R&D ON MESSAGING: GETTING AND STAYING AT TOP OF MIND JONATHAN ZINMAN DARTMOUTH COLLEGE CFSI Miami June 10, 2010

Overview of Talk What we know Getting from cutting-edge social science research… …to value-added development in messaging to customers. What we don’t know  Concepts for dealing with those unknowns How we prove and refine those concepts

Messaging: What We Know Consumer attention is limited Sometimes profit when attention is low Bank overdraft fee Sometimes profit by grabbing attention at key moment  Debt “on demand”  Savings at 401(k) enrollment

What we know: Challenges to effective messaging KISS: avoid information overload Most people undervalue value-added in personal finance  The customer is not always “right”, especially at first Many people lack clear goals Even more people lack clear tasks Even those with tasks struggle to stay “on”

Messaging: What We Don’t Know Message what: optimal content? Message when: optimal timing? Message how much: duration, frequency? [customization] Message + what else: bundle?  Product (features)

Messaging: How We Learn Take concept based on  Cutting-edge research  Business intuition/experience/constraints Test it using randomized-control field trials  “gold standard” in direct marketing, retailing (both finance and goods), medicine Evaluate and refine Virtuous cycle

Experimentation & the Learning Organization: A Virtuous Cycle Experiment Innovate Evaluate

From R to D: Example Phase 1 R&D project with 2 banks  Concept: bundle SMS reminders with programmed savings accounts  Test: randomize SMS reminders to save among new programmed-savings customers  Randomize content too  Evaluate  Balances increase; reminders that mention client goals are particularly effective  Reminders cost-effective for 1 bank

From D to R: Example Consolidate, refine, build on Phase 1 Phase 2 projects with several banks  Expand what worked in Phase 1  Test new concepts  Timing  Duration  Bundle with goal-setting & planning tools  Different approaches for “auto-pilot” vs. “hands on wheel”?

Thank you!! [extra slides follow…]

Message What? Thoughts on Crafting Content Objective: salience Tension: information overload Strategies  Mentioning specific goals probably helps  How elicit those goals?  Need plan too? “A goal is not a plan”  What else, if anything?  Remind of plan?  Progress toward goal? Distance to goal?

Message When? Thoughts on Timing Right Get people when they’re (il)liquid  Depending on what you’re selling Get people when demand is high  Messaging, not education Get people around task due dates Get a captive audience

Message How Much? Breaking In, Wearing Out Tension: habit formation vs. tuning out Early and often probably helps But for how long? Need to vary content over time to mitigate “tuning out”?

Message + What Else? Thoughts on Features, Bundles Goal-setting tools Plan-making tools Linked accounts Pathways to other products Customization  Customer is not always right

From Research to Development: Impulse Saving How critical are features that streamline saving?  Automatic transfers (“pay yourself”)  One-click transfers If critical do we make these a strong boilerplate in the signup process?  E.g., how much do you want to auto-transfer from checking to saving the day after each paycheck deposit date? (click here if you do not want to auto-transfer) If someone doesn’t sign up for auto-, do we remind them?  When, how often, and what’s the message?

From Research to Development: Pricing Pilot testing can help pin down optimal pricing, given a bank’s strategic objectives and revenue- model  Free?  Fee?  Teaser pricing?