Losing steam

Editor’s note: Suzanne Shelton is CEO of the Shelton Group, a Knoxville, Tenn., advertising firm.

As the drumbeat continues to sound throughout the mainstream media, warning consumers about the threats of permanent environmental damage resulting from various forms of energy use, American consumers’ thoughts and behaviors seem to ramp up in complexity and often sound a different drum altogether - one that utilities need to grasp and comprehend if they ever expect to achieve market penetration with renewable energy and energy efficiency.

Consumer thought and behavior diverge in many respects from common assumptions about what people think and know about energy use, conservation and the environment, as well as how they make their purchasing decisions. It is paramount for energy companies to understand the thought processes behind consumer motivations in order to reach customer bases with messages and motivations that make sense and help spur new customer choices and demands.

Now in its fourth year, Energy Pulse is a national consumer study conducted by my firm that analyzes consumer energy use, energy conservation and purchasing behaviors relative to energy-efficient and “green” products and services. The study also delves into the reasons why consumers think and behave the way they do about their own energy use and what factors motivate consumers into action.

Among some of the themes identified in Energy Pulse over the years, and in 2007 with the latest study in particular, are some critical realities that drive how utilities and energy companies should communicate strategically.

Lack of awareness

The American consumer consistently shows a substantial lack of accurate awareness about their own personal use of electricity, production of electricity and the role of coal-fired plants in greenhouse gas emissions.

While Figure 1 shows that 63 percent of U.S. consumers agree they are “very concerned” about the effects of climate change or global warming, there is a disparity between how greenhouse gas emissions are generated and which culprits Americans think are to blame.

The 2007 Energy Pulse study indicates two-thirds of consumers do not know that most electricity is produced by burning coal, and 19 percent of consumers think that hydroelectric generation is the No. 1 source of electricity (the U.S. Energy Information Administration cites that hydro is the source of only 3 percent of the electricity in the U.S.).

Figure 2 shows the responses to the question, “Which is the worst man-made cause of global warming or climate change?” Less than 4 percent of consumers name coal-fired electricity production as the biggest man-made contributor to climate issues. Nearly 30 percent of consumers think car and truck emissions present the worst man-made cause of global warming/climate change.

Contrary to those responses, however, the Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2005 report documents that fossil fuel combustion accounts for 79 percent of greenhouse gas emissions - and of that, electricity generation accounts for 41 percent of CO2, or nearly one-third (32.8 percent) of all greenhouse gases, while transportation (personal cars, diesel trucks, heavy-duty vehicles and jet fuel) accounts for 26 percent of greenhouse gas emissions. Personal vehicles account for only 15.7 percent of all greenhouse gas emissions.

This disconnect that American consumers have between climate change issues and their own electricity usage is drastic. Over the years, consumers have been conditioned to think that changing their driving habits is the primary way to help the environment. Because of this, consumers have never realized that the biggest thing they can do to reduce greenhouse gas emissions is to use less electricity.

In addition, consumers generally do not realize the volume at which they have increased their electricity use in the last 15 years. Today, many households, businesses and home-based businesses have computers, copy machines, cell phones, PDAs, MP3 players and other electronic devices that were not at all prevalent 15 years ago. Yet when we ask consumers in focus groups, “Are you using more energy today than you were 10 years ago,” the knee-jerk response from consumers is “no.”

Lack of understanding about renewable energy continues to be a factor with the American consumer as well. Energy Pulse 2007 found only 48 percent of consumers could name (unaided) at least one form of renewable energy, although this statistic is quite improved over 2005, when only 20 percent of consumers could do so.

Consumers are experiencing “green fatigue” but not related to repetition of environmental messages. They lost a marked level of enthusiasm in 2007 for energy-efficient home products and green housing, citing green home products’ higher prices as cause for concern. When advertising an energy-efficient product, telling consumers they’ll save money isn’t good enough. Energy Pulse shows that consumers want proof.

Consumers also expressed concerns that “green” and “energy-efficiency” are being used merely as marketing ploys. After being bombarded by the marketing messages of companies jumping on the green-friendly bandwagon, people are now much more inquiring about the bill of green goods being sold to them - not only in terms of, “Is it as green as what they say it is?,” but also, “Does it matter enough to me to pay extra?”

Green power shows no growth

Energy Pulse 2007 indicates that consumer likelihood to participate in green power programs has increased since both the Energy Pulse 2006 and 2005 studies, as indicated in Figure 3. However, green power has shown no growth in self-reported participation over the last three years - likely due to a finding from previous Energy Pulse studies that most consumers are unaware if their utility offers green power. In addition, the study reveals insights about the electric utility industry’s image problem with customers and that confusion over bills and rates drives a range of negative perceptions.

