Cost Savings – Page 2 – Behavioural Design

The way a restaurant bill gets split affects what’s ordered

Published March 31, 2015March 31, 2015 by Anand Damani

How do you split the bill while eating out at a restaurant with friends? Equally? Or depending on whose had what?

In Germany diners usually figure out the price of their individual bills and no one feels bothered. But in Israel or US or India for that matter, such behaviour may be considered rude. Irrespective, the interesting part is how splitting the bill affects ordering behaviour.

Behavioural economist Uri Gneezy and colleagues divided students who didn’t know each other, into 3 groups of diners, based on how they paid the bill. In the first group, six diners (three men and three women) paid individually. In the second, they split the bill evenly. In the third, the researchers paid for the whole meal.

Turns out, the way you split the bill affects what you order. Of course people ate the most when the researchers paid. But when it came to the equal bill-splitting group, people tended to order more expensive items, than they did when each person paid for his or her own meal. Because for every rupee/dollar they ordered, they had to pay only one-sixth of the cost. So why not order the most expensive dishes? It’s about the incentives, not about individual personalities.

Uri Gneezy, says, “This is an example of negative externality – someone else’s behaviour affects your well-being. Let’s say you are a non-smoker, and a smoker sitting next to you decides to light up. He enjoys his cigarette, but you are also ‘consuming’ his smoke. The guy smoking has bestowed a negative externality on you. The party consuming the goods is not paying all of its cost. In the bill-splitting situation, the person enjoying the large, expensive lunch is doing the same thing. People simply react to the incentives they are facing.”

Source: Uri Gneezy, Ernan Haruvy and Hadas Yafe – The inefficiency of splitting the bill – Economic Journal 114, no. 495: 265-280 (April 2004)

Behavioural Design for The Economist

Published February 11, 2015December 9, 2014 by Anand Damani

In a pilot for The Economist India, Briefcase demonstrated 20% savings of the customer retention budget.

In the challenging environment of magazine subscription renewals, Briefcase achieved similar subscription renewals as existing levels, but at 20% lesser cost. Thus demonstrating a 20% savings in the customer retention budget.

The rest of course is confidential.

People Power video (2min)

Published February 11, 2015November 7, 2014 by Anand Damani

Our experiment People Power in which we got people to reduce power consumption at no cost, explained in under 2 minutes. To know about the power crises in India and the details about the experiment please click here.

People Power has been featured in Fast Company, The Times of India, DNA and has got more than 1,50,000 views on The Logical Indian.

People Power – Our second behaviour change experiment

Published February 11, 2015August 26, 2014 by Anand Damani

Power Crisis in India

India currently suffers from a major shortage of electricity generation capacity, though it is the world’s fourth largest energy consumer after United States, China and Russia*. A 2012 report by the IEA estimated that nearly 25 percent of the population lacks basic access to electricity, while electrified areas suffer from rolling electricity blackouts.

McKinsey reports that the residential consumption will grow at 14% over the next 10 years, requiring India to generate power five to ten fold compared to what was generated in the last 10 years, putting a huge strain on power generation in India.

While increasing power generation faces many issues, one way we can reduce the power gap is through conservation.

Ineffective education-based campaigns

Many educational energy conservation campaigns and messaging like ‘Keep your AC at 24°C’, ‘Switch off appliances when not in use’, ‘Save electricity, Save money’ or ‘Be a good citizen’ or ‘Save the planet’ are being tried by different organizations and people across India, but none have proved to be successful at getting people’s to reduce their electricity consumption. Educational campaigns often don’t lead to action because they rely on an outside entity that warns you of the dire consequences of your behavior or tells you what is the ideal way of behaving. And that often makes people defensive, because we never see ourselves as the ‘bad’ people who waste electricity. Moreover several scientific studies have proven that we humans are often not aware of our own behaviour. Its like we know that we should not overeat, but we do so quite often.

The 6-month long experiment

So instead of relying on traditional thinking, we implemented a study (with modifications) done in California by Schultz and colleagues. We conducted our 6 month long experiment amongst 98 households across posh residential societies in Bandra-Khar, Mumbai, India. Permission of the Secretary of each residential society was taken to conduct the experiment. We collected the households’ electricity bills before they reached each member’s house. We then calculated the average bill amount in that particular society. Lets say the average was 1022 rupees. For all above average users, we put a stamp stating that the average in that society is 1022 rupees. Next to their above average amount, we put a frownie indicating that they could do better. The bills that were below average were delivered without any intervention. The households were not informed about this experiment.

