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Marketing an Energy-Efficient Product as ‘Money Saving’ Just Doesn’t Work – Here’s Why

Our latest national survey had an intriguing finding: More Americans are doing the right things — buying energy-efficient appliances, installing insulation, replacing their light bulbs with CFLs and adjusting their thermostats. Yet their utility bills are still on the rise.

What gives?

The poll, our sixth annual Energy Pulse survey, found 77 percent of homeowners say they’ve replaced their incandescent bulbs with energy-efficient CFL or LED bulbs.

In addition, about half say they’ve replaced their windows with more energy-efficient models, and similar numbers report having replaced their HVAC or furnace, added insulation and replaced appliances with higher-efficiency units. Yet 64 percent say their energy bills have gone up.

That means most Americans—despite their reported efforts to conserve energy and control costs—are getting a jolt every time they open their utility bills. How could this be possible? Four reasons:

1. Utility companies are, in fact, raising rates, which counteracts the savings gained by consumer efforts.

2. With all of our smart phones, HDTVs, laptops, and computers, we’re plugging in more devices than ever before, and consumers don’t realize how much extra energy they’re using.

3. The Snackwell’s Effect (“They’re low fat; I can eat ALL of them!):  It’s easy to believe that because we’ve put CFLs in everywhere, we can leave our lights on all the time, or because we just installed a high-efficiency water heater, we can take extra-long, hot showers.

4. The biggest reason of all: perception doesn’t equal reality. The Department of Energy estimates that only 13% of the sockets in American have been filled with CFL’s, which is a far cry from the self-reported 77 percent.  Consumers give themselves more credit than they actually deserve for their energy conservation efforts.

Bottom line: Perception IS reality. And if Americans believe they’ve already checked the energy efficiency box, yet haven’t seen the savings they were promised, they simply won’t be motivated to make any more changes in their behavior or buy the next energy efficient product.

That’s why those who market energy-efficient products should steer clear of saying, “Buy this product to save money!” It’s a promise that can’t be delivered on.

Utility rates are expected to continue to rise over the next decade. Unfortunately, these rate increases will outrun most homeowners’ ability to counteract them with energy-efficient products. So even with their best efforts (turning off lights, taking shorter showers), and even with significant financial investment (new furnace, new insulation), most Americans will not see lower utility bills.

For those marketing energy-efficient products, the message should be: “With electricity rates rising, take control of what you can!” It’s all about stressing control and energy independence.

Fortunately, energy-saving habits are on the rise. Our study, which polled 502 consumers across the country, found that those saying they’ve changed their behavior to save energy at home (taking such steps as washing clothes in cold water or adjusting their thermostat settings) jumped from 60 percent last year to 91 percent this year. And those who now unplug chargers and other electronics when not in use increased from 33 percent last year to 56 percent this year.

Why are more Americans now conserving energy? When asked the primary reason to save energy or buy an energy-efficient product, the top answer was “to save money” (32%), followed by “to protect our environment” (17%), “to preserve the quality of life for future generations” (15%) and “to be responsible and not waste resources” (10%).

The survey also asked: “Which of these things is the easiest to do that you think would help reduce your utility bill the most—in other words, the easiest thing with the biggest impact?” The No. 1 answer was “raise/lower thermostat settings” (18%), followed by “install extra insulation” (15%) and “unplug chargers, appliances and electronics when not in use” (13%).

What’s the most difficult thing to do? The top answer was “purchase an ENERGY STAR® appliance” (24%), followed by “install extra insulation” (18%) and “unplug chargers, appliances and electronics when not in use” (12%).

In other words, roughly the same number believe buying an ENERGY STAR appliance and unplugging devices are the hardest things to do as those who think they’re the easiest things to do.

Which side you fall on is mostly likely determined by whether or not you’re a true do-it-yourselfer, or whether you think you have time to do these things. (Many a do-it-yourselfer is too busy to do it themselves.) Conserving energy either takes time or money. Both are real barriers… and motivating consumers to get past those barriers requires making real promises that can be delivered on: take control vs. save money.

Suzanne Shelton is president and CEO of Shelton Group, an advertising agency exclusively focused on motivating mainstream consumers to make sustainable choices. The agency conducts four proprietary consumer opinion studies annually: Eco PulseTM, Energy PulseTM, Utility PulseTM and Green Living PulseTM.

Suzanne Shelton
Suzanne Shelton is president and CEO of Shelton Group, an advertising agency located in Knoxville, Tennessee. The agency conducts four proprietary annual consumer opinion studies – Eco Pulse, Energy Pulse, Utility Pulse and Green Living Pulse.
 
