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Green Power
Green pricing
Getting to 6 percent
Several specific strategies have emerged as particularly promising for achieving the 6 percent market potential: setting up strategic partnerships, targeting likely prospects, making best use of the marketing budget, and partnering with environmental groups.
Strategic Partnerships
Surveys provide
a new link to surveys reveal that green energy
program enrollees participate in the following
activities - suggesting that the associated
industries could be good alliance partners:
- Sixty-eight percent "often or sometimes" purchase organic food and health food, compared with 45 percent of nonparticipants; vitamins, herbal supplements and other health supplements are included in this category.
- Sixty-eight percent "often or sometimes" garden, compared with 56 percent of nonparticipants. One utility has had very good success offering green energy customers discounts to gardening supply stores.
- In the past two years, 64 percent had purchased goods and services from companies because those companies were perceived as being environmentally responsible compared with 37 percent of nonparticipants. This suggests partnerships with companies such as Ben & Jerry's and The Body Shop whose brands have become associated with environmentalism.
- Fifty-five percent "often or sometimes" run, hike, or ski, compared with 38 percent of nonparticipants. This suggests outdoor gear retailers as potential partners.
"Green" homebuilders are also natural alliance partners. These homebuilders design and construct homes that typically use environmentally friendly or recycled materials, consume less energy, provide improved indoor air quality, and gain certification from such organizations as the U.S. Green Building Council. Through coordination with these programs and partnerships with companies specializing in green building, green power providers can access new home buyers with a demonstrated interest in energy efficiency or solar power who are in the process of signing up with the local utility for the first time.
The National Marketing Institute has identified other products and services frequently purchased by healthy lifestyle segments. These include consumables such as cruelty-free personal care products, eco-cleaning products, ecological lawn- care products, energy-efficient light bulbs, and organic fiber clothing; durables such as alternative transportation, eco-tourism, and ecological/green building products (such as sustainably harvested lumber); and lifestyle products and services such as continuing education, fitness equipment, health club membership, martial arts classes, massage therapy, self-help tapes and seminars, socially responsible investments, and yoga classes.
Targeting Likely Prospects
Advertise on public radio and television by
becoming a donor/sponsor. In
addition, try to obtain lists
of public radio and television
members to target via direct
mail or e-mail. Green energy
participants are more than twice
as likely as nonparticipants
to donate to public radio or television: 61
percent compared with 28 percent. Some green
energy programs are already implementing this
recommendation, to good effect. See listing
of retail green
power products.
Obtain and target Democratic Party member lists. Green energy participants tend to belong to the Democratic Party or maintain no party affiliation. When asked how they tend to vote, 34 percent of participants said Democratic, whereas 22 percent of participants tend to vote Republican. Local county clerks offices usually have databases, often in the form of CD-ROMs, containing all registered members of political parties. This is public information obtainable at a nominal fee.
Where possible, participate in promotional events with local nonprofits and take advantage of any other opportunity to partner with nonprofits, especially environmental organizations. Seventy-three percent of participants volunteered their time with these organizations at least once in the past two years, compared with 57 percent of nonparticipants. Membership in environmental nonprofits is participants' single most dramatic distinction among all areas in the survey, even more than one would expect. More than half of participants belong to environmental groups, compared with only 16 percent of nonparticipants. (See Partnering with Environmental Groups).
Via direct mail or e-mail, target customers who have participated in certain other utility programs, such as high-efficiency appliances and lighting programs. Though such participation can be motivated by the desire for energy bill savings, it also can evince self-efficacy with respect to the environment and can be a predictor of green energy participation. For example, surveys revealed that 53 percent of green energy participants, compared with 41 percent of nonparticipants, own compact fluorescent bulbs.
The Center for Resource Solutions offers a green pricing accrediation service, and as part of that service provides marketing guidance and standards.
The Marketing Budget
How much money and other resources (such as personnel) one needs to market a green electricity program should depend on the program's goals. If one has only a modest amount of green capacity to sell, then of course one needs less money to get the word out. There is also wide variability in how organizations account for costs—for example, whether salaries are charged against budgets, or how carefully company resources (such as call center or Web design time) are accounted for. These caveats aside, a reasonable rule of thumb for marketing budgets is to expect to pay $30 to $70 per residential customer green power sign-up.
