How to choose a customer engagement strategy that works

How to choose a customer engagement strategy that works

Pretend that you work for Pacific Gas & Electric, an energy company serving thousands of homes in northern California. The hot summer months are coming, and if your customers use their air conditioners as much as they did last year, there's a strong likelihood your power grid will fail and blackouts will roll across the state.

To prevent this, PG&E has introduced an energy conservation program called "SmartAC." If a customer enrolls, PG&E will install a switch at their residence that allows the company to remotely control their air conditioner -- and in times of peak demand, that means turning it down or off. The program is voluntary, and there's no cost to the customer for joining.

Which brings us back to your new job at PG&E: head of enrollment for residential customers. Before you start printing up fliers or knocking on doors, though, I have to warn you that the company already has marketed this program in a few areas and customer interest has been low.

Sure, PG&E has told them that it costs nothing, and the company has touted significant public benefits. Not only would there be fewer (if any) interruptions in service, PG&E also could avoid spending billions of dollars to increase generating capacity -- a massive investment which undoubtedly would raise rates. But so far that public good appears to be trumped by self-interest. After all, who really wants to cede control of their air conditioner on a hot day?

Fortunately, some very smart people have come to you with three strategies to boost enrollment:

Strategy #1: offer a $25 incentive for signing up. Nothing fancy here -- just a good old fashioned bribe to help customers do the right thing.

Strategy #2: post a sign-up sheet in a public space (the lobby of an apartment building) to make the enrollment process more observable. Ask customers to write their names on the list so everyone can see exactly who's in and who's not.

Strategy #3: as above, post a sign-up sheet in a public space but assign each customer a code number to write on the sheet instead of their name. In this way, you're again making the process more observable but are also protecting the privacy of those who sign up (as well as those who don't.)

If you could invest your marketing dollars in only one of these strategies, which would you choose? The correct answer -- based on an actual field study completed earlier this year -- is #2. And by a wide margin.

The field study was conducted in Santa Clara County. While the SmartAC program had been marketed in other parts of California -- with the lackluster results noted above -- it had not been introduced in this county before the field test.

Materials advertising the program were slipped under doors, left on doorsteps or sent via mail to 2,413 PG&E customers. For one group, the materials offered the $25 incentive and no public sign-up sheets were involved; a second group received no cash offer but found sign-up sheets posted in common areas where they were asked to enter their names; and a third group also received no incentive but saw sign-up sheets where they could enter code numbers and remain anonymous.

All of the strategies increased enrollment compared to other regions in northern California, but not to the same degree. The anonymous sign-up sheets increased enrollments three times more than the cash incentives. And the sign-up sheets where customers entered their names were seven times as effective as the cash incentives, making Strategy #2 the clear winner.

Why? First, it was superior to Strategy #1 because it took a transaction that was happening out of the public eye and made it observable -- literally could see their neighbors signing up for the SmartAC program. While Strategy #3 also made the process observable, Strategy #2 offered the additional incentive of boosting an individual's reputation for publicly signing on (and, conversely, imposed a cost for not participating). It also tapped the power of indirect reciprocity, a form of cooperation where individuals become more likely to help when they see others helping first. (In fact, the study makes it clear that for indirect reciprocity to really kick in, we need to know the names of the other helpers.)

And what does this mean for you back in your real job? Whether you're asking people to give blood or give money, drive a fuel-efficient car or drive down energy usage at home, bear this in mind: human beings are more inclined to do the right thing when they can see others doing it, and when they know others will see them doing it as well.

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