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The simplest way to get your customers to pay up

feature-pay-bills-200British officials had a problem: Many citizens weren’t paying their taxes on time. For years Her Majesty’s Revenue and Customs service had sent letters to the late payers, using traditional threats of interest charges, late fees and legal action to try to get people to mail in their checks. Some did – but many didn’t.

So in a 2009 pilot study, for which I served as a consultant, HMRC tried a different approach: it changed the language in its dunning letters, drawing on psychological techniques to increase the odds that delinquent taxpayers would pay up.

In one letter, HMRC appealed to people’s sense of civic duty. “We collect taxes to make sure that money is available to fund the public services that benefit you and other UK citizens,” it read. “Even if one person fails to pay their taxes it reduces the services and resources that are provided.” Another used actual statistics: “Nine out of 10 people in Britain pay their tax on time.”

These small changes delivered big benefits. In 2008, HMRC had collected 290 million pounds of 510 million pounds in one portfolio of debt – a clearance rate of 57%. In 2009, using the new letters, it collected 560 million pounds of 650 million pounds in a similar portfolio – a clearance rate of 86%.

What compelled thousands of previously unresponsive people to mail in checks? The answer lies in a psychological phenomenon that’s widely known but poorly understood: people’s behaviour is largely shaped by that of those around them – what scientists call social norms. In particular, people are often motivated by their desire to conform with the group, especially if it’s a group with which they identify.

Social norms are not new, but many businesses are only now beginning to experiment with them as a tool to drive profits.

Here are five insights to guide them:

1. Look beyond marketing

The most obvious business applications of social norms are in sales and advertising, where examples of tremendous results from the slight rejiggering of a key phrase abound. My favourite is the substitution of “Operators are standing by” with “If operators are busy, please call again.” The image of a call centre overwhelmed by eager customers turned a product into one of the best-selling products in infomercial history.

But in the past decade, businesses have begun to recognise that social norms can drive results in areas other than marketing. Changing the wording on the placard in hotel bathrooms urging guests to reuse towels significantly increases compliance. Instead of casting the request in terms of environmental benefits, new placards in one chain stated that the majority of guests do reuse towels – and people’s desire to comply with social norms increased the reusage rate by 26%, saving the chain thousands of dollars daily in laundering and delivery costs.

2. If no norm exists, publish numbers and surveys

The common-sense approach of highlighting others’ positive behaviour won’t be much help if the behaviour you’re trying to encourage isn’t the norm. In such cases it might seem expedient to simply invent a number that supports your cause – after all, how could any hotel guest possibly know how many other guests reuse their towels? Tempting as this may be, it’s a bad idea. It’s unethical; the odds you’ll be caught are greater than you might think; and your future attempts will be regarded with suspicion.

Weigh up two other approaches instead. The first is to cite popular opinion rather than popular behaviour; this is known as the “injunctive norm”. Pointing out surveys indicating that most people approve of healthful lifestyles can create the sense of a social norm. The second is to publish absolute numbers that suggest popularity, even if most people have not yet fallen into line.

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