California is a national leader in greenhouse gas reduction, and through its major behavior change-fueled initiatives, the Sacramento Municipal Utility District (SMUD) is helping to light the way. Citing a paradigm shift inside his organization several years ago, SMUD CEO Arlen Orchard says that when his team first set out to develop and implement a plan for reducing SMUD’s carbon footprint, they very quickly saw they needed to learn more about their customers. “We used to design our programs based on what we thought we knew about what our customers wanted, rather than tuning into those things our customers value. So, we collected data to do that.” Arlen’s team gathered a great deal of valuable data about their customers, facilitated by newly installed smart meters. From that data, the team discerned trends in how SMUD customers use electricity. The team then added to that data their customers’ demographics and psychographics– that is, customers’ habits, hobbies, spending habits, and values.

Using this assembled information, Arlen’s team further segmented its customers beyond the traditional commercial and residential customer segments. For example, SMUD developed 7 unique residential customer segments. They reflected on how to create messaging that would cater to each specific segment and their particular leanings, and on how to develop a variety of nuanced approaches that would enable SMUD to reach them. Arlen says his team needed to use a lot of market research. “Unfortunately, classic market research is expensive to do, and takes a long time to get results,” says Arlen.

In light of that expensive reality, SMUD’s team opted instead to do what Arlen calls “quick and dirty” market research. The team developed two online communities to conduct their research. One was a residential customer group comprised of several thousand customers, crafted to reflect the diversity of their customers from age, ethnicity, and where they live, to socioeconomic status and whether or not they consider themselves “environmentalist”. The other group was comprised of a comparably representative array of business customers. Arlen says his team was explicit in sharing what they were doing with their customers: “We’re asking you to help us think through our ideas.”

“We used these online groups to test messaging and marketing. When I say ‘quick and dirty’, I mean that through this active online community, we’re getting a 35% response rate. We’re getting data within a week. All of a sudden, we can be agile in how we’re rolling out programs, and we can really start to achieve some adoption of new behaviors among our customers.” Arlen says his team’s work to develop and test their messaging was heavily informed by the EAST and MINDSPACE frameworks. He cited two examples of how this worked, both in light of SMUD’s goal to promote electrification.

The first example centers on encouraging the purchase and use of electric vehicles. Given SMUD’s aim to decarbonize its operations and its customers’ carbon footprint, Arlen’s team worked to develop and test messaging to understand the line of thinking most likely to inspire customers to opt for an electric vehicle. “We developed a rewards program called ‘Charge Free for Two Years’ that we promoted through parallel campaigns on billboards, across social media, radio and on television.” In short, the program offered those who purchase a new electric vehicle the opportunity to charge at home for free for two years from their date of purchase.

Rather than simply offering a rebate, SMUD hardwired an emotional appeal into their design of the program by tying a customer’s use of electricity to their purchase and use of an electric vehicle, and by affirming that customer’s purchasing choice in the first place. They also offered customers an additional choice: “If you’re not interested in the ‘charge free for two years’ offer, then we’ll take the equivalent value and put it toward an in-home charger.” Overall, Arlen says this approach was very powerful: “The idea of getting something for free over two years following their purchase was really appealing to customers.”

The second example features SMUD’s efforts to promote electrification in their customers’ residences. Arlen cited a well-known barrier to promoting electrification in the residential kitchen: customers strongly dislike traditional electric ranges because the electrified coil is challenging to use. Arlen’s team suspected that the advent of the induction range, a major improvement upon the electric coil, meant there was an opportunity to challenge and change that prevailing sentiment. They decided to engage willing customers in beta tests of new induction cooktops to see whether or not a first-hand experience could do just  that.

The SMUD team reached out to its online residential community and posed the question “Are you somebody who loves to try new products?”. In that same message, SMUD offered an explanation of the new induction cooktop appliance, and an invitation for the first 400 willing participants to test one of the new appliances for a period of two to three months. Interested customers clicked through to SMUD’s Energy Store, an online e-commerce site which sells and connects consumers with energy efficient products, where they were prompted to use a special customer code. Once they entered their mailing address, their free cooktop, valued at $100, was shipped directly to their home. Over the subsequent two to three month period, participants were emailed short online surveys to assess their user experience, and how their perspectives about the product changed over time. The SMUD team encouraged participants to create and share videos of their experiences and testimonials.

At the beginning of the program, SMUD’s initial survey asked participants for their impressions, especially among those who had never tried induction cooking and didn’t know anything about it. At the outset of the project, only 10% of those customers new to induction cooking had a very positive or slightly positive view of it. After their experience using it, however, Arlen reports that “… more than 90% of participants took a very or slightly positive view of induction cooking. 63% of those folks had a very positive view and would recommend it to their friends. From this, it became clear this experiential marketing and learning approach was very powerful.”

What SMUD learned through this experiment has the potential to promote electrification at scale, too, Arlen says: “Not only will the information help inform how SMUD promotes electrification among its customers, but will also help inform our approach with developers. We’d like to convince them to create all-electric housing developments, whether multi-family housing, or single home subdivisions. We’ve had some developers commit to all-electric subdivisions, and want to see those commitments scale up.”