According to the report, survey participants have been very likely over the past three years to say they will participate in green power, but the apparent show of support has not been particularly predictive of actual behavior.

Based on the study’s three years of consecutive survey data as well as focus group feedback in 2007, Shelton Group thinks low participation rates have to do with both awareness and targeting. Utilities that fail to initiate and sustain strong, consistent marketing support of green power should expect continued low response levels due to the extra effort required of consumers to participate in most programs.

In addition, it is not just the existence of marketing programs that is important - it is the targeting of these programs. Not every consumer is a good prospect for green power. Utilities should target customers who both have the means and the interest to participate. A mass-market approach is generally not effective.

Whereas “increasing energy prices” ranked as a top energy or conservation concern in 2006, Americans today seem to have adjusted to higher energy prices, with other concerns having grown in importance. When asked their top energy concern from a list of several potential concerns, “the quality of our Earth for future generations” is the No. 1 concern (20 percent), as it was in 2006.

However, “increasing energy prices” dropped from number two to fifth place and a newly introduced concern, “environmental problems damaging our health and/or the health of our families” is now tied for second with “U.S.  reliance on other countries for energy.” These results are all shown with percentage responses in Figure 4.

There were significant differences in primary concern, based on age, education, ethnicity, occupation, political philosophy and political party, and our firm strongly recommends any utility or other energy company carefully assess its own demographic market in order to determine the best message strategies.

Some good news

For utilities already offering aggressive green-power programs, there is some good news: Energy Pulse documents that more than 73 percent of consumers said it is important/very important that their utility generates or purchases at least some green power. In addition, 65 percent said that knowing their utility participates in green power and energy-efficiency programs positively impacts their opinion of the utility.

In terms of general perceptions, however, utilities face a challenging public relations problem, driven in large part by recent rate increases and consumer confusion about their bills - and even confusion about how electricity is generated and what renewable energy is. Energy Pulse 2007 focus group participants were consistently negative in their perceptions of utilities, particularly their electric utility. Consumers don’t understand how their bills are calculated or why their bills rise, and they often suspect greed and excess profit-taking by their power provider. While some consumers - particularly in the western U.S. - understand the need for utilities to encourage conservation, most are skeptical and think the push for green power is simply a marketing ploy to score points in the media.

Energy Pulse survey respondents have consistently said it’s extremely important for utilities to give them tools to help them reduce their bills. Interest in most utility programs has increased from last year, and interest is high for a number of products newly tested in Energy Pulse 2007. Sixty-eight percent of respondents said they were likely/very likely to participate in time-of-use billing. And, while such a program isn’t available in every state or at every utility, 49 percent of consumers said they would, hypothetically, participate in a solar rebate program. In addition, interest in energy-efficient product rebate programs is high.

Despite a growing U.S. marketplace touting the benefits and desirability of green home products and new-home construction, Energy Pulse 2007 indicates consumer purchase intent for energy-efficient home products was down in 2007 compared to a year ago. The current economy and housing market decline - coupled with consumer perceptions that green products cost more - may be resulting in a marked drop in consumer enthusiasm for energy-efficient homes and other green home products.

When asked, “Would you choose one home over another based on energy efficiency?” those who answered yes declined significantly in 2007 compared with responses in 2006, by 16.27 percentage points. Also reflecting the housing troubles of the past year, Energy Pulse documented a 13 percentage point decline in the number of consumers who have “recently completed home renovations,” from 30 percent of consumers who responded affirmatively in 2006 to only 17 percent in 2007.

Energy Pulse 2007 also documents that purchase intention for every energy-efficient home product evaluated is down from the study’s 2006 results. Decreases in levels of “likely/very likely” purchase intent for the following products and activities between 2007 and 2006 include:

  • Purchase a programmable thermostat: down 22 percent.
  • Purchase energy-efficient compact fluorescent or halogen light bulbs: down 11 percent.
  • Purchase an Energy Star appliance: down 19 percent.
  • Install extra insulation to make home more energy-efficient: down 15 percent.
  • Install special energy-efficient windows or doors: down 12 percent.
  • Purchase higher-efficiency heating/cooling system: down 17 percent.
  • Request home energy audit or seek information to improve home energy efficiency: down 9 percent.
  • Install solar panels or other renewable energy generation at home: down 21 percent.

Take notice

Fewer consumers seem willing to put the cash into a green or energy-efficient purchase despite how much it may save them in the long run or how it might assuage their guilt about the environment. Marketers should take notice with respect to the content and credibility of their messages. Prices matter and consumers may be growing weary of companies that appear to tout green merely as a marketing ploy. Sixty-one percent of Energy Pulse 2007 respondents thought energy-efficient products cost more. Therefore, energy-efficient product marketers should make it clear if their products are priced comparably to less efficient alternatives.