Applying Behavioral Economics

Applying Behavioral Economics EBALDC & SparkPoint Oakland Center’s 2010 VITA Site FEN Behavioral Economics Panel Federal Reserve Bank of San Francisco

East Bay Asian Local Development Corporation 35 years of building healthy neighborhoods Presenter: Charise Fong

November 18, 2010

EAST BAY ASIAN LOCAL DEVELOPMENT CORPORATION Background about EBALDC and our VITA Program

• 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) 2

SPARKPOINT OAKLAND CENTER Background about VITA and SPOC at Lion Creek Crossings

• 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.

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OPPORTUNITIES TO APPLY BEHAVIORAL ECONOMICS Background about VITA and SPOC at Lion Creek Crossings

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

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)?

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APPLYING BEHAVIORAL ECONOMICS Focus groups helped to identify important factors to draw VITA clients

• 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).

4 main factors influencing potential VITA clients: 1) 2) 3) 4) * 5

Convenience (hours and location) Information security Tax law expertise Speed of service delivery (both tax preparation time and refund waiting time) Price turned out to be a minor issue

MARKETING MESSAGES Developing marketing messages using behavioral economics.

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“Don’t throw away 20 hours of pay”

Loss aversion

“Is 7 days worth $200?”

Loss aversion

Comparison checklist

Simplified choice, decision making

“DON’T THROW AWAY 20 HOURS OF PAY” Developing marketing messages using behavioral economics.

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“IS 7 DAYS WORTH $200?�

Developing marketing messages using behavioral economics.

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COMPARISON CHECKLIST Developing marketing messages using behavioral economics.

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CHECKLIST OF FACTORS Developing marketing messages using behavioral economics.

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CHANGES TO DESIGN OF VITA PROGRAM Applying Behavioral Economics to service delivery

• 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.

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OUTREACH AMBASSADOR PROGRAM Incentivizing referrals from clients

• 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 client’s chances of winning a prize).

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

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BUNDLING SERVICES WITH VITA • 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.

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2010 VITA RESULTS FROM THE SPOC LION CREEK CROSSINGS SITE • 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.

How successful were the outreach methods?

Referrals from CBO's, media, and other sources 44%

New Materials Using Behavioral Economics 24% Word of mouth referrals 32%

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FINAL THOUGHTS • 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.

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CONTACT INFORMATION

Charise Fong Director, Neighborhood and Economic Development East Bay Asian Local Development Corporation Oakland, CA 510-287-5353, cfong@ebaldc.org

www.ebaldc.org 16