Applying Behavioral Economics

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Applying Behavioral Economics:EBALDC's VITA program and the SparkPoint Oakland Center. B.E. was applied to increase the intake of tax clients utilizing the free volunteer income tax assistance program that recently expanded to East Oakland. B.E. was also useful for identifying changes to improve the program delivery so that clients would be more likely to have their taxes done at a VITA site over paying for expensive tax preparation done by for-profit businesses that offer predatory Refund Anticipation Loans.

Text of Applying Behavioral Economics

  • East Bay Asian Local Development Corporation 35 years of building healthy neighborhoods

    Applying Behavioral EconomicsEBALDC & SparkPoint Oakland Centers 2010 VITA Site

    Presenter: Charise Fong November 18, 2010

    FEN Behavioral Economics PanelFederal Reserve Bank of San Francisco

  • 2 EBALDC is a community development corporation based in Oakland serving diverse low and moderate income neighborhoods in the East Bay.

    EBALDC operates the 3rd largest VITA site in Alameda County, and is a member of the UWBA Earn It!Keep It!Save It! Campaign.

    For the last 2 years, we have operated a satellite VITA site at one of our housing developments - Lion Creek Crossings in East Oakland.

    Our Lion Creek Crossings satellite VITA site had very low uptake (between 10-20 tax filers/yr)

    EAST BAY ASIAN LOCAL DEVELOPMENT CORPORATION

    Background about EBALDC and our VITA Program

  • 3 EBALDC is one of the founding partners of the SparkPoint Oakland Center (SPOC), a UWBA financial stability initiative.

    SPOC opened its first offices at Lion Creek in 2009, and at the time, it was not well known in the community.

    EBALDC planned to run the Lion Creek VITA site at SPOC. We were concerned that we might not draw many new

    clients because SPOC was so new, and previous years the site had low uptake.

    SPARKPOINT OAKLAND CENTERBackground about VITA and SPOC at Lion Creek Crossings

  • 4Behavioral Economics helped EBALDC and SPOC create solutions to increase client outreach and participation at our Lion Creek Crossings/East Oakland site.

    OPPORTUNITIES TO APPLY BEHAVIORAL ECONOMICS

    Key Questions: How do we increase uptake of our VITA services among both Lion Creek Crossings tenants and residents in the surrounding neighborhood? How do we discourage the use of expensive paid tax preparers and refund anticipation loans (RALs)?

    Background about VITA and SPOC at Lion Creek Crossings

  • 5 EBALDC worked with Amy Brown, Behavioral Economics expert from the Aspen Institute.

    We conducted focus groups to understand the target audience and the factors that people considered important when seeking tax preparation services (channel and hassle factors).

    APPLYING BEHAVIORAL ECONOMICSFocus groups helped to identify important factors to draw VITA clients

    4 main factors influencing potential VITA clients:1) Convenience (hours and location)2) Information security3) Tax law expertise 4) Speed of service delivery (both tax preparation time and refund

    waiting time)* Price turned out to be a minor issue

  • 6Dont throw away 20 hours of pay Loss aversion

    Is 7 days worth $200? Loss aversion

    Comparison checklist Simplified choice, decision making

    MARKETING MESSAGES Developing marketing messages using behavioral economics.

  • 7DONT THROW AWAY 20 HOURS OF PAYDeveloping marketing messages using behavioral economics.

  • 8IS 7 DAYS WORTH $200?Developing marketing messages using behavioral economics.

  • 9COMPARISON CHECKLISTDeveloping marketing messages using behavioral economics.

  • 10

    CHECKLIST OF FACTORSDeveloping marketing messages using behavioral economics.

  • 11

    More convenient days/hours (weekdays, weeknights, Saturdays)

    Opened earlier in the season (mid-January) Appointment waiting times no more than 30 min. Coffee, drinks and snacks while people were waiting Friendly greeters helped people to fill out their intake

    forms as soon as they arrived and talked to them about other SPOC services.

    Games/activity books for kids while they wait.

    CHANGES TO DESIGN OF VITA PROGRAMApplying Behavioral Economics to service delivery

  • 12

    We wanted to encourage word of mouth referrals Clients were asked to refer friends and family if they

    liked our services (power of peer testimonials)

    For each referral, a client received an entry in to a raffle drawing (so each referral increased clients chances of winning a prize).

    RESULT: 31 clients referred 44 new people who also became clients.

    OUTREACH AMBASSADOR PROGRAMIncentivizing referrals from clients

  • 13

    SPOC had been struggling with getting people to come back after initial screening for income supports

    We tested the opt-out approach, asking people to fill out the income supports worksheet as part of the VITA intake.

    While clients were in their tax prep appointments, we calculated clients income supports eligibility results.

    At the end of their tax appointments, we asked clients to stay and review their income supports eligibility results.

    Most clients were willing to stay, and in some cases to also meet with a financial counselor.

    BUNDLING SERVICES WITH VITA

  • 14

    We exceeded our 2010 goal by 57%, serving 188 tax clients and obtaining $300,349 in tax refunds

    Among Lion Creek residents we had a 400% increase in participation over the previous two years.

    2010 VITA RESULTS FROM THE SPOC LION CREEK CROSSINGS SITE

    How successful were the outreach methods?

    Referrals from CBO's, media, and other sources

    44%

    New Materials Using Behavioral Economics24%

    Word of mouth referrals32%

  • 15

    The behavioral economics approach made us rethink how we market and deliver services.

    We wish we had tracked the effectiveness of each of the different marketing approaches to better understand which factors have greatest impact.

    This coming tax season, we will incorporate more behavioral economics to reach more people and encourage clients to enroll in other services.

    CFED & Ideas 42 can connect organizations to research partners and technical assistance.

    FINAL THOUGHTS

  • 16

    Charise FongDirector, Neighborhood and Economic

    Development

    East Bay Asian Local Development Corporation

    Oakland, CA510-287-5353, cfong@ebaldc.org

    www.ebaldc.org

    CONTACT INFORMATION

    Slide Number 1EAST BAY ASIAN LOCAL DEVELOPMENT CORPORATIONSPARKPOINT OAKLAND CENTEROPPORTUNITIES TO APPLY BEHAVIORAL ECONOMICSAPPLYING BEHAVIORAL ECONOMICSMARKETING MESSAGES DONT THROW AWAY 20 HOURS OF PAYIS 7 DAYS WORTH $200?COMPARISON CHECKLISTCHECKLIST OF FACTORSCHANGES TO DESIGN OF VITA PROGRAMOUTREACH AMBASSADOR PROGRAMBUNDLING SERVICES WITH VITA2010 VITA RESULTS FROM THE SPOC LION CREEK CROSSINGS SITEFINAL THOUGHTSCONTACT INFORMATION