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Disconnecting the pain of payment

Category: Blog & News

Bill shock can sour the relationship between a business and its customers. In response one energy retailer has introduced what they claim is a ‘game changer’.

De-coupling the pain of payment

The "Predictable Plan" is Origin Energy's latest behaviourally geared initiative. It follows their “Don’t Waste Your Roof” campaign that used Loss Aversion to stimulate interest in solar power.

Origin forecast a household’s usage for the year and bill a fixed amount every month or fortnight. The product is a response to customer dissatisfaction with the unpredictability of energy costs.

Aside from signaling that they listen to their customers, Origin stands to benefit in a couple of ways. The plan not only smooths revenue and cash flow, but Origin is de-coupling the usage from the payment. The mental connection between consumption and cost thereby recedes even further in the minds of consumers. 

This ‘set and forget’ direct debit standard payment means energy bills will no longer grab our attention. Like a mortgage, energy will be processed by our System 1 snooze function rather than our critical thinking System 2.  Instead of poking the bear with bill shock, Origin is aiming to let sleeping dogs lie. 

No incentive to reduce usage

Origin is making the case that this provides certainty for customers. The bigger issue though, is that people will have no incentive to reduce their use of energy. 

Let's say I am consuming less than last year. Thanks to the Endowment Effect I will feel that I am not using that to which I am entitled. And much like an all you can eat smorgasbord, my tendency will be to pig out. 

Indeed in the US people who discovered they were using less power than their neighbours increased their consumption. Regression to the mean, a function of norming behaviour, suggests the same may happen if people feel they are paying for power they haven’t used. The lure of a cheaper plan next year will not be enough to stop consumption creepage in the present.

Added to this, there’s no cap or penalty for over-use (until a recontracted Plan price the following year).  That means no short-term financial reason to curtail usage. In fact, energy will start to feel like it's free. Origin is thus promoting lazy energy use habits that will be hard to break down the track.

In sum, Origin has come up with a way to drive a consumption habit without penalising customers in the short-term. While their promise of ‘no nasty surprises’ might appear to be good for the consumer, I hope that goes for the planet too.

 

This article also appeared in Smartcompany.

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