Canadian Telecom Consumer Study – Improving Data Overage Disclosure Practices

One of the major frustrations for consumers when interacting with companies is a lack of transparency in the fees they are paying for a service. This creates a sense of distrust and skepticism, where consumers feel like they are being “cheated” or “scammed” by big corporations. From a behavioral science perspective, understanding how trust is built and maintained is a critical point in the consumer journey to not only improve conversation rates but also customer retention.

From a consumer’s perspective, decreased trust lowers the perceived value of the company. If this perceived value is lower than the economic cost of the service, a loose-loose scenario is created for both the brand and the consumers. As a non-profit, The Decision Labs aims to leverage behavioral science in order to create win-wins between companies and consumers. We believe that both the consumer and the company can benefit from a better understanding of the product and the people that use them. Ultimately, those who succeed and continue to grow are those who leverage a deeper understanding of their consumer’s needs, biases and preferences and turn them into design opportunities. By guiding the design of customer interactions, the principles of behavioral science offer a simple, low-cost route to improved customer satisfaction and retention.

To illustrate this, we ran an online study that showed how improving data overage disclosure practices can improve consumers’ overall trust, loyalty and likelihood that they will recommend the provider. In 2017, Canadians spent about 1.3 Billion in overage fees according to the CRTC. Naturally, this creates frustration and friction that can, potentially, erode provider-client relationships by giving them a reason to distrust their providers. As a consumer, the cost of switching to another provider is low and the options are plenty. Therefore, optimizing for customer loyalty, especially at these friction points, is critical to customer retention.

Our sample size consisted of 104 Canadians (42% Female; 35% < 50,000 CAD household income; 18% Telus; 18% Rogers; 13% Bell Customers; 10% Koodo; 12% Fido; 8% Virgin; 2.8 years average time with current provider). We provided participants with a hypothetical month of text messages about data usage from a provider and asked them to rate the provider based on these interactions. We used a baseline message from a major Canadian provider and then created a series of messages based on behavioral economics concepts such as framing, salience, and social norms. For example, the standard warning message warned: “If you go over before then, your standard data rates will apply.” We attempted to convey that the provider has the consumer’s best interest in mind: instead of a warning, we advised “To avoid additional charges, learn how to manage data usage…” We found that these small changes in copy were able to have significant effects on consumer attitudes.

Chart 1

Specifically, this minor change in messaging increased trust by 11.3%  (Chart 1) and feelings that the provider had their best interest in mind by 20.3%. We also found that this framing improved the perception of transparency, where 19% more participants felt like they had enough information to form a good decision about data overage. Critically, this messaging also demonstrated a 15.2% increase in the likelihood of recommending the service provider. 

Although we only implemented a simple tweak in the messaging, we were able to significantly change the way consumer’s perceived the trustworthiness, transparency and likability of the service provider. As a non-profit, our long term goal with studies in the telecommunications industry is to help providers convey information in a clear and positive way. By taking into consideration the behavioral and economic perspective, we can move towards a service/product design that optimizes for consumer-provider relationships in a way that is mutually beneficial for both parties.

To Vote or Not to Vote?

According to the U.S. Elections project, 49.2% of the eligible voting population cast a ballot last November, marking the highest recorded turnout for a U.S. midterm election since 1914.[1]Yet, despite this recent peak, the United States still has an abysmally low turnout record compared to the rest of the democratic world. While only 58% of eligible voters participated in the 2016 U.S., other developed nations saw significantly higher turnout in recent national elections. In France, for example, 67.9% of the voting-age population participated in the most recent national election, and in South Korea, 77.9% participated in the 2017 national elections.[2] So, what can we civically-minded individuals do to increase turnout? Well, behavioral economics offers some answers. By understanding the psychology of decision-making, candidates and politically engaged individuals can design more effective messages to get constituents and friends out to vote.

What is Framing?

Traditional economic theory assumes people are perfectly rational, making fully-informed choices across different environments in order to maximize expected utility. However, a host of psychologically-informed research on decision-making — and, perhaps, our own intuition — dispels this model of homo economicus. Rather, our decisions are subject to any number of cognitive and environmental limitations.

One foundational example of such a limitation is that how information is framed plays an outsized role on our perception of that information (Kahneman & Tversky, 1979).[3] Building on their earlier model of prospect theory — which, as detailed below, demonstrated the relative value that people place on losses and gains, and their preferences for risky behavior over both — Kahneman and Tversky went on to show that the same question could elicit very different responses depending on whether it is framed with a focus on losses or gains.

Consider the following example: in one famous study, participants chose between two different programs designed to treat 600 people affected by a deadly disease. Treatment A was predicted to save 200 people, whereas treatment B predicted a 33% chance that everyone would be saved and a 66% chance that nobody would be saved. One group of participants was presented with the two treatments framed positively, i.e. how many people would be saved, and a second group was presented with those same treatments framed negatively, i.e. how many people would die. Interestingly, although the groups were presented with logically equivalent options, A was chosen by 72% of participants when it was presented positively (“saves 200 lives”) dropping to only 22% when the same choice was presented negatively (“400 people will die”).[4] Put simply, people demonstrate inconsistent preferences regarding the same outcome depending on how that outcome is framed.

