- Date
- 14th October 2024
- Categories
- Carbon Finance
By Dr Simon Batchelor, Gamos Ltd. Loughborough University
In this blog I reflect on the need for carbon finance projects to ensure they have an after sales service that proactively nudges customers to use stoves as much as possible.
In a blog about customer journeys and its associated working paper, I mapped out the most generic customer journey and attempted to apply it to the acquisition of a modern energy cooking device. The blog and paper list the initial steps to the journey as Awareness, Consideration, Intention hopefully resulting in Acquisition. A business has to invest in marketing (advertising, awareness raising – whatever you wish to call it), to first make potential customers aware that such a product or service exists, then there is a need to get the customer’s attention, such that they consider whether that product or service is right for them, and then sales agents need to help them turn that intention into an actual acquisition of the product or service.
We are exposed to these processes every day – the billboard or Facebook where Kenya Power tells us Githeri can be cooked for as little as 50 cents in Kenya with an EPC, the X (formerly Twitter) post star rating of the Bureau of Energy Efficiency in India that tells us this stove is more energy efficient (and therefore cost effective) than that stove, the sales agent visiting a women’s group demonstrating products and seeking a start of a PAYGO deal or the conversation within the family on whether it makes sense to acquire the device and reduce monthly expenditure on cooking fuel.
These are all standard processes at the start of the customer journey, well known and discussed by every business school in the world. Indeed, in both my blog and working paper, I have spent quite a few words talking about them.
However, after acquisition, the customer journey continues with their Experience of the new product or service and their experience of after sales service or enhancement, and we hope that positive experiences all lead to an advocacy stage where they tell their neighbours and friends about how good the product is. At the End of Life of the product, there is the hope that it will be sensibly disposed of.
What I had not noted in that version of the working paper was how Carbon Finance verified by the “Metered & measured energy cooking devices” (MMECD) disrupts and subverts that typical customer journey. The journey remains almost the same in sequence, but an emphasis has to be placed on proactive after-sales follow-up, not in pre-sales wooing. I am not sure this is the best word, but this seems to be ‘nudging’ on post sales use of the appliance.
Most businesses put a lot of effort into that initial customer acquisition. They need extensive marketing to raise awareness of their product and to convince the customer their product represents the best value. However, when carbon finance is applied, the project developer can offer customers the product or the service for a fraction of the retail price in a conventional sale.
So, for instance, an induction stove or Electric Pressure Cooker which retails at around $80 to $100 can be sold at $10 to $15 because the carbon finance will give the supplier the balance over the next few years. Similarly, the ‘improved cookstoves’ that cost $40 to make, have been ‘given away’ in Rwanda, and the $40 is being recovered later from carbon finance.
When products are sold (or given away) at such a discounted price, the initial customer journey can be quick, and decisions are simple. If a sales agent offers to sell you a product at a 90% discount off its normal price, few customers would turn down the offer.
Historically, project developers have not invested in post-sale nudging to ensure maximum use of the stove as the carbon finance has flowed based on the developers reporting and sampled verification. The methods used to disperse the carbon finance take into account how many stoves are distributed, and then base ongoing decisions about carbon finance flows, on sampling of households. This is often not measured but is based on enumerators judging whether the stove looks used combined with the respondents’ verbal data. That method has some flaws and is being challenged in the literature. As the researchers at University of California, Berkeley put it in Nature, “Over-crediting is mostly from exaggerated estimates of stove adoption and use, underestimates of the continued use of the original stove ….” .
However, with the new metered method, actual use is in the data foreground. Whatever you may think of the state of the carbon offset industry, for this blog I only want to draw attention to the idea that if the carbon payments are based on actual measured use, they will need a new element in the overall business infrastructure – “proactive nudging”.
With the metered method, the carbon finance is based on digital data delivering actual use. Each kWh is measured and variously collected or uploaded via an Internet of Things (IoT) device. Without trying to explain the whole method, basically, after a baseline is established, each kWh of electricity used in the appliance for cooking is accredited with a saving of carbon – and the carbon finance paid out accordingly.