The results of the experiment

The units consumed by the household in the month was taken as the measurement of electricity consumption. And reduction in electricity consumption was a measure of units consumed in the month compared to units consumed in the same month last year.

Over a period of 6 months, the average reduction in unit consumption by above-average users was 1.33% compared to an average increase of 6.02% in unit consumption by non-stamped users.

1.33% reduction on a national scale can power 17,465 villages for one year.

Over this period of 6 months, we found an average of 50% of above-average users (stamp intervention group) reducing their electricity consumption, compared to an average of only 39% of non-stamped users (no intervention group) reducing their electricity consumption. The base rate for above-average users was lower before the experiment began.

The behavioural science behind the effectiveness of People Power

Human behaviour is contagious. We often look at how others around us are behaving and act accordingly. We go along with the crowd to avoid social exclusion. Though we may not be aware of the degree to which we’re socially influenced.

In fact we people don’t see ourselves as easily influenced by those around us. If we were to ask people what would make them change, we suppose they will rank “what others are doing” last. But when we tested what really works, following the herd has proven to be very persuasive.

In the experiment, we didn’t tell anybody what to do. We just told them what people like them were doing.

And when we check out the typical electricity bill, we see that it’s a disaster of line items. So we contextualized information in a way that was motivating for people to conserve power. The information provided by the stamp let the above average users know how much their neighbors were consuming. That set the social norm and got them to reduce their power consumption.

People Power – A simple intervention that gives people the power to make a big difference at no cost.

People Power has got featured in Fast Company, The Times of India, DNA and has 1,50,000+ views on The Logical Indian.

Sources:

People Power is based on the study by Schultz, P. Wesley, Jessica M. Nolan, Robert B. Cialdini, Noah J. Goldstein and Vladas Griskevicius, “The Constructive, Destructive, and Reconstructive Power of Social Norms”, Psychological Science 18 (2007): 429-34

*EIA – U.S. Energy Information Administration Report updated March 18, 2013; Wall Street Journal 2 Jan 2012 and McKinsey’s report, ‘Powering India – The road to 2017’

Calculation of 1.33% on a national scale can power 17,465 villages – [Total energy (in GWh) consumed in India = 852903 (as per Govt. of India, CEA, July 2013). 1 Gwh = 10,00,000 kwh.Total energy (in kWh) consumed in India = 852903000000. Per capita consumption of energy (in kWh) in rural India (y) = 100 (Ministry of New and Renewable Energy, Govt. of India 2012 and World Energy Outlook 2011, IEA). 1.33% of Total energy (in kWh) consumed in India (x) = 11343609900. Total rural population that can be served with 1.33% of energy savings (x/y) = 113436099. Divide the result by 5 and we get number of rural households = 22687219. According to the 2011 census of India, 68.84% of Indians, around 833.1 million people live in 640,867 different villages. So average population per village comes to 1299. Divide the above result (22687219) by 1299, we get number of villages = 17,465.]

Bonus: Check out one of the most famous experiments in studying conformity under group pressure – the Solomon Ash experiment here.

Ads aimed at changing behaviour are a waste of money

Published December 9, 2014May 5, 2014 by Anand Damani

What an ad. Funny. Entertaining. Beautifully scripted. Well directed. Brilliantly acted. Excellent choice of music. Award-winning. And totally ineffective.

The ad not only acknowledges that bullying happens, but it also reinforces that bullying will continue to happen. Just that those who get bullied will get their revenge, even though its after 30 years.

Leave alone the fact that it got the psychology completely wrong, how exactly are such ad campaigns that get produced in hundreds every year in every country supposed to work? In this case, do the ad makers expect the bullies to remember (at the time of bullying) that their targets may seek revenge after 30 years and therefore not indulge in bullying now?

Or another example of an award winning ad seen by millions of people around the world – Smoking Kid. How many people do you think have quit smoking after viewing this ad?

Ever wondered why we hear so much talk around us, but see little change happening? So many promises, agendas, quotes, speeches, videos, ads, so much inspiration (gas) which seems powerful and emotional in the spur of the moment, but eventually leads to nothing. It’s because mere awareness rarely leads to action. We’re ruled by something that’s far more powerful than the inspirational or entertaining or factual messages we’re exposed to – habits.

