3 UX Strategies to Help Ecommerce Users Save Money: Reveal the Total Cost of OwnershipDecember 12, 2011
For big-ticket purchases like buying health insurance, the sticker price (monthly premium) is just the beginning. Via the interface, UX designers can and should encourage users to think beyond sticker price and discover the total cost of ownership of their healthcare usage. Armed with this knowledge, users can make apples-to-apples comparisons, find savings, and confidently click the Buy button.
What is Total Cost of Ownership?
Total cost of ownership (TCO) is a way of thinking about a price. It's the difference between initially buying a thing versus the long-term cost of owning it. TCO enables consumers to 'see through' a vendor's stated price to glean the true price—the actual cost once all the peripheral and long term costs are added up.
TCO thinking adds the now costs with later costs. For health insurance consumers, the now cost—the premium—is easy to know. But that's only one part of health insurance TCO. What about the costs the consumer pays over time, like deductibles and visit co-pays? What seemed simple is now clouded with unpredictable factors (will I get sick this year?) and gotchas (e.g. costly doctor or medication co-pays).
Determining the total cost of ownership is not always easy, and multi-dimensional products like health insurance make it even harder.
Without considering these other costs, consumers tend to shop according to the lowest premium available—even if it results in a higher annual cost. Which is why many consumers hate buying insurance: they suspect they're getting the wrong policy for their situation—and paying too much as a result. So how can UX designers fix this information gap and stack the deck in favor of the consumer?
Plan A: Crunch the numbers for your users
In Lesson #5 of my last article, 5 Lessons Learned in Redesigning America's First Health Insurance Exchange, I proposed a decision tool as one strategy to encourage users to think about total cost of ownership (TCO): a wizard would ask the consumer questions about their past health service usage, comfort with risk, etc., and would respond with a list of plans for the consumer to consider.
Unfortunately, this is a large technical undertaking, requiring a lot of data crunching, extensive user testing, and time.
Considering the already huge task load for each U.S. state to launch a healthcare exchange, are there any interface-centric ways to encourage TCO thinking? Let's start by taking a look at the TCO comparisons consumers are already comfortable performing.
Plan B: Leverage how consumers already shop
Price discovery in the supermarket via apples-to-apples comparisons
In most grocery stores consumers are given the gem of "unit price"—the secondary item price label, usually in orange. The unit price lets the consumer do an instant value comparison between products of different sizes and weights.
That "value"-size olive oil for $19.99 is suddenly seen as a good value when its unit price is 20% less than the smaller size.
This is familiar value comparison territory for any head-of-household. Unit prices solve the problem of determing the initial costs for similar products that are just different enough to evade an apples-to-apples comparison.
Consumers can already choose a cell phone plan easily
When shopping for a wireless plan a consumer thinks about how many minutes, texts, and how much data transfer (for smartphones) they used in the past—and estimate whether their usage in the future will be more or less. They look at how much overages cost (40-cents a minute, 25-cents a text, etc.). They inevitably decide between playing it safe and spending extra each month to ensure they avoid overages. Or, they risk it, and choose a plan with a low price in which they run the risk of incurring overages.
Choosing a plan is a personal and unique decision—one that should be based on a user's historical usage, expected future usage, and tolerance of risk. Pretty simple for most consumers, right? Pull out the old cell phone bills, make a guessimate at future usage, look at overage costs, and make the call.
Consumers understand and use fuel economy numbers when car shopping
When a consumer is buying a new or used car, the EPA makes it easy for them to compare fuel economy between vehicles. The window sticker (and fueleconomy.gov) show a city and highway mpg figure for each car.
MPG figures can be misleading though. At the gas pump, the 2-mpg difference between a 15-mpg vehicle and 17-mpg vehicle is far greater than the difference between a 25-mpg vehicle and a 27-mpg vehicle (see example). 2-mpg ≠ 20% savings or $200 savings.
Enter: Estimated Annual Fuel Economy
Ultimately the consumer cares about how much it costs to drive 100 miles, not how many miles they can go on $1. Hence, the EPA introduced "Estimated Annual Fuel Cost", front and center, alongside traditional city and highway MPG numbers.
Applying TCO thinking to health insurance
Encourage consumers to review past usage history
Just as in purchasing insurance, a consumer purchasing a cell phone plan 'backs into' a plan, e.g. picks the plan that is the least undesireable. The cell phone consumer, though, has the advantage of seeing past usage history very easily since every wireless carrier provides a monthly usage summary in their bill that includes minutes, text and data (if applicable).
Some, but not all, health insurance carriers offer online services that let you see usage history. Encouraging consumers to get hold of past usage information could be done on an introduction screen to Bronze, Silver, Gold plans or an info page about annual deductibles.
Normalize annual & monthly
"Quick! What's $2,000 divided by 12?"
"I don't know. Give me a calculator."
Grocery stores show unit pricing to consumers to let them compare cost of products of different quantities. In health insurance, there is an incongruity between monthly premium and annual deductible that discourages such comparisons.
A savvy consumer will divide a plan's annual deductible by 12, add it to the monthly premium, showing a worst-case scenario where the consumer pays the full deductible. The consumer can then easily compare that against a plan with no annual deductible. But that's a lot of leg work for such an expensive product, wouldn't you say?
A simple way of encouraging this type of value comparison is to let the consumer see premiums—on either a monthly or annual basis—with a toggle.
Use real world numbers
Toggled to the Annual Premium view, the cost number is becoming more easily comparable (in combination with the annual deductible).
Taking a page from the EPA playbook, what if we took those numbers a step further and introduced a 'worst-case scenario' cost figure for the consumer? Let's show them what they would have to pay if they maxed-out the annual deductible and had $200 worth of co-pays that year.
There could (and should) be other consumer costs that figure into a "worst-case scenario" such as prescription drugs, hospital stays, etc.
Merely showing a monthly (or annual) premium on its own does not accurately reflect what most consumers are really going to pay for their health insurance's total cost of ownership.