Rother District Council – using behavioural insights to reduce demand

Rother District Council (RDC) wished to increase the take-up of payment by annual direct debit for the garden waste collection in order to reduce processing and chasing costs. This was specifically to reduce the number of cheques being received, as is the most costly method of payment for the council. This case study forms part of our productivity experts resource.

Efficiency and income generation

Other methods of payment, such as online card payments are preferable to cheques, but they still rely on the customer remembering to pay each year, so generally requires an element of chasing for payment when they inevitably forget to renew. Direct debit is the least costly for the authority.

The challenge

Several people were paying for their garden waste collection by cheque each year. This could be due to lack of trust in online payments (security), lack of ability to go online and set up one-off payments or sign up for Direct Debit, or simply out of habit and being in control of writing the amount out and signing a cheque. The challenge was; how do we make Direct Debit the easiest option for people when they receive the reminder letter about renewing their garden waste collection? There are two types of letters sent out each year. One that is sent to existing customers already paying by Direct Debit to advise them it will be automatically renewed based on the details in the letter, and the other, which is sent to all other customers (non-DD) asking them if they wish to renew and to instruct how to pay.

The solution

The in-house Demand Management Team (DMT) reviewed the two letters having received an introduction to letter-reading habits at the initial Demand conference provided by Social Engine, our consultant.

Letter 1: Existing Direct Debit Customers

Issue

If all of the details are correct in this letter, it generally means that no action is required to be taken by the customer. However, the letter was quite long, and didn’t let the customer know they didn’t have to do anything (if all was correct) until the last sentence.

Solution

the DMT suggested including a ‘key points’ box on the right-hand side of the letter, including the fact that this is ‘for information only if all is correct’, ‘your payment will be collected automatically by Direct Debit’. In the letter we thanked them for paying by Direct Debit, as this is the easiest for them and the most cost effective way for the council.

Letter 2: Existing customers – non-Direct Debit

Issue

This letter requires the customers to check their details, and then if all is correct, to make payment. It stated that our preferred method is Direct Debit, and then provided instructions on how to sign up to Direct Debit using our website. It also explained that our other payment methods were on the reverse. There were a few issues that the DMT saw immediately. Firstly, going online is usually the barrier to several people, so they will shy away from doing that, in which case the only alternative is a cheque. On the reverse, the first alternative payment method was how to pay by cheque. This was followed by direct debit and how to set up online or over the phone, and finally, card payment (online only). The issue here is that cheque was given priority at the top – people will take that as the default option. Also, it can sometimes be difficult to get through on the phone, so again is likely to result in someone sending in a cheque if they had tried to set up a direct debit by calling in but not able to get through.

Solution

Reduce the wording on the front of the letter to allow space for the bottom third to be a direct debit payment slip, as people who like to write out cheques are more likely to complete a form. It also removes the barrier of going online or trying to phone in. Change the ordering of the alternative payment methods on the reverse, putting how to pay by cheque at the bottom.

The impact

In June 2017, just one month after the new letters had been issued, there had been 2294 new direct debits set up, 512 of which were the tear off slips from the 4840 letters that had been sent. Following this first month, several more were received, taking the total to c700. The table below illustrates the impact:

 

2016/17

(at 27/9/16)

2017/18

(at Feb ’18)

Total number of accounts paid

18920

19217

Total number of accounts paid by cheque

3894 (20.6%)

2415 (12.6%)

Total number of accounts paid by Direct Debit

4288 (22.6%)

7108 (37%)

Total number of Direct Debit tear-off slips received

N/A

c700

The number of cheques as a percentage of total accounts paid in 2016/17 was 20.6 per cent. In this current financial year (2017/18) this fell to 12.6 per cent. In figures, this is 1479 fewer cheques to process.

In terms of the increase to Direct Debit take-up, in 2016/17 it was 22.6 per cent of the total accounts paid, and in 2017/18 it grew to 37 per cent. That’s a 14.4 per cent increase, and as figures, an additional 2820 accounts paid in our preferred way (lowest cost to the council).

When it comes to what the demand team can ‘claim’ as a successful outcome, there are three different possibilities, all at varying degrees of success. Using calculations provided by the chief finance officer of a neighbouring authority it can be assumed that the ‘true cost’ to an organisation of processing a cheque is £10. If we took the 700 tear-off slips as our success in increasing direct debit take-up, assuming this reduced the number of cheques by the same amount, this equates to £7,000 in cheque processing efficiencies. If we looked at the reduced number of cheques overall, this could equate to £14,790. If we looked at the number of increased direct debits, this could total £28,200.

As the task was to increase direct debit take up through providing an easy way for customers to sign up, and to reduce the number of cheques received, we could say that this exercise saved somewhere between £7,000 and £14,790 annually. To calculate a more accurate result, it may be possible to look at the records to analyse which accounts were paid by cheque in the 2016/17 year and compare the same accounts this year to see how many of those are now direct debit.

How is the new approach being sustained?

It is highly unlikely that Rother District Council will refuse to accept cheques for payments therefore it is important to encourage customers to switch to direct debit by making it as easy as possible.

The DMT will be working with the IT and Garden Waste team in March to April 2018 to look at how the letters and Direct Debit forms can be further improved to seek to reduce cheques to the lowest possible numbers. One idea is to provide the customer with a pre-paid envelope for DD forms only (i.e. addressed to the Garden Waste team and e reminder on the inside of the sealing edge that this envelope is for direct debit forms only, not cheques (similar to DVLA service pre-paid envelopes). Whilst this comes at a cost, the saving in processing cheques would far outweigh the initial outlay.

The DMT will also be supporting service areas in reviewing all letters that ask for payment, to ensure there is a corporate consistency and that Direct Debit is used where appropriate.

Lessons learned

A Random Controlled Trial (RCT) could have been carried out if the DMT had more time to plan and implement this. In May 2017 we had about three working days to review the letters and make our recommendations to the department. In this second phase, we will have more time, and we may carry out an RCT with the pre-paid envelope idea. We will have to ensure the incoming envelopes (both pre-paid and otherwise) are carefully monitored and logged at point of receipt. This will help us to understand whether the pre-paid envelope makes a difference in the take-up of direct debit.

Contact

Richard Parker-Harding

Email: Richard.Parker-Harding@rother.gov.uk