But billions of money still gets spent on messaging and education to change behavior – not just by the government but also by the private sector. Such communication may succeed in creating an illusion of efficacy by changing attitude/intention, but has proven to be a highly ineffective way of changing behavior – whether of consumer, shopper, employee or public behavior. Truly, old habits die hard.

In the UK, for example, in the 1970s and 80s, the government spent millions on ads educating people to wear seat belts on TV, radio and billboards. Streff and Geller estimated that by the end of the 80s, 80-90% of British people saw these ads 8-9 times each. One would assume that showing people being launched head-first through their windscreens would make people respond. Turned out that most of the people weren’t responding, until in 1983 when the law changed along with strict policing, that most people started wearing them.

In India too, billions are wasted on behaviour-change advertising, whether it’s the ‘Swatch Bharat’ campaign or ‘Save fuel, save money’ campaign or tax payment campaigns. Regards public behavior the government has the option of making certain behaviors compulsory and punishable by law. But even when it is compulsory by law, we in India find ways of overcoming them for several reasons. For example we don’t wear helmets, seat belts, break traffic signals, sit on top of running trains, evade taxes, etc. Advertising isn’t making any difference.

The private sector does not have such legal recourse. So companies use awareness and education to change behavior, which meets with the similar ineffective outcomes. Take for example billions being spent on advertising to get Indians to change behavior and adopt products like mutual funds, breakfast cereal, mouthwash, etc. Or take the example of Colgate wanting Indians to brush at night. How many hundreds of crores and number of years do you think Colgate will take to get Indians to brush at night if it relies on advertising? While advertising is a time and money draining solution, Behavioural Design is about simple, scalable, small tweaks/nudges that make a big difference to big problems. Eg. Bleep – horn reduction system and so many other examples you would find on this blog.

It’s time for CEOs, marketers and policy makers to shed their old habit of relying on ineffective solutions like advertising and awareness-based campaigns and adopt Behavioural Design to change behavior effectively. It‘s the scientific way to change human behaviour.

Source for UK numbers – F.M. Streff and E.S. Geller – Strategies for motivating safety belt use: The application of applied behavior analysis – Health Education Research 1, no. 1 (1986): 47-59

Get more work done from home

Published February 21, 2014February 17, 2014 by Anand Damani

Working from home means no pressure of deciding what to wear to work, no skipping breakfast due to hurrying up, no traffic jams, no wasting fuel, no pollution, no wasting time, no wasting money, no late-punching into office, no unnecessary meetings, no pointless brainstorms, no fake smiles, no sucking up, no monkey business. On the contrary working from home means having personal space, being at ease, improved focus and concentration, better ideation and greater creativity.

Christine Durst, founder and CEO of Staffcentrix and author of two books on the subject of telework, says the benefits start with basic cost savings from travel, real estate and utilities to areas such as recruiting and retention — and, yes, productivity. (Since 1999, Staffcentrix has designed and delivered a variety of training programs for such clients as the US Department of State, Air Force, and Army).

Durst says that telework programs can reduce absenteeism and tardiness, and even curb stress-related illnesses. But the one thing she hears again and again from remote employees is that they simply get more done.

Yet very few companies encourage their employees to work from home. We understand its natural for employers and bosses to wonder if you are really working or dozing off at home. But as long as you deliver quality output in the timeframe agreed, should it matter?

However like any other change, it’s going to be met with resistance by your company. So in order to lower the resistance, we think companies could do with 3 helpful interventions. One, companies need to have a clear formal policy on remote working, so that all employees know what’s appropriate and what’s not. Two, they need to provide employees with proper tools for remote working (laptop, internet connection & mobile) not just to ensure smooth work, but also so that managers can communicate with employees in a variety of ways and three; they could start a pilot by choosing result-driven individuals with good communication skills (and perhaps no kids), working remotely for 1 day per week and test it, rather than rely on conventional ways of decision-making i.e. over-analyzing whether it’s a good idea or not and not testing it.

Do also read Richard Branson’s take on it here.

A way of boarding that saves time and lowers blood pressure

Published December 9, 2014June 24, 2013 by Anand Damani

Warning: This post is the longest we’ve ever written, but we think you are likely to find it rewarding.