When a program is first launched (or relaunched), one needs to spend quite a bit to hit several different types of marketing channels. This can be quite expensive and requires some faith. "It's unrealistic to expect a new product like this to break even immediately," noted one experienced green program manager. However, equally important is to preserve some funds for reinforcing media messages. Suggested another manager, "you need to make a continuing investment throughout the year; this isn't a program you can launch and then wait for things to happen." And several green program managers pointed to the importance of staying in touch with subscribers, to maintain their participation. "We started a newsletter for participants to keep them informed and to encourage them to continue their support. When we published the newsletter less frequently, there was a drop-off in support for the program," commented one program manager. Staying in touch, of course, requires some funds as well. Program managers' views varied on whether it gets harder or easier to sell green energy over time. Some found there was a large, pent-up demand, and people signed up as soon as the program was announced, but that it got progressively more difficult after that. Others found that, over time, increased awareness levels coupled with more data on just what types of customers were signing up made it easier, not harder, to sell.
Bill Stuffers and Bang Tails This method of getting the word out about a green pricing program has several advantages:
- It is inexpensive. Bill stuffers only cost about 10¢ apiece by one estimate.
- It is familiar to the utility. Billing and mailing departments are comfortable with them, as they've sent them many times in the past.
- Readership is high. Everyone opens their bills and, according to one utility manager, "our research shows that one-half of our customers read our billing inserts."
- The response rate is reasonable.
- Bill stuffers are typically sent to everyone, and therefore can provide valuable intelligence on unexpected buyers. "While response to bill stuffers is not fantastic, you get some different segments that show up there, and you can then go after them with direct mail," noted a green program manager.
This method does have its shortcomings, of course. Some buyers will just not be reached by this channel—they may not read anything that arrives with the bill, they may need a more personal contact, and so on. For example, one municipal utility noted that its bills are also used by the city as a communication channel. "So I think we've conditioned our market to open up the envelope, take out the bill, and throw the rest away," a manager pointed out. And bill stuffers are not effective in the commercial and industrial market, because bills are opened by the accounting department, which is not interested in new products or services. Overall, the low cost and reasonable response rates for bill stuffers and bang tails mean that utilities should definitely use this channel.
Direct Mail direct mailing to prospective buyers was the second most popular channel. The principal attraction is that direct mailings can be sent to targeted groups that are more likely to buy, allowing you to "fish where the fish are," commented one manager. Response rates were sometimes surprisingly high (6.9 percent for one utility, for example), but this must be traded off against the higher cost (typically between $1 and $1.50 each, including postage). The response rate is largely a function of how good your information is on just who should receive the direct mailing. As noted above, careful analysis of those who have responded to blanket channels such as bill stuffers can reveal likely indicators for use in targeting direct mail. Noted one manager, "Direct mail is very expensive. But if you don't do that, you can't reach the customers who don't read the bang tails and bill inserts."
Partnering with Environmental Groups: Worth the Effort
The single largest indicator of success found in one review of utility green pricing programs was partnerships with environmentalists. Simply put, programs with active and positive such partnerships were doing well, and those without were not doing well. It's clear that building and maintaining such a partnership can be time-consuming, difficult, and frustrating; but it's well worth the time and effort.
Why Work with Environmental Groups?
- Credibility. The public support of an environmental group "gives consumers a sense that this is a legitimate green program," noted a manager at a rural electric cooperative. Some utilities have a less-than-stellar environmental reputation, and an environmental partner can help overcome distrust of your program.
- Access to potential buyers. Members of environmental groups are often good candidates for participation in a green program. One utility put sign-up forms in the local Sierra Club's newsletter.
- Program design. Environmentalists are one target audience, and their reactions and suggestions can help design a successful program.
- Marketing support. Environmental groups "have taken brochures and had articles in their newsletter," noted one green program manager. Similarly, "they handed out information about our program at their booth at the State Fair," said another. This has proven especially valuable in making commercial and industrial sales. These users often buy green to improve their environmental image, and the presence of an environmental spokesperson at a sales meeting can help make the case.
How to Work with Environmental Groups
Interviews revealed several tips on how to
work effectively with environmental groups.
