Ignoring Irrational Buying Behavior Means Fewer Energy Efficiency Purchases

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Predictably Irrational CoverCheck out Predictably Irrational by Dan Ariely.  Or just read his blog for a while. We humans are wacky when it comes to making decisions.

We’re just not rational. Here’s a good example on how different frames of reference affect decisions we make. In one of Areily’s experiments, he pretended he was giving a poetry reading and presented different scenarios to two groups of students. The first group, he told that they would have to buy tickets to attend. The second group, he told they would be paid to attend.  He then told each group that event was free.  Students in the first group were excited to attend, believing they were getting something of value for free. On the other hand, student in the second group largely declined, believing they were being forced to volunteer for the same event without compensation. Same event. Same cost. Little actual knowledge about the event. And very different choices based on how it was originally described.

This has some unsettling implications for energy-efficiency programs as they are frequently run. I wonder if offering setting expectations that energy audits are free provides an anchor on their value? What if we emphasize rebates and then change the game for consumers by removing rebates (even worse, remove rebates and suggest they’ll be coming back sometime)? What if say a National Lab gave cost information on energy measures that actually is much lower than real-world pricing that consumers should expect? What if these costs were baked into recommendations spit out by some audit tools? (Home Energy Saver Pro?) This stuff matters. And in the energy-efficiency world, it seems we get it wrong a lot.

Contractors, we’re not off the hook, either. Homeowners are frequently paralyzed by too many choices. And yet some contractors, while claiming expert status, present many choices to homeowners pushing the expert responsibility to the homeowner who isn’t really equipped to decide which type of 4 different insulations they what or whether they want R-40 or R-50 or R-60 in their attic or a myriad of other possible energy-saving options.

And rather that create a package of solutions, some will list about each line item, with the cost associated with it. In home performance, we talk about “house as a system”. Why then, would we offer “improvement measures as an a la carte menu”? Not only does this confuse homeowners and lead to fewer sales and smaller projects, but in may respects it flies in the face of systems thinking.

Research shows people like to be told what to do, even if only implicitly.  Shine a light on the fruit and put the salad bar in the way of the candy  and kids eat more fruit and salad. Offer your customers a comprehensive packaged solution and they’re more likely to buy a comprehensive packaged solution!

The behavior research points to other things we often get wrong.

For example, and perhaps related to the “single action bias” I’ve discussed previously, is the fact we assign a cost to transactions themselves.  What does that look like in home energy? In terms of what the consumer experiences, there is a cost in the screening audit, a cost in the walkthough audit, a cost in a comprehensive audit, cost in multiple bids from every trade, and more. This is a pain that is in addition to the actual dollars they pull from their wallet. Reaching into the wallet it in itself a cost that people prefer to avoid. And of course, having to take time off of work or out of their lives to jump through a lot of hopes to talk with an army of different people just to make the daughter’s bedroom more comfortable sometimes leads to just buying the goofy heater with the Amish mantle instead.

Simplifying the number of steps a person has to take to make a good, science-based improvement is a must. And back to the beginning of this post, framing this in the right way is important, too.

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About the Author:

Mike Rogers is the President of OmStout Consulting. A nationally recognized expert in residential energy-efficiency, he works with contractors and programs to scale sustainable market approaches to improving homes. More on Google+

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