Urgency and engagement: Empirical evidence from a large-scale intervention on energy use awareness
Introduction
Utilities all over the world rely heavily on users to submit their energy readings to achieve billing accuracy. This is especially true in the residential natural gas market, for which smart meters - that transfer consumption data automatically and make meter reading by the customer or by the utility unnecessary - are lacking. Many European countries have rolled out smart meters for measuring electricity, but natural gas lags behind. In Europe, for instance, just five countries, among which Italy, have decided to roll out natural gas smart meters. Yet, natural gas dominates energy expenditures in many countries: in Italy, for example, the average household pays 80 per cent more for gas than for electricity. Identifying strategies to effectively encourage customers to send meter readings and improve the accuracy of energy bills is thus a widely relevant policy and marketing issue.
Increased billing accuracy is likely to improve both consumer welfare and administrative efficiency through a number of channels. First, billing accuracy reduces the likelihood of bill shocks. Bill shocks are one of the main causes of delayed and incomplete bill payments, and of complaints customers make to utilities’ customer care services. Second, bills based on customers’ actual consumption, rather than on their estimated consumption, send users a more precise signal of their energy usage and increase the fairness of the billing system. Third, existing evidence suggests that making information on consumption clearer, more salient or more frequent, results in expenditure reductions (Allcott, 2011, Costa and Kahn, 2013, Ferraro and Price, 2013, Gilbert and Zivin, 2014, van Houwelingen and van Raaij, 1989). More specifically, feedback on consumption to residential customers, who read their own meters, has been identified a promising method for motivating them to save, when smart meters are not available (Darby, 1999). Understanding how to motivate people to attend to their gas consumption is therefore both challenging and policy relevant.
We study an intervention aimed at making gas customers more attentive to their consumption. Specifically, we evaluate a communication campaign encouraging customers to submit self-readings, to be billed for their real rather than for their estimated consumption. The utility sent each targeted customer one of two versions of the campaign message. One version imposes a sense of urgency on customers through a close deadline for submitting a meter reading. In particular, this version of the campaign message informs customers that they are entering a special 4-days’ time window and that they will receive a bill based exclusively on their real consumption if they send a reading before it ends. The other version of the message more generally links self-readings to having one’s bill based on real consumption. We test the relative impact of the two versions of the campaign message on self-readings, and compare it to self-readings rates among customers not receiving the campaign.
The utility did not select randomly which customers should be targeted by the campaign, nor who should receive the different versions of the message. In order to obtain a clean impact evaluation of the campaign messages, we adopt tools commonly used in the evaluation of public policies, when randomization is not an option, to generate a valid control group, i.e., one with the same observable characteristics, on average, as the treated sample. Specifically, we use propensity score matching to match the sample of treated customers with untreated ones displaying similar characteristics.
Knowing that submitting a reading would result in a bill based on real consumption increases self-reading after the campaign by 12 percentage points, relative to the control group of customers excluded from the campaign; being given a deadline, by which to send a reading, leads to an additional increase in submitted readings of 16 percentage points. We explore the heterogeneous effect of the campaign, depending on customers’ prior level of engagement with the utility: while effective also on previously unengaged customers, both versions of the campaign messages raise self-reading rates more among active customers, i.e. customers who were active on the utility’s portal or submitted self-readings before the campaign.
Our results are consistent with recent evidence showing how agents, when made aware of time restrictions on a task, tend to prioritize it, even if secondary with respect to other tasks (Zhu et al., 2019, Zhu et al., 2018). Since missing the deadline in our setting does not prevent customers from submitting a self-reading and benefitting from the improved informational content of the resulting bill (Zhu et al., 2018),4 likely explanations for the urgency effect that we observe point to the desire to meet a certain goal (Kivetz, Urminsky, & Zheng, 2006), or to individuals’ tendency to prefer immediate benefits over future ones (Frederick et al., 2002, McClure et al., 2004). Urgency draws attention (Botti et al., 2008, Cialdini, 2007, Pribram and McGuinness, 1975, Zhu et al., 2018, Zhu et al., 2019), creating enough tension to trigger action, even among those customers who are generally less reactive to informational campaigns. Indeed, we show that urgency significantly and marginally increases the response rate even among customers displaying the lowest level of attention towards the service. Still, our results confirm that urgency affects more individuals who are tuned into the time dimension (Zhu et al., 2018), such as customers regularly paying bills or submitting self-readings.
