A Tale of Two Value Propositions

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energy star v heady topper

Example inspired by Amory Lovins? Or Zymurgy at ACI last week? Probably both!

Last week, I talked about value from both the benefit and the cost sides. Let’s dive into the benefit side a bit more deeply…and not the way many of us energy nerds often do.

Here’s a hypothetical project, and two archetypal contractor stand-ins.

Really Smart Energy Contractor, Bill, is working for a customer who pays $3,000 (exactly, $3,000) in annual utility bills. He has put together a work scope which includes replacing an old and failing HVAC system with a newer high-efficiency system, correcting some bad but simple-to-fix duct leakage issues, and doing a good attic air-sealing job in a house that needs it before topping off the insulation to R-50. And he’s doing it all for $14,500. (His prices seem a bit low to me, but that’s a different conversation.) Bill does quality work, and he’s also willing to guarantee his estimated energy savings of 30%, with a guarantee that has teeth. And lucky guy, he has access to some attractive program financing with a 2.99% rate up to 15 years.

Here’s Bill’s offer to his client: “I’ll do this project for you for $14,500. You can finance it at 2.99% for 15 years. You’ll save–and remember, I’m guaranteeing you’ll save 30% of your current usage because my energy predictions are that good–$75/month. And with that 2.99% efficiency loan through the program, your loan payment will only be $100/month. So, for the cost of a good pizza every month, you’ll have the peace of mind of knowing that you’re using less energy every month.”

Nothing wrong with the offer, per se. If you’ve got someone who just wants to save energy (not money), it might work. But it probably won’t be very compelling to most customers. And if that’s the sound of most of the offers that YOU are making, you won’t sell many. Yes, you’ll sell some. But likely not enough. Not enough to sustain most businesses. Not enough to provide good jobs for many people. And not enough to make a dent in the nation’s residential energy use if that’s something you care about.

Here’s another project. [This project should look more than a little bit familiar!]

Really Smart Solutions Contractor, Beth, is working for a customer who pays $3,000 in annual utility bills. She has put together a work scope which includes replacing an old and failing HVAC system with a newer high-efficiency system, correcting some bad but simple-to-fix duct leakage issues, and doing a good attic air-sealing job in a house that needs it before topping off the insulation to R-50. And she’s doing it all for $14,500. (Her prices, too, seem a bit low to me, but I digress.) Beth and her team do quality work, and she’s also willing to guarantee her estimated energy savings of 30%, with a guarantee that has teeth. And lucky gal, she has access to some of that same attractive program financing with a 2.99% rate up to 15 years.

But here’s the big difference between Beth and Bill.

Beth’s offer to her client (who happens to be the same client that Bill is courting as you might have surmised): “Thanks for helping me understand what’s important to you. I’ve narrowed down that laundry list of things we could do to focus on the priority issues of making your daughter’s bedroom warm enough in the winter and cooler in the summer, and of helping fix that problem you’re having with so much dust. Did I get that right? [“Yes”]. While we’re onsite sealing things up, it makes sense to improve the insulation in your entire attic. Now, this project is going to cost $14,500, but there’s some good news. In addition to fixing your daughter’s bedroom and helping shrink that dust problem, you’ll save–and remember, I’m guaranteeing you’ll save 30% of your current usage because my energy predictions are that good–$75/month off your utility bill. Plus, this qualifies for that utility loan we discussed, and your loan payment will only be $100/month. So, for the cost of a pizza every month, we’ll keep your daughter’s bedroom within 2 degrees of the rest of the house, we’ll stop the dust coming in through those leaky ducts and holes I showed you, and you’ll have a brand new heating system, to boot.”

Same project in both cases, but framed wildly differently.

Beth sells more projects than Bill. Bill and Beth are both good people. They both do good work and they’re committed to doing even better. But Bill is having a hard time sustaining his business and paying his mortgage. He’s not helping many people, either. That’s too bad.

Bill should be more like Beth, at least when it comes to listening to customers, finding out what they care about and are willing to pay for, and helping them save energy in the process. You should be more like Beth, too.

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About the Author:

Mike Rogers is the President of OmStout Consulting. A nationally recognized expert in residential energy-efficiency, he works with contractors and programs to scale sustainable market approaches to improving homes. More on Google+

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