What this means, however, is that the project developer, who supplies the appliances, receives financing based on actual usage. If the actual use is minimal, then they get minimal finance. So, if a household takes up the offer of a $10 EPC, and then puts it on the shelf for special occasions, the supplier is losing money. They have provided a device that may have cost them $80, for only $10. That means they will make a loss and will be out of business very soon!
So, what the project developer needs to do is nudge the household to use the appliance. The developer can see from the uploaded data which devices are not used, or barely used, and they could then phone these households to ask why. For instance, in recent project interviews, there was a strong answer from households that the pots supplied with the induction stove were too small….and that allowed the developer to package a larger pot in the bundle. Even sending a new pot after the initial sale would be economically worthwhile to the developer because without it the use of the stove would be light and therefore the payments of carbon finance would be light. By supplying a new pot, the use would increase, and the carbon finance claims increase, more than covering the cost of the new pot, and ensuring the developer covered the real costs of the stove.
After sales service has always been in a good business model. Getting satisfaction scores from customers, or assessing net promoter scores, is part and parcel of ensuring your business stays on track, and is providing a product or service that people appreciate and want. But this idea of proactive calling to nudge users into more use (in order to ensure a flow of carbon finance), is something more than this. Suppliers sometimes have call centers to do marketing, and to take calls about repair and maintenance, but few businesses have call centers who proactively phone customers to make sure they are using the product. Why would they?
An exception to this might be ‘Pay as You Go’ or some other finance deal. A cadre of agents might be tracking who has made their payments, and phoning the households that have not made payments to find out why, and to ‘chase’ them for payment.
But it hasn’t been the experience so far that call centers might be needed to encourage customers to make greater use of their appliance. In the telecoms business, mobile network operators may offer upgrades to prompt better use of a phone, with the aim of increasing the average revenue per user (ARPU), but they wouldn’t phone a user and directly suggest making more use of the phone.
With MMECD carbon finance, that is about to change. In order to get sustained use of the technology, and therefore be able to claim sustained income from carbon finance, project developers may well have to introduce a new type of customer contact. One designed to nudge. “How is your experience with our product?”. “Have you considered using it for curry?” “Do you realise that if you cook beans in it, you will save a lot of time?”. These are value statements that traditionally come out the mouths of sales agents, pre purchase. But it is likely that carbon project developers will need to do ‘sales’ after the selling! And they will likely need all the associated tools that marketers use – e.g. YouTube demonstrations on how to use the equipment, YouTube demonstrations on how to cook certain meals, and leaflets and books suggesting recipes. Nearly all eCooking appliances now come with a small cookbook, showing people how to use the device and making 5 or 6 recipe suggestions.
But personnel at a call center will need to be skilled at identifying from the data someone has acquired the device but is barely using it, and then phoning them to enquire why they are not using it. Then try to overcome the barriers, in much the same way as sale agents are trained to see why we are not acquiring the product in the first place.
Of course, some of us get annoyed at sales calls trying to sell us something we didn’t ask for. The dynamics of being phoned for a ‘nudge’ call will be interesting. They may see it as a form of ongoing customer relationship, creating a false sense of relationship as is so common on social media, and they may see it as the supplier helping them get more value from their purchase. This will be a new communication territory. However, while I suspect some buyers of the carbon finance equipment might get annoyed at a follow up call, the supplier’s funds are dependent on regular use of the product. No use = no payment for the appliance.
Cook to earn, where some of the finance is passed down to the household could well create any extra incentive to use, but again the non-users may need a prompt – “you could be earning more if you use it more”.
What I want to draw attention to is the potential need for a different type of call center:
- Call center for sales – random phoning, or following up on a lead, to turn intention into acquisition.
- Call center for PAYG(MFI) – chasing payments
- Call center for after sales – handling queries on error messages or how to operate, fielding maintenance requests, connecting user to a repair technician.
- Call center for nudging – proactively following up on a sale, based on data, encouraging greater use of the product.
Nudging is a new element in the customer journey, and yet it will be a vital element for businesses to make suitable returns from a carbon project. Since it is new, I don’t think we know how to best do it, but that’s some research we need to do in the coming couple of years.
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