Free vouchers for internal travel - why doesn't it work?
It was recently reported that Singaporeans have used less than 1/4 of the total value of Singaporediscovers vouchers.
This is not unexpected. When the procedure for using the vouchers was announced, behaviouralists had already observed that the transaction costs were too high. It required multiple steps, there is additional effort to go through a 3rd party booking partner, and it was restrictive (e.g. it couldn't be combined).
But surely these are minor inconveniences to pay for what is essentially a $100 voucher? Not at all. Consider the perception that forms in most Singaporeans' minds in planning to use the voucher - there so much effort and time required, potential frustration that something might not work, and fear that you are in fact getting a poorer deal with one partner vs another vs going straight to vendor, etc.
These are invisible transactions costs, which accumulate to make a free deal far less attractive.
We have always known (though repeatedly underestimate) this. Picture 3 shows an experiment done by Ogilvy, working with a telecommunications company selling telephone products in the 1990s. They tried 3 different methods:
a. customers can order by a paid-for return mail,
b. customers can order by phone
c. customers can order either by phone or by mail.
Method C got as many responses as methods A and B combined.
Just the convenience of ordering is sufficient to persuade a customer to buy a product, independent of the product itself.
But we really don't need an experiment to show us this. We have plenty of life experience.
How often have we gone shopping and came back with more than what we wanted? Anyone who has been to the supermarket would attest to this. How many times have left buying more items than we planned, simply because we saw something at a convenient location and just grabbed it?
We can understand why some of this bureaucracy was introduced - to outsource backend workload to 3rd parties, to ensure that the vouchers are used in the targetted areas, to prevent abuse etc. But just imagine having gone through all that planning, and the hope that these rediscover vouchers will give a much-needed boost to travel sectors, that eventually most of these vouchers were never used.
Do we take into account these costs and opportunity costs?
How different would it have been if the choice of vouchers were by default, and the process simplified? You book a hotel or a tour, and the customer is then asked if they would like to use their vouchers, with the default being yes. The customer is then asked to provide some details so that a check can be made that he/she still have sufficient credit. The customer experience becomes positive and pain-free.
But this piece isn't a slight on STB. Around the world in meeting rooms where ideas are evaluated and decisions made, both bosses and staff tend to favour the most defensible idea, the one that ostensibly covers all the bases. It is the format of meetings that encourages this bias, and it's more prominent in organisations that are less flat.
For the staff, safer ideas invite less criticism. People in meeting rooms all around the world feel the need to want to look smart, and the easiest (and ironically, most convenient) way to look smart is to point out something that could wrong. By choosing solutions that at first instance appear safe, staff are saving the trouble and agony of having to explain and defend themselves. Moreover, too crazy an idea and the boss might think you're stupid. Very few bosses ever think that a safe idea is stupid because, by definition, it is harder to attack.
For the bosses, the safer the idea, the easier it is to account for it in the event that something blows up. Again, imagine the repercussions if it was reported that 5 people had been abusing a glitch in the system and spent $400,000 in vouchers. How would they explain that? (It should be obvious to you that even if someone had cheated $400k or even $4mil worth of vouchers, it is still a tiny amount compared to all the unused vouchers currently)
Whereas a safe solution is far easier to defend. Singaporeans are lazy, Singaporeans are still worried about the economy, Singaporeans need more education and information, Singapore is boring. Yeap, sure, so it's not really our fault.
Source: The Straits Times (national newspaper)
But in doing so, most meetings miss out on a critical question. What do we lose, if we went with the safest option? Our fears force us to remove risk.
But could we manage risk instead? What if we had dared to ask: what is the worst that could happen? Is it really that bad? Is it worse than what we could potentially lose with the safe option?
Ogilvy's vice-chairman, Rory Sutherland, who also heads the company's behavioural insights team, observed that what works best tends to be unusual. He realised that if he wasn't the vice-chairman, people would probably not have listened much to him. For example:
- nothing increased the customer base of an energy company more than a cute soft-toy. The soft-toy outperformed a year free energy deal by 600%. In fact, people wrote it protesting that didn't want free energy, they would sign up with the company if they could get the soft toy.
- Or that sometimes, the best way to sell the best product is not to tell people how good it is. It is to introduce an inferior product, so people can compare for themselves.
- Or the famous example of organ donation. When organ donation upon death is by default no donation, rates of organ donation is less than 10% in almost every study. By just changing the default to yes (unless you opt-out), organ donation rates average 99% across many different countries.
We evaluate many of our problems "logically", which is by itself illogical because people aren't logical, to begin with. Instead, many of our challenges are psycho-logical in nature. How can we get people to stay healthy? How can we get people to be vaccinated? How can we get people interested in climate change? How can we get staff to continual learn? How do we get departments to digitalise? These are not logical problems, they are psycho-logical ones.