The first was to work with them from the beginning;
getting the support and assistance of environmental
groups requires contacting them early in the
program design process. "The earlier you begin
working with them, the better," advised one
green marketer. "Your product development may
take longer because they're involved, but you're
going to end up with a better program, a better
product, and a lot more support." This may sound
like a burden, but in fact it can be a great
help. "The environmental groups actually helped
us design the product, the pricing, and the
marketing," reported a utility manager. These
groups know your target audience better than
anyone. The second piece of advice from our
interviewees is that environmental groups have
a very strong preference for new renewables,
rather than existing—in fact, their support
is probably contingent on this. See also Getting
Green Electrons.
For an excellent description
of a successful utility-environmental
group partnership, see the Western
Resource Advocates website.
Commercial and Industrial Market
Large energy users are potentially an appealing market for green energy sales for several reasons: First, large energy users account for 62 percent of all kilowatthours sold in the United States and, by definition, these users buy electricity in sizable chunks. Second, signing up large energy users can bring name recognition and credibility to a green energy program, thus attracting additional large buyers, small business, and residential customers.
But convincing large commercial and industrial end users to buy green energy at a premium is not easy. A vice president of marketing for an electricity retailer summed up his company's experiences selling green energy to commercial and industrial customers as a "love-hate relationship'on the one hand, we love them because of the name Identification. they provide when we sign them up. But on the other hand, they require considerable account management resources, and it can take a very long time to complete contract negotiations."
Our research confirmed what most probably suspect—many commercial and industrialgreen buyers have some kind of predisposition toward environmentalism, whether because of an internal corporate philosophy, or a desire to reach environmentally concerned consumers, or both. It therefore makes sense to initially focus on strategies to identify these organizations, and the best contact person within them, to begin discussions about green energy.
Most green energy sales in this sector happen because a champion within the company pursues the contract doggedly. But helping the champion with the internal sales process by being able to speak to the energy user's specific mission and goals is important too.
Over the long term, increased awareness about green energy among the general public will make it easier to sell more green energy to large energy users. That's because the public won't reward businesses that pay a premium for green energy unless they know how to assign it a value. Just as today they might assign a certain value to companies that recycle and use recycled materials. Basic public awareness can only come with time and effort. Along the way it will be important to "convert" green energy into meaningful pollution reductions that large energy users can tout.
Four Steps to Selling Commercial and Industrial Customers on Green Energy
1. Target the best prospects.
2. Identify the right contact person.
3. Appeal to the primary contact.
4. Help contacts make the sale internally.
1. Target the Best Prospects A review of announced deals, as well as interviews with end users and green energy suppliers, suggests that commercial and industrial customers most likely to sign a deal for green energy will fall into at least one of these categories:
- Companies with environmentally minded customers.
- Companies with well-defined environmental policies.
- Companies led by people who promote environmental stewardship.
2. Identify the Right Contact Person As suggested by step one, CEOs or other high-ranking company officials who have a personal interest in or knowledge of green energy are obvious candidates for lead contact. But finding contacts with a personal interest in, or knowledge of, green energy is valuable even if they aren't senior staff. In fact, "there is almost always a single champion—someone who takes the lead and really makes it happen," said a business development manager at Green Mountain Energy.
3. Appeal to the Primary Contact The most effective message in marketing to the primary contact within an end-user company will largely be dictated by who the contact is and by his or her departmental affiliation. Winning over a contact that works in marketing or public relations, for example, requires a pitch that incorporates a clear vision of how a green energy purchase relates to a company's "story" and a promise to leverage all possible publicity opportunities.
4. Help the Contact Make the Sale Internally Once the utility has identified a champion within an organization; the next step is to help that person sell the idea of buying green energy internally. This step is easier if the contact person is the CEO, but it's critical even if the person you're dealing with has direct authority over energy contracts. The purchase of green energy is likely to be a group decision, which makes for a more complicated sales process. Decision makers must be able to rationalize their decision to pay a premium for green energy from a cost-benefit perspective—as they try to do with everything else.
Getting Green Electrons
Green pricing programs can be seen as an effort to sell a new product – green electricity. As such, a successful program must ensure that the product itself is what consumers want. Three attributes of green electricity require consideration: age, location, and generating source. Consumer preferences vary, are easily influenced by media reports and peer group influences, and are difficult to pin down. In general, they follow the pattern shown in this figure:
- Local or nearby generation is preferred to that imported from farther away
- New generation is preferred over existing
- Wind and solar are preferred over hydro and waste
The more your green supply fits these preferences, the easier it will be to sell. Many other considerations influence renewable supply decisions, but if you are planning for a green pricing program, it's worth considering these factors as well.
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