There are long queues at boarding no matter which airline you travel by. And once inside the plane, we’re often waiting in line once again for someone in front us whose is trying to keep his/her cabin luggage overhead. Imagine the time that gets wasted for you and the airline. In this industry, more than any, time is money. The quicker the airline can board, the more it will be on-time, the more satisfied will be its customers, the more money it can make. But how can this be made possible?

Southwest Airlines in the US has a unique solution to this problem. Southwest doesn’t have seat assignments. Here’s how it works:

In airlines that assign seat numbers, when you’re trying to get to your seat, you’re not only waiting for someone to find their seat, you’re also waiting for them to put their bag in the overhead bin. So if you’re assigned to say, Seat 26A, you must wait until Seat 22C puts his/her bag in the overhead compartment.

But if you’re on Southwest Airlines, the procedure and behaviour of passengers is completely different.

So let’s say you’re flying on Southwest with a carry-on bag. You’re anxious about getting a window seat and making sure your bag gets in the compartment, so you check-in online 24 hours beforehand (the beginning of the check-in window), and are placed in boarding group A. Group A gets to board first.

Southwest keeps in mind that most people don’t care if they sit in row 10 or row 25, but they are likely to have a strong opinion about having a window or an aisle seat.

Fast forward to the airport. You arrive and get into the queue for group A, confident that there is a very good chance that you’ll get the seat you want and overhead space.

Now you’re walking onto the plane and suggested to move towards the further rows. The person in front of you has a bag and spots an aisle seat in row 25, and stops to put their bag in the bin. You’re a window person, and see one in row 21. The person behind you also wants a window, and stops at row 18. Notice what happened here: no one was held up because of the person in front of them. You all sit down, and the process repeats.

The boarding process becomes similar to a conventional boarding process as the seats fill up – if you’re in Group C (last to board) and say there’s only one window seat left and it’s at the very back of the plane, you have to wait 20 seconds for the person in front of you to claim their aisle seat at the front.

Compare this to a conventional boarding process: not only would you have had to wait for Seat 21C to put his bag in the compartment, Seats 21 A, B and D have to fight with their bags, and the other seats’ bags in order to fit their bags in. Multiply this by 30 rows, and you can see how this adds time to the boarding process.

What Southwest has done is eliminate that 20-to-30 second delay for 80% of passengers and instead limited it to, say, the 30% of passengers at the end of Group C. These passenger-to-seat delays add up quickly; and with roughly 130 seats each at 20 seconds each, that’s potentially 43 minutes of delays during seating! This, among other reasons, means that Southwest can turn around their planes in about 25 minutes, the fastest of any airline.

And not to forget, lower your BP. Travelers who are the most anxious about getting their preferred seat and their bag in the bin are more likely to check-in at the first second, earning them a coveted spot in Group A. But people in group B know there is, say, a 50% chance they’ll get a good seat and space in the overhead bin. Group C knows their chances are slim of getting either. The point here is that everyone has a rough idea of their probabilities and also that the probability is the direct result of their own actions, i.e., how quickly they checked in.

And the best thing I like about this way of boarding: I’ll never be seated in the wrong seat!

Big thanks to Michele Walk, Operations Manager at Engage for the information.

If you’re good at math, consider yourself blessed

Published October 25, 2023November 26, 2012 by Anand Damani

I struggled all my studying years with MATH (Mental Abuse to Humans). I was so bad at math that I had even developed a method of memorizing patterns to solve problems, so that I could apply them in case a similar question came up in the exam paper. If you were and are good at math, I have very high regards for you, because most of the human race is simply bad at it.

Consider these two promotions. One is a flat ‘33% off’ on the MRP. The other is 33% more quantity of the product free. In short – ‘33% extra free’. Are both similar? Which one seems more attractive to you?

If both are similar in terms of a proposition to you, but you still prefer ‘33% extra free’, you’re in the majority. In a study, Akshay Rao, the General Mills Chair in Marketing at the University of Minnesota’s Carlson School of Management, asked undergraduate students to evaluate two deals on loose coffee beans — one with 33% more beans for free, the other at 33% off the price. All the participants chose ‘33% extra free’, inspite of ‘33% off’ being a quantitatively bigger and better offer favouring the customer. (33% off = 50% extra free)

The reason why we opt for ‘33% extra free’ is not just that we suck at math, but we are also infatuated with the idea of getting something for free. It seems as if the power of ‘free’ makes us worse at math.