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15 thoughts on “Marketing an Energy-Efficient Product as ‘Money Saving’ Just Doesn’t Work – Here’s Why

  1. I think this has a lot to do with so called “avoided costs’. That is as we implment more energy efficent technologies, the energy producers (utility companies etc) are faced with producing the same capacity but recouping less revenue. To cover the balance they must recoup this money in the form of “avoided cost”. My question is at what point does this practice run counter to the whole idea of becoming more energy efficient?

  2. The article claims that “Utility … rate increases will outrun most homeowners’ ability to counteract them with energy-efficient products.” This claim is false. Utility rate increases generally average less than 5% per year (often about half that).

    Contrast the 2.5%-5% rise in utility rates with the 75% energy savings of CFLs. I don’t buy the argument that people leave their lights on four times as much with CFLs vs. incandescents. In fact, there are hardly enough hours in a 24-hour day to accomodate such a blatant increase. And yet that’s approximately what it would take to counteract the 75% energy savings, and thus fall victim to a rising energy bill despite the switch. Similar comparisons could probably be made for other products, like increased insulation or more efficient HVAC. I conclude that the ‘Snackwell effect’, while undoubtedly real, is simply not large enough to do as the author claims.

    Let’s look at the CFL example in another way. Assume for a moment that the ‘Snackwell effect’ was absent. In that case, a 5% per year rise in electricity prices would require approximately 28 years before the electricity paid to light the CFL cost the same as the electricity paid to light the original incandescent 28 years ago. In the intervening 27 years, the homeowner would have been saving on the utility bill.

    And while it’s true that homeowners have more and more gizmos that increase the ‘phantom load’ (electricity used while the device is supposedly turned off), the phantom load increase is likewise insufficient to mask the true cost savings realized by significant eficiency improvements. After all, I have such phantom loads, but I don’t have significantly more of them this year than I did last year. If I undertake energy efficiency improvements, I am bound to see a decrease in my bills despite the slight yearly rise in my phantom loads.

    Perception not equalling reality is the only explanation that makes sense. Not only do surveyed people consistently overestimate their energy efficiency measures, they also undoubtedly mis-estimate how much their utility bills are actually changing on a yearly basis. How closely do you keep track of that, for example? How closely do you suppose others keep track of that?

    I know that the article is mostly concerned with perceptions, since that’s what sells products. But I disagree with the title and the conclusion. Selling efficiency improvements based in part on the cost savings is still a valid way to sell products. We just need to be more proactive in educating consumers about what their true energy efficiencies are, how much room they truly have to make improvements, and how much money such improvements are likely to save them.

  3. Another comment. Suppose your average monthly electricity bill is $100. That’s in the ballpark of what many people actually pay. In that case, you pay the electricity provider $1,200 per year. And after just 20 years, you have paid them a whopping $24,000! Just for your electricity.

    What do you think you could save if you took just 10% of that total, or $2,400, and invested it today in energy efficiency improvements like adding insulation, fixing drafts, etc.? You could probably make a whole slew of improvements with that sum of money. Probably plenty to realize a savings that is considerably larger than the $2,400 investment. And those improvements will go on generating yet more savings, year after year after year – long after the first 20 years have passed.

  4. Sorry for the comment blitz. I just realized another thing. Regardless of how energy savings compare with rising utility rates, it will always be true that an energy efficiency improvement will save money down the road – whether utility rates increase or not, and regardless of the magnitude of such increases. In fact, the faster that rates rise, the more money the efficiency improvements will be saving you.

    The only valid comparison to make is to compare the up-front cost of the efficiency improvement to the utility cost savings that will be generated by that improvement.

  5. Dave, I must also disagree with your comment. Regardless of how many efficiency improvements people undertake, the utility companies will continue to produce just enough of their commodity (electricity, natural gas, etc.) to satisfy demand. If overall demand goes up, they will produce more and get paid correspondingly. If overall demand goes down, they will produce less and get paid correpondingly (that is, they will not need to “produce the same capacity”). Either way, they will still make the same percentage profit.

    Finally, I just wanted to clarify one of the points I was making above. To calculate the $ savings of any efficiency improvement, the homeowner should not compare utility bills from different years (i.e. ‘the bill before the improvement’ vs. ‘the bill after the improvement’). Instead, they need to compare the post-improvement bill to what that same bill would have been if the improvement had never been undertaken.