How does framing work in real life?

Researchers have found that this framing effect holds true in settings ranging from personal finance, to policy, to healthcare. Patients, for example, are often faced with important decisions, such as whether to get a colonoscopy, whether to go to the dentist for a biannual check-up and whether to apply sunscreen to prevent sunburn. To encourage people to engage in these healthy behaviors, providers can emphasize the positive outcomes of engaging in the behavior (gain-framing), or on the negative outcomes from not engaging in the behavior (loss-framing). Prospect theory offers predictions about which frame will be more effective.

The theory posits that framing affects people’s aversion or penchant for risk. While “risk” in Kahneman and Tversky’s study involved a probability that a particular outcome would occur, psychologists have expanded that definition, applying prospect theory to situations where a decision carries different levels of “risk” depending on the extent to which it can result in an unpleasant outcome.[5] For example, choosing to get a cancer screening can be “risky” because one runs the risk of getting extremely unpleasant information (that one has cancer). According to prospect theory, people should become more risk-seeking (i.e. more likely to get a screening) when the decision is framed in terms of losses. This is exactly what has been borne out in the research.

In one study, women were assigned to view either gain-framed videos emphasizing the benefits of getting a mammography, or loss-framed videos that emphasized the risks of not obtaining a mammography.[6] Although the two videos were factually equivalent, women who viewed the loss-framed message were more likely to obtain a mammogram within 12 months of the intervention, compared to those who saw the gain-framed message.

In contrast, prevention behaviors, like applying sunscreen, are engaged in to avoid the onset of an illness. Since the primary risk with prevention behaviors is with not taking action, prospect theory predicts that gain-framed appeals would be more effective.[7] That is, people would become more risk-averse when the message is framed as a gain and would therefore be more likely to try to avoid the risk of skin cancer. In one effort to demonstrate this, researchers distributed gain and loss-framed brochures about skin cancer to beachgoers and offered them a chance to get free samples of sunscreen. Those who had received the gain-framed brochure were more likely to seek out the free sample than those who had been given the loss-framed brochure.[8]

Together, these results suggest that framing can substantively affect people’s decisions about whether or not to engage in particular health-promoting behaviors.

Can careful framing drive voter turnout?

Just as framing effects have applied to get people to screen for cancer, so too can they be applied to get people to vote.  Just as getting a health screening can be seen as a “risk,” so voting can, for some individuals, be a risk. Particularly for first-time voters — including students who have just reached the voting age or individuals who have simply never voted — the barrier to voting is the possibility (or “risk”) of having to wait in line for hours or of putting yourself into an unknown situation. In one survey, over ten percent of unregistered individuals decided to not vote because they thought it was “difficult to vote” or because they were “too busy.”[9] For these individuals, prospect theory dictates that loss-framed messages may be more effective than gain-framed messages.

Thus, when targeting people who have never voted, perhaps candidates (or PSAs) should focus their statements on the potential losses that could occur if those individuals do not vote. For example, a Democratic candidate trying to encourage liberal first-time voters to vote may create a campaign message that states: “without your vote, we could lose the possibility of gaining control of the House.” Prospect theory suggests this could be more effective than a logically equivalent message that states “with your vote, we could gain control of the House.”

For some people, though, the barrier to voting is not that the act of voting is itself a “risk” but it is that they simply feel that their vote will not count. For these individuals, risk comes into play if the potential voter can be convinced that without their vote, their preferred candidate risks losing the election. In other words, just how NOT applying sunscreen poses a risk of getting skin cancer, the risk for these individuals is that not voting poses a risk that their candidate will not win. For these individuals, prospect theory suggests that a message focused on gains would be more apt.

So What?

It’s important to note that there are a variety of reasons that more than half of the U.S. population does not vote.  Designing a gain versus loss-framed message is immaterial for the thousands of individuals who cannot vote because they have a criminal conviction. Only policy changes that reverse felony disenfranchisement can restore the right to vote for some people.

But, for many of us, the decision to vote can be influenced by a candidate’s message. And as long as we continue being the hopelessly irrational humans that we are, framing can shape the decision of whether we exercise our constitutional right to vote.

The Hot New Frontier of Energy Research Is Human Behavior

When it comes to discussions about energy and climate, the focus is nearly always on technology. We wonder whether coal can be cleaned and solar panels made efficient, if there might be a breakthrough in algae biofuels or carbon storage. In short, we think about about hardware.

But a traditionally overlooked area of energy innovation is experiencing a boom in research attention: human nature. Engineers and power companies are now drawing on lessons from the social sciences, trying to understand the behaviors that shape energy use and how people can be persuaded to use less energy in the first place.

