Strong Market is Essential for Energy Efficiency Finance
Marketing is an essential ingredient for the success of energy efficiency finance. But too often, finance and efficiency experts focus on technical and financial issues and underestimate the importance of marketing. Using best practices in marketing is necessary to drive demand to the high levels state goals require.
At a New England Clean Energy Council panel in Boston on Nov. 29 titled Monetizing the Savings from Energy Efficiency Projects, the relationship between marketing and finance came up repeatedly as a key issue which needs further exploration in the industry.
“There’s not been a lot of uptake on existing programs,” said Martin Gitlin, Senior Advisor at Harcourt Brown & Carey Energy & Finance. “The biggest obstacle is… what to do to convince people to buy energy efficiency.”
The panelists agreed that consumer reluctance to invest in energy efficiency is making it difficult for programs to reach ambitious state targets. All of the outreach strategies the panelists see as effective – community-based outreach, one-to-one communication, and intervening at the point of sale – require a significant investment in marketing. This level of marketing goes far beyond the standard one-size-fits-all approaches of some energy efficiency programs.
“‘If you build it, they will come’ doesn’t work,” said Angela Ferrante, Director of Alternative Energy Solutions at Energi. “The only way this gets marketed is by people going out and hitting the pavement and educating people about the program.”
Claire Broido Johnson, Chief of New Markets & Services at Next Step Living, said customers do sign up for programs if they hear a recommendation from a friend or trusted colleague. Next Step Living is engaging in targeted, community-based outreach as it expands its work this year.
Energy efficiency programs have also found it challenging to develop persuasive messages. Mark Barnett, co-chair of the Energy Technologies & Renewables Group at Foley Hoag LLP, said the approaches organizations are taking to the commercial market are “not hitting buttons that people care about.”
In a separate interview, Kerry O’Neill, Senior Advisor at the Clean Energy Finance Center, agreed with Gitlin’s comments. “Consumers don’t care about energy. When you’re trying to get a lot of uptake, you’re trying to break through the noise of busy lives to get customers to take action.”
Last year, O’Neill participated in an energy efficiency marketing task force sponsored by the Housing Development Fund in Connecticut. The task force was part of a stakeholder planning process in Connecticut which developed recommendations for strengthening residential energy efficiency in the state. O’Neill has also been collaborating with Connecticut’s Clean Energy Finance and Investment Authority (CEFIA), which developed a marketing plan for its commercial property assessed clean energy (C-PACE) program.
O’Neill’s insights from participating in these projects have made her a strong advocate for improved marketing. She said driving consumer demand is crucial for any financing program. She also emphasized the value of budgeting for intensive marketing and outreach that goes beyond advertising.
When starting a program, O’Neill said, it’s essential to coordinate three components – consumer demand, workforce capacity, and capital requirements. Often, consumer demand falls short.
Residential Customers: Messages and Contractors
“Targeting of customers based on their demographic and psychographic profile is the normal way of marketing these days,” O’Neill said. But this approach has not taken hold in energy efficiency marketing yet. Instead, customers receive mass-distributed, one-size-fits-all messages which often focus mostly on saving money. But not all residential customers are motivated by financial savings. Some are concerned about comfort, while others may respond to a message from a trusted source or contractor.
The Lawrence Berkeley National Laboratory’s Driving Demand project explores some of these approaches to marketing and provides recommendations. The Driving Demand report says providing information and financing is insufficient to encourage widespread adoption of energy efficiency. Making the retrofit process easy, customizing messaging for audience interests and needs, partnering with contractors, and collaborating with trusted messengers can strengthen marketing and outreach.
Merrian Borgeson, one of the authors of the report, provided further recommendations. “A lot of people don’t… see their energy bills as a problem,” she said. She added that having a simple, clear message, working with trusted messengers, and talking about benefits that matter seem to be crucial for promoting energy efficiency.
Borgeson said program staff should use marketing to pique customer interest and talk about financing later. “You don’t want a used car loan unless you want a used car. Once a customer wants something… but they don’t have the cash… that’s when financing comes in.”
O’Neill said partnering with contractors is essential for strong marketing. “Contractors are one of the most critical marketing channels,” she said. She recommends co-branding materials with contractors.
Borgeson said her research supports the value of contractor sales training programs. She said that how contractors communicate with residential customers is vitally important for driving program success.
Commercial Customers: Budgets and Relationships
In the commercial and industrial market, finance plays a greater role in motivating energy efficiency investments than it does residentially. However, finance in this sector is one piece of a broader picture which includes intensive person-to-person marketing.
“A big focus of CEFIA was… focusing hard on what motivates commercial property owners and the commercial real estate market,” O’Neill said. This is more difficult than it might seem at first glance. Developing messages for each group of stakeholders is a challenging and time-consuming process involving individual conversations.
Selling energy efficiency to these stakeholders is similarly time-intensive. It requires developing personal trust, working through peers and professional associations, and setting up meetings with decision makers. “Each of these audiences is a potential conduit for deals and also for other contacts,” O’Neill said.
Economic difficulties have made commercial building owners more financially conservative than they might be otherwise. Financing is a key part of a strong marketing pitch for commercial and industrial customers. Building relationships with these customers, answering their questions, and explaining the favorable financial terms of energy efficiency programs are all essential.
Article by Kat Friedrich, appearing courtesy Energy Efficiency Markets.
photo: 401(K) 2013.
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