Leadership

Save Money By Asking People to Do Nothing

Trying to change consumer behaviour in your business? Consider a shortcut: changing their default option

Written by Rick Spence

You may have seen default options changed before. Unless you ask them not to, a cable company may start charging you for extra channels you never ordered, or a hotel may ding you for using an in-room safe you didn’t even notice. Such fees are usually thinly disguised cash grabs €“ and they’re not recommended at any time.

But changing the default option can work when you’re asking customers to pay more for a good cause€“something other than boosting your own firm’s cash flow. In a recent article in Bloomberg Businessweek, columnist Cass Sunstein examined how altered default options could change the world €“ or at least the environment. In one example, she noted that most desktop printers are set, by default, to print out documents on single pages. By adopting the default of double-sided printing (printing on both sides of the page) for its campus devices, New Jersey-based Rutgers University saved 55 million sheets of paper over four years.

Most people probably don’t care if documents are printed on one side or two. But they are unlikely to take the time to change the default setting on a printer to double-sided, even if they want to protect the forests. By taking that option out of their hands, Rutgers saved nearly $12 million €“ and 4,650 trees.

Sunstein also looked at the impact on changing the default rules on retirement savings. In the United States, employers usually ask workers whether they want to enroll in registered 401(k) savings plans. In other words, the default is non-enrollment. According to Sunstein, even if enrollment is easy and they have money to spare, “the number of employees who enroll is relatively low, particularly in the initial years of eligibility. As a result, a lot of workers end up with insufficient savings for retirement.”

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But more and more U.S. employers, including Boeing and AT&T, now set the default option to automatic enrollment. Unless an employee objects, they are automatically enrolled in savings plans, so they start saving sooner. The workers may have fewer dollars in their pockets every week, but according to Sunstein, the use of automatic enrollment plans has been found “to have a bigger effect on encouraging savings than significant economic incentives such as tax breaks for savers.”

One more example: in Germany, two cities have achieved much higher levels of clean energy use, simply because their citizens are automatically enrolled in clean energy programs unless they specifically opt out.

Clearly, changing the default setting for consumers involves exploiting the well-known inertia that affects human behavior. When they’re given a choice between acting or not acting, most people will tend not to act€“especially when there’s an implied benefit to that option, or insufficient pain to prod them into taking an action.

How could your business take advantage of changing the default?

Think about how hotels save money by no longer changing your towels or bedsheets during multi-day stays, unless you specifically request those services.

What non-revenue-generating services could you cut back on in your business, simply by letting customers know that those services are still available on request?

Or maybe your business could become known as a better, more caring neighbour by announcing that you will round up all purchases to the nearest dollar, and donate those extra funds to worthy local charities or community projects €“ while letting people know they can get their change back if they just ask for it.

If your products or services involve a choice between everyday quality and a slightly more costly “green” option, maybe you could change the default purchase to the eco-friendly option. That way, most customers will be pleased to be helping the environment, while price-sensitive clients will be happy the lower-cost option is still available.

Be careful, however, that you don’t change the default option solely to augment your own bottom line. Let people know that the benefits will be shared generously, and most customers will accept the new preferred option with barely a blink.

Rick Spence is the Toronto-based author of the Canadian Entrepreneur blog and a consultant on marketing, strategy and business growth. You can reach him at rick@rickspence.ca.

More columns by Rick Spence

Originally appeared on PROFITguide.com