There’s a new cold reality for anyone wanting to make
their homes more energy efficient–and for retailers, manufacturers, and
marketers in this green industry: One of the biggest motivators for homeowners is
now out the window.
Starting this year, most of the tax incentives once available
to reward Americans for making these upgrades are gone.
The new federal tax law slashes
incentives for home energy efficiency improvements from 30 percent to 10
percent of costs for many improvements, generally taking credits back to
2005-2008 levels and reducing the maximum cumulative credit from $1,500 to
$500. In addition, there are now
lower, project-specific caps like $200 for energy efficient windows, and $300
for central air conditioning systems, compared to $1,500 in credits that were
available for these improvements in 2009 and 2010. Finally, if a taxpayer has claimed over $500 for energy
efficient home improvements in previous years, he can’t claim any new credits
So what’s the big deal?
My firm polls Americans
four times a year to gauge their shifting attitudes and opinions about energy
efficiency and sustainability, and we dig into what actually moves them to
choose greener products and shift their behaviors to be more efficient.
soon-to-be-published Utility Pulse study, we clearly see that the evaporation
of federal tax incentives will have a negative impact on energy efficient home
improvement activity, particularly for the two higher-income consumer segments
that have the discretionary income to make improvements and are the most likely
to use this form of financial incentive:
Cautious Conservatives (primarily upper-middle income, educated,
middle-aged, Republican-leaning white guys who don’t believe global warming is
caused by man) and True Believers (primarily middle income+, educated,
Northeast liberal Boomer women).
In fact, the availability of more generous federal tax incentives has
been a primary driver for the increase in energy efficient home improvement
activity we’ve seen over the past year.
Here’s how the data breaks
out: Almost one quarter (23%) of
the respondents in our survey who had undertaken energy efficient retro-fit
activities said they’d received a rebate or financial incentive for the
activity. When asked to specify the type of rebate they’d received, most said
they’d received either a utility rebate (41%) or a federal tax incentive (39%).
Exactly one quarter said the incentive was absolutely necessary–they wouldn’t
have acted without it, and 7% said the incentive encouraged them to pay a
slightly higher price for a higher-efficiency model. Thus at a minimum, approximately one third of the population
who made their home more energy efficient would likely not have acted or would
not have purchased the more efficient unit if it weren’t for the incentives
still exist, but the federal tax incentives mostly do not. That means utilities, manufacturers,
retailers and contractors will need to be more innovative and targeted with
their marketing, and make utility rebates more prominent and convenient than
ever before. Here’s our advice:
All consumer segments prefer instant rebates
at the point of sale. Few
utilities have structured their programs in this way (beyond CFL offers). There is a need to develop partnerships
with utilities, retailers, manufacturers and contractors to create more of
these kinds of programs. For
instance, start offering at-check-out rebates (branded with the Utility’s
energy efficiency program logo at-shelf and even on package, with stickers) for
low cost home sealing items like weather-stripping and spray foam.
while tax incentives were the second most popular form of incentives for both
Cautious Conservatives and True Believers, mail-in
rebates were preferred more by Cautious Conservatives than any other group. These older consumers are more patient
and willing to “do the work” required for these kinds of rebates and
they have the financial wherewithal to bear the up-front costs, without the
discount. So get these out there
to this segment of the population.
bottom line: While the reduction
in energy efficient tax credits will hamper home improvement activity in the
coming year, energy efficient product and program marketers who strategically refine,
position and message their programs can still be successful. It will be harder. A market segmentation approach that takes
into account segment attitudes, needs, drivers and barriers is needed, along
with a strong umbrella campaign to build awareness.
In addition, most
utilities have barely scratched the surface when it comes to utilizing existing
customer and demographic data for predictive modeling and targeted direct
marketing. In short, it’s time to
stop mass-marketing and start target-marketing energy efficiency programs. That’s the only way to overcome the tax
credit set-back and say hello to continued energy efficiency sales.
Suzanne Shelton is the CEO of
Shelton Group, an advertising agency exclusively focused on motivating
mainstream Americans to make more sustainable choices. Suzanne is a guest
columnist in multiple publications and a featured speaker at numerous
conferences every year on this topic, largely pulling insights from the firm’s
quarterly polling of Americans and their creative campaign work for some of
America’s largest brands.