By Gina Woodall and Joe Bates
While the origins of the current recession are well known (i.e., the collapse of the housing bubble, the Wall Street financial crises, the abrupt downturn in consumer spending), it has not been clear how the energy sector can benefit from it. Recent research by Rockbridge Associates reveals how consumers’ desires to save money and help the environment during the downturn are creating opportunities for energy providers to meet their own business goals. Couple the weak economy with a smart targeted marketing strategy for energy efficiency programs, and energy utilities can reduce overall consumption.
Unlike consumers, most energy providers are doing well financially, despite the recession. However, they continue to find themselves under increasing pressure to reduce power consumption. The fact is, the nation’s energy utilities are faced with a problem not caused by the recession. In many regions of the country, energy companies are producing at full capacity and have no room to expand without incurring huge expenses. Even where expansion plans are underway, it will take many years for additional capacity to come on line. And “green” energy sources, such as wind farms have limitations as well (http://www.nytimes.com/2008/08/27/business/27grid.html).
Thus, energy providers across the country need to figure out ways to reduce customers’ demand and extend the life of their current infrastructure. Many energy efficiency programs are underway sponsored by cutting edge energy utilities, including demand response and rebate programs, but participation has been weak. The weak economy and a targeted marketing strategy can increase the success of these programs.
How does the poor economy help energy utilities reduce demand? If consumers are spending more time at home, due to spending less time out (i.e. not spending money in restaurants, malls, etc.), aren’t they using more energy? A recent Rockbridge survey sheds light on this issue.
In order to save money, there are many ways consumers are retrenching; 43% are postponing the purchase of a high-end electronics product, 40% are delaying making home improvements, 33% are making their home more energy efficient to save on energy bills, and 32% are pushing back the purchase of a home appliance. If you read the last sentence too fast, you might not have picked up on a startling fact. Let’s reiterate the point. One-third of households are actually spending money now on energy efficiency so they can save money later. This finding has significant meaning for energy providers.
What energy investments are consumers making today? Today, 81% of consumers use energy saving light bulbs. This statistic alone is amazing due to the much higher cost of CFLs than incandescent bulbs at check out (typically 3 to 5 times more expensive). More evidence of consumers spending now in order to save later is their purchases of energy efficient appliances, such as refrigerators (55%), water heaters (48%), and heating / cooling systems (41%). It is clear consumers acknowledge a little pain in the wallet today will save money in the long run.
Is it all about the wallet or do people actually care about the environment? Actually, it is both. Two-thirds of these product owners say they purchased the products to save money AND to help the environment. It is the best of both worlds making it easy to be green.
Can we expect this trend to continue? Yes. The above chart also illustrates this point. Not only are consumers buying energy efficient products now, but more consumers are planning to make such purchases in the future. This potential is greatest among the products least owned today, such as solar water heaters (39% either currently own or plan to buy in the future, mostly the latter), solar system for home heating (41%), and homes that are designed to be eco-friendly (43%). Consumers will continue to act on their belief that what is good for the environment is also good for the wallet, and vice versa.
This sentiment is also evident among consumers when it comes to participating in energy efficiency programs, such as those initiated by local and state utilities. For instance, 34% of consumers have replaced appliances through participating in a rebate program, 28% receive utility bills showing comparative energy use, and 27% receive their electricity from a provider using clean, renewable energy sources. Similar to reasons for owning energy efficient products, consumers are participating in these programs to save money AND to help the environment. This trend will also continue as the future potential participation rate for most of these programs is 50% or more of consumers, according to our research.
What role can energy utilities play in spurring conservation behaviors? A recent Rockbridge study shows the vast majority of energy use reduction will come from a small segment of customers. Providers can maximize their energy reduction program results through a targeted marketing strategy. We know from our research that consumers can be divided into six segments with different beliefs and behaviors in the green space (see below).
Based on this market segmentation, it is clear that a misguided energy conservation strategy will waste resources by reaching out to ALL consumers because many (a) respond to environmental issues by avoiding consumption and shunning technology, (b) are eking by a living and lack the time and resources for green services, or (c) are among the minority of the public that views the green movement as hype. Thus, four types of consumers represent the greatest opportunity for a green strategy.
Green Tech Leaders - deeply committed consumers who also happen to be innovative. They believe in technology, think green is “cool,” like doing business with green companies and believe that green products and services benefit their wallets.
The Opportunity: These consumers only represent 10% of the market, but tend to influence others, making them a prime target for expanding awareness and usage of your energy savings programs. They are heavier than average users of social networking media, so it is important to give them informational resources to help your cause (e.g., an RSS Feed to a newsletter on energy programs).
Green Tech Followers - similar to the “leaders” in their commitment and innovative tendencies, the major difference being they do not readily influence others. They think green is “fun.”
The Opportunity: These consumers represent 18% of the market, and with the Leaders, are a logical target for green initiatives.
Tech-Savvy Green Sympathizers - not as zealous as the other two above, but they are environmentally aware, would like to do business with green companies and believe that green products and services will benefit their bottom-line.
The Opportunity: These consumers make up 31% of the market. They are technology geeks, and an ideal target for using energy efficient devices to go green.
Enviro-Friendly Skeptics - these consumers are a more cynical audience, at least in terms of receptivity to technology. This group does believe in adhering to a green lifestyle, but they are more negative about the potential impacts of technology. In fact, they are the most likely to believe technology may worsen environmental problems. As a result, they seek technologies with a proven track record.
The Opportunity: These consumers make up 12% of the market. By focusing on the efficacy of the technology and programs you are using to implement your green strategies, you can gain the support of these customers.
Energy providers should take advantage of the recession to promote the green trends and reduce energy demand. Energy utilities are perfectly positioned to lead the green movement. Not only are they the focus of many environmental efforts, but they also have a huge impact on their surroundings. They are tied hand-to-hand to the green movement. The bottom line is that many consumers are waiting for their energy companies to lead the way in the green movement. Through initiatives such as replacement programs, rebate programs and demand response programs, providers can meet their business needs of reducing energy consumption, save consumers money, AND help the environment.