The potential savings are enormous. According to a recent report from the American Council for an Energy-Efficient Economy, an energy industry think tank, the U.S. could cut energy consumption by one-quarter without hurting its economy. Another analysis pegged the potential household savings offered by such simple measures as carpooling and window-sealing at 7 percent of total U.S. carbon emissions, an amount roughly equivalent to the year emissions of France.

With the United States pledging to dramatically cut fossil fuel pollution by 2030, the shift in focus is coming at an opportune time. “In the last few years, there’s definitely been a lot more interest in behavior,” said Ed Vine, an efficiency researcher at Lawrence Berkeley National Laboratory. “In order to achieve our energy-saving goals, it can’t just be technology by itself.”

Vine has worked at Berkeley Lab, which conducts research for the U.S. Department of Energy, since the late 1970s, not long after a cardigan-clad President Jimmy Carter asked Americans to turn down their thermostats to save oil. For the next few decades, that moment would become a cultural shorthand for energy conservation based on changes in personal behavior: well-intentioned, sensible and, well, kind of boring.

Moreover, most of the people working on energy efficiency were engineers, who tended to view challenges as essentially technical. If they designed better systems, of course people would use them, because that would be sensible. Human nature isn’t always sensible, though. Witness the long struggle to make energy-efficient light bulbs mainstream, or the way most people still prefer to raise the thermostat rather than put on a sweater.

Eventually, as economists Hunt Allcott and Sendhil Mullainathan would write in Science in 2010, engineers and policy experts needed to confront “a more complex, less idealized, view” of energy choices. They’d have to engage with the social sciences, with psychology and sociology and anthropology, and use randomized trials and iterative designs.

“Engineers do innovative things, and that’s still continuing,” said cultural anthropologist Susan Mazur-Stommen, who directs the Behavior and Human Dimensions Program at the American Council for an Energy-Efficient Economy. “But engineers are not great at understanding human behavior. They’d make these rational arguments about saving money or energy, and people would say, ‘That’s great!’ But people didn’t change.”

The influence of social scientists can be seen in the agenda from this year’s Behavior, Energy and Climate Conference. There are talks about improvements in modeling human behavior, the roles of social networks, and the methodological details of conducting ethnographies.

Many of the talks at the conference involved how to frame energy-saving programs, or analyzed the influence of promotions. Simply signing pledges, for example, seems to have long-term effects, and it’s better to emphasize a few key behaviors rather than presenting long lists of possible changes. According to Vine, strategies for encouraging people towards better behaviors—nudging them, in social science-speak—are a major research theme, as is the resonance of different messages with different demographics.

“We find that energy savings is a good selling point for certain people up to a certain point, but you need other messages for other audiences,” Vine said. Some people find environmental health, personal comfort or energy independence to be especially compelling, and energy companies are just now developing a fine-grained understanding of their market’s segmentation.

In a similar vein, Mazur-Stommen is intrigued by the various ways people respond to home energy-management apps, such as Google’s now-defunct PowerMeter. Some people ignore them, while others make the apps a part of daily life. That seems to have little to do with technical aptitude, she noted: Indeed, techies seem to lose interest once they’ve figured out how the systems work.

Mazur-Stommen also mentioned burgeoning interest in applying principles of game design to energy programs. Her own pet project is the Tamagotchi Building Project: an attempt to envision how buildings can be anthropomorphized, so that energy-efficient acts feel like gestures of affection. “People inhabit their buildings for much of each day,” said Mazur-Stommen. “Wouldn’t it be great if we could enter a more nurturing relationship with them—if we could think of them as pets?”

Mazur-Stommen’s architectural Tamagotchis are still hypothetical, but a few companies have already started taking social insights to market. The most prominent is Opower, which works from the premise that behavior changes are frequently motivated more by peer pressure than virtue or even self-interest. Opower contracts with utility companies to give personalized assessments of household energy use, which is compared to neighborhood patterns and accompanied by savings advice. So far, they’ve consistently achieved energy savings of around 2 percent.

Another company, Bidgely, has developed algorithms that pull appliance-specific energy signatures from household electricity patterns, then provide suggestions on how to cut back. According to preliminary research by Bidgley, this results in average energy savings of 6 percent. Further hinting at the market’s possibilities, Apple recently announced its entry into home energy management, and Google purchased smart-thermostat maker Nest Labs in January.

For all the interest, though, commercial applications are still in their infancy, Vine said. Much room remains to innovate and apply social science’s insights to commercial products. “That’s the next step: testing some of the ideas that the social scientists are talking about,” he said. “There’s still a long way to go.”

If it still seems hard to imagine Americans putting on their collective sweaters, though, Vine points to the experience of California during the electricity crisis of 2000 and 2001, a period which helped fuel interest in behavioral studies of energy use. Within months of being asked to reduce their energy use, Californians cut back by a whopping 7 percent. Later, when the crisis ended, energy use went back to normal—but the episode showed that change was indeed possible.

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