Now, how you take advantage of this will depend on whether you are a consumer or a marketer.

Goddess of magic can save you fuel

Published October 25, 2023October 1, 2012 by Anand Damani

Remember being told by a kid in an ad sometime back, to switch our cars off at signals, because saving fuel meant saving money? If you didn’t, crores of tax payers money (in India), in the form of TV, radio, outdoor advertising went down the drain. Ok, so you are one of the few who do recall this message. Have you changed your behaviour? Do you now switch off your car at traffic signals? Does your driver do it? Have you asked your driver to do it? Ever?

Most of us don’t. It’s too much effort. You would first need to switch the AC off and then turn the ignition switch off, to turn the engine off. And when the signal turns green, you gotta turn the ignition key on, get frantically honked at (we’re talking India remember), change the gear from neutral to first, get frantically honked at again, put the hand brake down, and finally get moving. Oh yes, turn the AC on again. Even if you are highly eco-conscious or highly stingy, it’s still too much effort.

Here comes the Goddess of Magic. Isis, the Greek Goddess of Magic, is the inspiration behind the name of an innovative automobile product called, the same in capital letters – ISIS – Intelligent Stop Immediate Start!

Intelligent Stop Immediate Start (ISIS) is a device, which if fitted inside your car, can save you anywhere between Rs. 500 – Rs. 2,500 for every Rs. 10,000 you spend on fuel. The way it works is that when your car comes to a halt at a traffic signal or while in stop-and-go traffic, and you put the car in neutral, ISIS switches the engine off automatically. To start the engine back, you simply have to press the clutch. No additional effort required. Solutions made keeping in mind that humans are built lazy, work well.

What about the AC you must be wondering. ISIS comes with a built-in sensor, which detects even a minor drop in cabin temperature. If ISIS detects a drop in temperature beyond what is set by the driver, it restarts the engine automatically. As per tests conducted, the cabin temperature remains constant for about 1-2 minutes when the engine is switched off. Most signals restart, within 60 seconds in any case. And if you wish to start the engine/AC at any time, you simply need to press the clutch and the engine with the AC starts again.

One more benefit of the Goddess of Magic, besides saving fuel and money – the reduction in particulate matter, hydrocarbons, nitrogen oxides, carbon monoxide, sulfur dioxide, carbon dioxide – the stuff that’s weakening our lungs.

ISIS has been developed by Indent – Dhruv Chaudhry’s company. Indent is an auto research and development company, which focuses on creating innovative auto products that, benefit the environment and improve safety. To know more about ISIS click here.

Our advice to the PCRA (Petroleum Conservation Research Association) and Mr. S. Jaipal Reddy, (Union Minister of Petroleum & Natural Gas, India) – instead of spending crores on building awareness for saving fuel via advertising, change actual behaviour by promoting products like ISIS and help India save trillions worth of fuel.

Trust advertising to mislead

Published October 25, 2023September 10, 2012 by Anand Damani

Chances are you apply paste on your toothbrush the same way it is shown in the ads (as shown in the illustration above). Then you place it under the tap to add a bit of water to make it moist. I hear you saying ‘How else?’ right?

Well, here’s what the dentists recommend. Dentists say we should squeeze the paste at a 90 degrees angle into the brush from the top, so that the space in between the bristles gets filled with the paste + that we don’t add any water.

This works in two ways. First, the paste keeps getting released from the toothbrush at a consistent pace, ensuring that the paste comes into use, even after the initial burst of foam in the mouth. Second, dentists recommend we don’t add water because it leads to breaking and slipping of the paste out of the mouth. (You might have noticed those chunks of paste falling into the basin or on your clothes, if you are clumsy like me.) Dentists say that in anticipation of brushing our teeth, our mouths generate enough saliva, to ensure that the experience of brushing is not too dry for our liking. Together, this ensures that the quantity of paste used is just right and there is minimum wastage.

Don’t trust me? I have started doing it since few weeks. The paste lasts longer and is therefore more effective. Nothing gets wasted, I don’t act clumsy (atleast not in this circumstance) and the mouth doesn’t feel dry at all without the water. However small this may sound, I’m glad I learned the right way to brush, never mind that it’s happened at the age of 34.

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