Stop talking about savings!

Stop Talking about Savings!

To drive consumer behaviors, we need to change how we talk about energy efficiency.  6 reasons why:

by Mike Walker • May 20, 2015

Over the past 13 years we’ve helped a lot of clients – including Energy Star, the Northwest Energy Efficiency Alliance, New York State, and numerous electric utilities – promote energy efficiency.   Almost without exception, their first marketing instinct is to tell consumers how much money they can save.  One of our biggest challenges as consultants is to convince them that this approach demands some scrutiny.

Here are six reasons, rooted in behavioral science, that suggest we should talk less stridently about saving money if we want to motivate consumers to reduce energy consumption:

  1. The Loss Aversion Principle. In economics and decision theory, loss aversion refers to the human tendency to strongly prefer avoiding losses to acquiring gains.   Some studies suggest that losses are twice as powerful, psychologically, as gains.  Yet most energy efficient products and programs emphasize how much money we can save.  To be more effective, we should turn this knee-jerk marketing appeal on its head.  Instead, we should stress how much money people are already losing – each and every day, month, or year — until they take action.
  2. On their own, rational appeals rarely drive new behaviors. Telling humans about dollar savings should appeal to their rational selves, and in an ideal world that would be sufficient to spark action.  But the central truth uncovered by research in behavioral economics is that humans don’t always act in their own self-interest.  That’s why marketers need to appeal to both the rational (minds) and the emotional (hearts) of our target audiences.  Talking about savings alone is generally insufficient.
  3. Ever-rising rates hide savings. Utility rates go up over time.  In fact, the average retail price of electricity in the US has risen every single year over the past ten years, despite the fact that our economy imploded and fossil fuel prices fluctuated wildly over the same time period.   Persistent rate increases mask the savings we achieve through our energy efficiency efforts.
  4. Growing demand hides savings, too. We’re plugging in more electronic devices than ever before, but because we do so gradually over time, we don’t realize that our overall “baseline” energy use is increasing. Like rising rates, growing energy consumption conceals the savings from energy efficiency measures.
  5. Negative feedback. This is a function of rising rates and rising demand: when we don’t see the savings we were promised on our utility bill, we get discouraged.  In behavioral science lingo, the feedback we receive is negative (because our actions didn’t result in the anticipated reward.)
  6. The resulting credibility crisis. The negative feedback loop has two pernicious effects.  First, it means we’re less likely to respond to future energy efficiency appeals.  Second, we question the integrity of the source of the appeal, whether that’s our utility company, a product maker, or an energy efficiency advocacy group.  And we’re less likely to trust them next time around.

A classic example:  Sally bought an energy efficient refrigerator last year, but STILL saw her utility bills go up.  Although the real culprit may have been an increase in the cost of electricity, a record-cold winter, or her recently acquired 50-inch plasma TV, she isn’t going to build a spreadsheet to figure all of that out.  Instead, the next time she faces a decision involving energy efficiency, she’ll remember that her fridge was supposed to save her money – money she never saw.

I’m not saying that we should never talk about energy savings.  The most effective behavior change initiatives appeal to both the heart and the mind.  I AM saying that efforts to promote energy efficient behavior need to reflect these realities, rather than ignore them.