-ground recruitment by program staff. These efforts include building relationships with community groups within WMECo’s service area. Community marketing efforts augment direct mail, garnering 150 percent more participation than direct mail alone. This structure also offers a robust opportunity to design creative approaches that secure even deeper engagement and savings.
To support local efforts focused on specific townships, a robust website interface specific to each community was established to deepen the connection with WMECo customers. Retaining that local feel supports community involvement on the ground and captures as much customer engagement as possible.
Twitter and Facebook assist customer engagement. Based on the experience of Western Mass Saves, however, social networks should supplement flesh-and-bones social networking through community marketing and engagement.
Leading with carrots vs. wagging fingers. Because Western Mass Saves uses direct marketing to draw customers to opt in, close attention is paid to which direct mail approaches deliver the highest conversion rates or can drive deeper engagement. A higher conversion rate means more bang for the buck and shows the most promise to scale.
The benchmark mailer that integrates neighbor-comparison messaging (i.e., you vs. your neighbor) nets a 0.51 percent conversion rate similar to the 0.6 percent industry benchmark response rate for unsolicited direct mail. In contrast, the mailer alerting customers of rewards available based on energy savings achieved up to a 6 percent conversion rate depending on the amount of reward points offered—an order of magnitude higher.
The right behavioral tool for the job. Customers respond differently to messages, which is why Western Mass Saves integrates behavioral marketing strategies to maximize engagement after participants opt in. The core approach revolves around the following:
1. Contextual feedback: Examines personal energy use through past performance. This approach employs a very high click-through rate of more than 30 percent.
2. Loss aversion: People act sooner when they fear something will be taken from them, even if they didn’t know they had it in the first place.
3. Goal setting: Leverages realistic, self-designed goal setting. The likelihood of making progress toward a goal increases if the goal is realistic, so Western Mass Saves guides customers toward achievable goals.
Creative incentives. Western Mass Saves integrates a localized approach to incentivize energy-saving behavior with rewards points that can be designed to support local merchants. Customers may redeem accumulated rewards points for discounts, cash-equivalent gift cards and other incentives from national and local retailers. The incentives provide real-world financial benefits that fit everyday purchasing habits. This direct, tailored, incentive-based approach is the most effective mechanism for scaling engagement.
The value of competition. People love to compete, especially in teams. Western Mass Saves uses energy-savings competitions that pit townships head-to-head.
The yearlong competition tasked four communities in West-Central Massachusetts with the goal of reaching 3 percent total energy savings over the previous year. The winner, announced in the spring, won a 1-kW solar panel installation on a public building. In the meantime, the opt-in rates have proven impressive: Each community brought in participation above the standard rate. Based on these results, similar competitions hold promise to further scale customer-based efficiency programs.
Maximizing customer satisfaction, minimizing impacts on customer support. One potential pitfall of customer engagement is that it can impact customer-support resources such as call centers. Customers might call for help to navigate a program or, in the worst case, to complain if it offends them, which results in call center expense. WMECo’s call centers have experienced no additional expenses, and overall customer satisfaction has risen. This can be attributed to the many program materials’ guiding customers toward online help resources. That deep program participation builds new bonds between the utility and the community.
As utilities seek increasingly creative ways to meet aggressive efficiency goals and boost customer satisfaction, new customer engagement programs show impressive results.
Western Mass Saves indicates that when used correctly, behavior-based programs scale gracefully and garner deeper, more effective customer engagement. WMECo sees this engagement translate into energy savings and customer satisfaction.
The winner of the Western Mass Saves new 1-kW solar panel, by the way, was Sunderland, which achieved a 10 percent opt-in rate of eligible homeowners.
But really everyone won.
Ludlow, Amherst and Easthampton each were awarded 20 screw-in LED lighbulbs in recognition of their energy savings.
Tom Scaramellino is founder and CEO of Efficiency 2.0, a New York City-based customer engagement solutions provider. Reach him at email@example.com.