 

Behavior Change Analysis

Much can be learned about promoting individual and population-scale behavior change from SMUD’s efforts to drive electrification across its residential and business customer base. Arlen stated that his team’s work was informed directly by the MINDSPACE and EAST frameworks. Specifically, by building an engagement strategy informed by human behavior and known cognitive biases in the human brain, along with nuanced data and trends about their customers, SMUD was able to directly engage with their customers in ways that were meaningful to them and responsive to their particular tendencies.

For instance, in the case of the induction cooking units, SMUD aimed to connect with customers as they were purchasing their new home. They made sign-up for the testing program convenient, with SMUD shipping the appliances directly to participating customers’ homes. In doing so, SMUD made their engagement efforts EASY and TIMELY.

Similarly, the SMUD team aims to connect with developers as they are designing new housing developments, encouraging them to source electric ranges for all their new units before any construction or supply chain decisions are made, also a strategy involving timeliness and SALIENCE. Securing these commitments with developers also means influencing the DEFAULTS that customers encounter when purchasing a newly constructed home furnished with an electric induction cooking range and other energy-efficient appliances.

In the case of the “Charge Free for Two Years” program, SMUD tied a customer’s use of electricity to their purchase and use of their electric vehicle. SMUD affirmed their customers’ purchase of electric vehicles and appealed to their EGO, embracing the fact that humans behave in ways that make them feel better about themselves.

In the case of SMUD using the occasion of a new electric vehicle purchase to introduce tools and a routine of electric charging to their customers at the time of purchase, thereby facilitating the integration of new NORMS associated with customer use of electricity to charge the motor vehicle in their lives.

Arlen and his team nudged SMUD’s customers to give electric ranges and electric vehicles a try by offering strong INCENTIVES such as the “Charge Free for Two Years” program and the option to test and give feedback about their induction cooking experiences on free electric ranges they could keep when the testing period ended.

Finally, SMUD made their electric range testing program SOCIAL by engaging their participating customers online, alongside other users, and asked them to provide feedback in the form of videos, chats, and testimonials on social media. At the conclusion of the program, SMUD’s team asked participants whether they would recommend the electric range they tested to their friends, which utilizes the heavily influential MESSENGER and word-of-mouth means of promotion.

 

Conclusion

SMUD’s customer engagement strategies for promoting electrification among both residential and business customers across its service area offers relevant, real-time examples of how leveraging cognitive biases and the tendencies of human beings can actually change human behavior in positive ways. “Everything we do starts with our customers and the communities we serve. Our board of directors sets our strategic goals, and defines longer term outcomes. With those guiding our actions, we aim to reduce not only SMUD’s carbon footprint, but also that of our customers. At the same time, we’re building new revenue sources and encouraging customer loyalty, so internally we are responding to the incentives we see in us making these changes as well,” says Arlen.

By creating a fun, hands-on experience, like the induction cooking range test program, SMUD helped its participating customers try and learn about something new that also tested their assumptions about electric range cooking and their emotional attachment to cooking over a natural gas or propane flame. By incentivizing and affirming the purchase of electric vehicles, SMUD is doing right by the future of our world, and at the same time, extending the feel-good benefits of that benevolent act to its customers.

While SMUD has only just begun testing and refining these behavior change strategies, it will be interesting to watch the shift in electricity usage scale across the Sacramento region in the years ahead. Visit the SMUD website, where you can access the SMUD Energy Store and also find more information about the organization’s many programs and intitiatives.

 

Special thanks goes to Arlen Orchard, CEO of the Sacramento Municipal Utility District for his willingness to be interviewed for and participate in this project.

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The theoretical basis for the Behavior Change Blog Series is informed by two mnemonic frameworks shown in detail below. The MINDSPACE framework is a list of the elements that inform cognitive biases and human behaviors, while the EAST framework is a list of directives that are derived from MINDSPACE and help inform strategies for influencing behavior change in humans. These two frameworks were established by the Behavioural Insights Team (BIT), a social enterprise based in the United Kingdom.

 

MINDSPACE Framework	EAST Framework
Messenger – We are heavily influenced by who communicates information to us.	Make it Easy – Harness the power of defaults, reduce the ‘hassle factor’, simplify messages.
Incentives – Our response to incentives is shaped by predictable mental shortcuts such as reference points, aversion to losses, and overweighting of small probabilities.	Make it Attractive – Draw people toward preferred behaviors, design rewards and sanctions to maximize effect.
Norms – We are strongly influenced by what others do.	Make it Social – Show people the norm, use the power of networks to encourage and support, encourage people to make a commitment.
Defaults – We “go with the flow” of pre-set options.	Make it Timely – Prompt people when they are most likely to be receptive, consider immediate costs and benefits, help people plan their response.
Salience – Our attention is drawn to what is novel and also to what seems relevant to us.
Priming – We are often influenced by subconscious cues.
Affect – Our emotional associations can powerfully shape our actions.
Commitments – We seek to be consistent with our public promises, and to reciprocate acts.
Ego – We act in ways that make us feel better about ourselves.