IBM survey highlights consumer understanding a as key factor to realising the benefits of smarter energy

IBM (NYSE: IBM) has unveiled findings from the “2011 IBM Global Utility Consumer Survey,” which revealed that many consumers around the globe do not understand the basic unit of electricity pricing and other energy concepts used by energy providers.

December 15, 2011

IBM (NYSE: IBM) has unveiled findings from the “2011 IBM Global Utility Consumer Survey,” which revealed that many consumers around the globe do not understand the basic unit of electricity pricing and other energy concepts used by energy providers. The company also identified a list of crucial behavioural patterns that have the potential to impact how providers communicate and drive motivation amongst consumers.

IBM surveyed more than 10,000 people across 15 countries across developed and developing countries to explore the wants and needs of energy consumers worldwide. The findings expose a major gap between what consumers currently know and what they need to know to reduce energy consumption and benefit from smarter energy initiatives. Over 30 percent of those polled, for example, have never heard of the term “dollar per kwh” or the equivalent currency, and more than 60 percent are unaware of smart grids or smart meters.

The survey also revealed that knowledge is linked closely to people’s willingness to embrace change and their approval of local energy initiatives. Sixty-one percent of people with a strong knowledge of energy technology and pricing terms viewed smart meters and smart grid deployment plans positively, compared to only 43 percent of those with minimal knowledge.

“There have been major strides with new energy saving technologies, new programs and incentives, but in many cases the market is seeing more confusion amongst consumers than expected,” said Lesley- Anne Wilkinson, MEA Lead for the IBM Institute of Business Value.” This year’s survey points to a need and an opportunity to go back to basics and educate consumers by using terms that they understand, behavioural triggers and channels they already use. People want to conserve energy; we just need to get better at showing them how.”

Shifting consumers perceptions and influences The perceptions, expectations and influences of the energy consumer have changed over the last four years. Despite efforts by utilities and others in the industry to create consumer-friendly conservation tools, many consumers still do not have the information or the proper incentives to make better energy choices.

“The most critical insight from this study for South African Utilities companies is that understanding consumer behaviour and perceptions is critical. In this space if consumers don’t feel empowered to understand the core issues related to green energy, or how they could contribute to a more energy efficient planet it simply translates into not fully understanding what their bill reflects, or how to reduce their energy consumption and both ultimately delay the behavioural change that is needed .”

Examining the energy usage through the lens of behavioural economics, utilities have better insight into the thoughts of consumers, their motivations, misconceptions and triggers for change. These behavioural factors include:

Alternative Motivation: Financial incentives are not the only factors that encourage consumers to decrease their energy consumption. In fact, based on the consumer survey, money no longer dominates the decision-making process compared to years prior. Instead, younger consumers today are evaluating choices based on the environment while those over 55 noted the health of their national economy as a key motivator for behavioural change. The first step towards activating behavioural change is by acknowledging that consumers are not simply triggered by monetary drivers, but also motivated by benefits such as comfort, sustainability, and confidence in the nation’s economic prospects when making decisions about energy use.

Information Availability: How a choice is framed and presented can make a big difference. For instance, presenting too many options can at times be detrimental. While in theory more options should always be a plus, the resulting complexity can ultimately demotivate consumers. This finding is consistent with the IBM survey results which showed that consumers under 25 are prone to follow the lead of others rather than sort through the options on their own, being two and one-half times more likely to rely on their personal networks as a primary source for information than those 55 or older. By presenting the right balance of choices, utilities can help reduce the need for complex, time-consuming decisions that can hinder a consumer’s desire to make independent choices about their energy consumption.

Social Drivers: Another approach for greater adoption of smarter energy is to tap into people’s inherent social nature. People rely on social proof, or the behaviour of others, to determine the right ways to act in many situations. This social action trigger is behind the introduction of new programs such as consumer portals which allow consumers to see and compare their usage to those of their neighbours. For energy providers such as Enemalta Corporation and Water Services Corporation in Malta, the portal is instrumental in encouraging consumer adoption and lowering overall usage.

This approach demonstrates that social comparisons are frequently a more powerful lever of persuasion. By understanding the human psychology of choice and decision making, the industry can identify the greatest barriers inhibiting change, discover opportunities for improvement; adopt new methods of communication and design programs that are in line with consumer demands.

” It’s all about conversations now, and unless organisations learn how to engage in, and possibly steer, those conversations they are at a distinct disadvantage. The key is that this interaction can also be used to inform organisations on consumer behaviour and perceptions and thereby help them adapt education and awareness campaigns to get the desired results,” concludes Wilkinson.