Western Union Payments

Shaping Customer Behavior with Default Choices

Discover how communication tools influence customer payment behavior.

Providing customers with an abundance of payment options is critical to creating a positive customer experience and earning loyalty. Yet for cost-saving purposes, it’s important for billers to encourage their customers to use self-service payment channels.

By selecting the appropriate default option — a payment system that is selected automatically unless an alternative is specified — billers can nudge their customers toward the most desirable payment channels and types. Here are tips for using default options in ways that benefit customers and billers alike.
Human nature dictates a preference for options that are presented as defaults, explains Joan Meyers-Levy, professor of marketing at the University of Minnesota’s Carlson School of Management. Generally, people do not want to spend time and energy opting out of a default setting. If customers are automatically enrolled in an online payment program, it’s likely that few will opt out, Meyers-Levy explains. “On the contrary, if people take the time to decide whether or not to sign up, they usually end up forgetting to do it,” she says.

Why Defaults Work

Defaults play an important role in “decision architecture,” a term that economist Richard H. Thaler and legal scholar Cass R. Sunstein explored in their 2008 book, Nudge: Improving Decisions About Health, Wealth, and Happiness, to explain how defaults — or nudges — shape the way people view their options. One of the main reasons that defaults are widely successful in consumer environments is because most people perceive defaults as authoritative recommendations and social norms from which they should not deviate. Take, for example, the state of Washington, where legislators switched to a default rule requiring drivers to pay $5 to benefit state parks when renewing their license plates, unless the drivers asked not to pay the fee. Soon, the default rule brought in $1.4 million in donations — more than the amount garnered when the fee was presented as optional.(1)
Online and mobile billing systems are often inexpensive and simple for customers to use, making them great defaults for bill presentment and payment. The challenge of online billing lies almost entirely around consumers’ initial resistance to adopt these programs.

How to Nudge Customers

In this case, psychology-based strategies can be used to stimulate cooperation. Meyers-Levy refers to a study by researchers at the Samuel Curtis Johnson Graduate School of Management at Cornell University in Ithaca, N.Y., which studied consumers’ reactions to various participation requests for hotels’ environmental conservation programs. Researchers concluded that hotel guests were most likely to reuse their towels when the hotels displayed signs that communicated a “reciprocity by proxy” strategy. In other words, the sign indicated that the hotel had already donated an undisclosed amount of money to an environmental conservation group, and asked customers to help repay the amount by reusing towels and using less energy.

The same study found that basic requests and incentives (“We will donate if you participate”) also stimulated customer cooperation.

In the context of bill presentment and payment, a company could tell customers it has donated an undisclosed amount of money to an environmental organization on behalf of the company and its customers, and ask customers to help cover the cost of the donation by participating in environmentally friendly billing options such as pay by text, mobile-optimized Web payments, email billing or recurring payments.

Lastly, it’s important to make sure customers are aware of their ability to opt out of mobile and online payments. In addition to creating a positive experience by providing options, this message will also reinforce the notion that the online default is an authoritative recommendation. Playing up the flexibility and diversity of payment options will help ease the transition from mail-in billing to online and mobile payments.

(1) “Switching the default rule to save state parks in Washington,” Oct. 21, 2009, Nudge: Improving Decisions About Health, Wealth, and Happiness