  6. Very good article. Nice to see numbers, figures and stats along with sensible commentary.

    Regarding the surprising gap in reported CFL bulb use and the actual use: it’s so true that in general we give ourselves more credit than we perhaps earn for our green efforts. I do it, too.

    Lots of great observations in this piece – well done!

  7. Great article Suzanne and I can tell you firsthand that as an energy efficiency practitioner who lives his work with an ultra-low energy use home I see almost every day examples of people who have become accustomed to an energy ‘budget’ and consume to that level regardless of upgrades.

    Case in point my neighbor who after getting a tour of our home, after finding out our July energy bill was $63 (sixty-three) while his was well over $350, and noticing every single light fixture save for two bulbs over my wife’s sink where she puts on her makeup are CFLs promptly went to Home Depot and bought a case of CFLs. So did a host of other neighbors who also marveled at our low energy bill.

    A few days later while walking back from the park with our dogs my neighbor says, “Hey Jack, come check out my house on the way home. The new lights are great!”

    And what to my wondering eyes do I see? Yes every single light in the house is now on!

    Neighbor says, “We can now leave all the lights on for a clean, bright look just like the Architectural Digest magazine and our bill won’t go up.”

    Often the single easiest step most people (and businesses) need to take is use the off switch! http://www.emerson.com/edc/post/2010/07/29/Lete28099s-try-using-the-e2809cOffe2809d-switch.aspx

    Second item, and one overlooked in your study, is the practice by the utilities to shield the consumer from month-to-month fluctuations (and mask energy efficiency improvements) with the simple monthly flat-rate payment option. This practice is grossly misleading as the consumer is not aware of their excessive consumption in the cooling/heating season. Worse yet is they do not see the benefit of any major system-level upgrade such as the new ENERGY STAR® appliances, CFLs, or changes in use behaviors such as using plug-strips for parasitic loads. At least not until the next annual averaging period at which time the utility is also passing along a price increase.

    Frankly the level-pay plan should be banned by all PUCs across the nation.

  8. @Dave
    Not false.
    Lighting generally only represents 10% of one’s electric bill, so replacing all your lights will save about 7.5% on your bill. At 3% per year the rate increases would offset the savings in 2-3 years. And unless you can find another way to decrease your lighting energy use by another 50-75%, then you have to look elsewhere to offset the next year’s rate increases. The efficiency improvement is a one-time hit, but the rate increases keep on coming.

    3% per year increase means an increase of 35% in a decade. To offset that would require reducing energy use by more than 25%, which is pretty hard without making significant capital investments. And it can’t be done just by changing light bulbs, unplugging chargers and fiddling with your thermostat.

    It is absolutely true, as you correctly point out, that improving lighting efficiency is a big economic win. The problem is that it is hard to see the savings in the bill, because lighting is only a small percentage of the total bill.

  9. @Steve O
    You are comparing ‘the bill before the improvement’ vs. ‘the bill after the improvement’. As I noted above, that is an incorrect way to assess cost savings. Instead, they need to compare the post-improvement bill to what that same bill would have been if the improvement had never been undertaken.

    Replacing just one incandescent with a CFL will save the homeowner money – even if rates go up. The reason is that the homeowner will be using less energy to light that bulb (assuming the same number of hours ‘on’). Therefore, they will be saving money over what they would have had to spend in the case of never making the bulb replacement.

    In other words, their bill will have increased (due to rate increases) by a lesser amount than it would have increased with those same rate increases while using the original incandescent.

  10. I think the important take home point here is that when looking at your utility bill, ask yourself have you used less electricity than for the same period from previous years. This is the only way to assess if you have made any savings. When investing in any energy efficient devices, the individual savings are small, but are significant over several years. The amount utilities charge for usage is irrelevant because the relative amount you will be paying is less if you use less electricity. Save on electricity and you will save money! I guarantee it.

  11. I work for a builder and sustainability is a tough sell. Everyone favors it in the abstract, but when it comes time to spend money, most buyers would rather spend their money on luxury upgrades that pay dividends every day in terms of the pleasure they derive from owning and using them. The pleasure from a CFL is obscure and indeterminate compared with the pleasure of a sumptuous master bath.

  12. My business is energy efficiency, primarily for retail stores. It is a very rare company that will buy efficiency technology that is not supported by federal/state tax incentives, and utility rebates. They want to save, but not invest. I have technology that will reduce energy consumption by a minimum of 18% and pay for itself in less than 18 months, but companies will not invest in it unless at least 50% is paid for by someone else. This is corporate wellfare. I wonder if there is a national shareholders green iniative?

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