We go beyond the recent literature in two main ways. First, to the best of our knowledge this among the first tests of the urgency effect in a real setting. Previous work (Zhu et al., 2018, Zhu et al., 2019) has focused on small samples of either students or online workers (such as MTurkers) with hypothetical decisions. Here, we evaluate it in the field, with a large set of customers engaged in behaviours with real and relevant economic consequences. The current work is also novel in its focus on the heterogeneity of the urgency effect, namely in investigating whether urgency has the same influence on unengaged customers. We find a significant reaction from customers who displayed low attention to their own consumption before the campaign, even if not as strong as that of engaged ones.
Our results also contribute to the growing literature that puts behavioural insights to work and demonstrates their effectiveness in policy relevant domains through field studies (Andor and Fels, 2018, Brandon et al., 2019, Harrison and List, 2004, List and Price, 2016). In the energy sector, existing studies have overwhelmingly focused on fostering efficiency in electricity consumption and used social information as behavioural lever (Allcott and Mullainathan, 2010, Allcott and Rogers, 2014, Allcott, 2011, Andor et al., 2017, Sudarshan, 2017). However, existing evidence shows the potential of enriching the behavioural policy toolbox (Abrahamse and Steg, 2009, Fischer, 2008) and demonstrates how even interventions not directly aimed at reducing consumption can improve efficiency, thanks to their impacts on increased awareness and attention to resource usage (Ayres et al., 2013, Darby, 2010, Hargreaves et al., 2013, Jessoe and Rapson, 2014, Wichman, 2017). The current paper is one of the first attempts to use urgency as a means to increase consumers’ engagement in the energy market.
The paper proceeds as follows: Section 2 briefly describes the setting of our study and provides support for its premise, Section 3 presents the design of the campaign and the data, Section 4 the empirical results, and Section 5 concludes.
Section snippets
Energy self-reading
Natural gas is used by about 95 per cent of Italian households for heating, as well as being the main energy source for hot water and cooking, and makes up about 65 per cent of energy consumption in the country (“I consumi energetici delle famiglie”, 2014). Gas and electricity are responsible on average for 7 per cent of household expenditures among Italian consumers.5
Gas
Data and design
We study an intervention conducted by a large energy company with operations in Italy and worldwide. The utility launched the campaign in May 2017, at the end of the heating season. More than 1 million customers received the campaign messages by email over the course of one week, namely a first message on May 5th, and a reminder on May 8th. We have data on the 1,083,369 customers targeted by the campaign, as well as on 1,637,002 customers that did not receive any message, who constitute our
Results
We now turn to the analysis of the campaign’s impact on self-reading. All subjects in the treatment sample received the campaign email and 12,779 of them opened the email, equivalent to a 43.29 per cent average open rate. Of them, 29.17 per cent submitted self-readings in the 15 days following the campaign.
Fig. 1 shows the share of customers submitting self-readings within 15 days from the campaign’s start date by treatment and control groups (top panel), the share of customers opening the
Discussion
We study the impact of messages encouraging customers of a large utility to submit gas meter readings. Treatments vary the content of the messages, in particular making salient a near deadline for submitting self-readings, which would make the upcoming bill completely based on real consumption, as opposed to estimated one. Imposing a sense of urgency is a strong motivator of engagement, especially for customers who already pay some attention to their gas consumption.
This study has implications
Declaration of Competing Interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Acknowledgement
The work was supported by the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007–2013) / ERC grant agreement no. 154 336,155 - project COBHAM “The role of consumer behaviour and heterogeneity in the integrated assessment of energy and climate policies”.
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Fellow, Fondazione Pesenti; Affiliated Scientist, RFF-CMCC European Institute on Economics and the Environment.
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Fellow, Center for Economic Analysis of Risk, Georgia State University.
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Director, RFF-CMCC European Institute on Economics and the Environment, Fondazione Centro Euromediterraneo sui Cambiamenti Climatici.