Bundle Up for Energy Savings
Published: March 21, 2012
Dulcey Simpkins and Melanie Wemple
The concept of bundling is simple: Products and services that naturally enhance each other—like texts and web access, skis and poles, or chips and dip—can be offered together at a discount. Customers spend more overall for a bundle compared to purchasing just one of the items, but they receive increased value out of that higher spend.
People with a newer smartphone have probably experienced the seduction of product bundling. When you walked into Best Buy, all you wanted was a better phone. What you left with was a smartphone with a more expensive voice and data plan that included an astronomical number of texts, because you couldn’t pass up “such great value.” We think utilities can also capitalize on customer expectations of added value from bundles.
Can Utilities Bundle DSM Offerings? They Already Do!
Weatherization packages are the most obvious form of demand-side management (DSM) measure bundling, saving both the implementer and the customer time and money by offering direct installation of measures during a home audit. Another example of bundling is Home Performance with Energy Star, which encourages whole-home efficiency by increasing incentives based on the number of measures installed. Rocky Mountain Power bundles right-sizing and proper installation incentives for contractors with customer rebates for high-efficiency central air conditioners. Other examples of bundling best practices include installing efficient windows in coordination with insulation and air sealing, or performing duct testing and sealing during the replacement of HVAC equipment.
Bundling Can Increase DSM Savings and Reduce Lost Opportunities
Utilities can increase savings for their DSM portfolio by bundling because that approach gets more measures installed per participating customer. Additionally, the value of increasing the number of installed measures right now—instead of deferring them until next year or possibly never—makes bundling a tool for reducing uncertainty. A utility may need to spend more up front to create and market a well-designed bundle, but this could save money in the long run by eliminating the need to market multiple offerings in succession to the same customer. Moreover, savings from a successful bundled transaction are “in the bag” right now and for the life of those measures.
To Bundle Effectively, Market Research Is Key
It’s important to take your cues from your customers. Which programs are they actually participating in and when? What combinations of programs might help accelerate their participation and boost your savings? Research from the E Source Residential Energy-Use Study 2011 indicates a strong correlation between customer participation in weatherization and the percentage of customers who subsequently participate in whole-home audits (31 percent), whole-home audits and appliance rebates (16 percent), and appliance rebates and appliance recycling (51 percent). A bundle between any of these paired offerings, or a multimeasure bundle linking one pair to another, could increase the strength of these program relationships and capture the savings from all of them in the here and now.
Keep It Simple, and Don’t Forget the Bargain
Lest the bundling picture appear too rosy, we add a cautionary note: Dangers of bundles may include alienating customers with poorly chosen bundle components or with overly restrictive conditions—or worst of all, with no bargain. Well-designed product bundles should move customers beyond their initial purchase plan and spark their interest in considering additional items. Avoid overly complex bundles if you want your customers to appreciate your insights into their needs. Finally, don’t forget why customers choose a bundled offer in the first place—to get a good deal.
Are you offering an interesting product bundle that motivates customers to invest more in energy efficiency? Let us know!
For a more in-depth discussion of product-bundling strategies and opportunities, see our report Gaining Efficiencies Through Residential Product Bundling (for members of the E Source Residential Market Service).
About the Authors
Dulcey Simpkins brings a wealth of local and regional experience with energy initiatives and policies to her work at E Source. In addition to investigating and publishing about energy-efficiency and demand-response program design, implementation, and evaluation, Dulcey also has a research focus on behavior-change program design, marketing, and evaluation. Before joining E Source, Dulcey worked for three years in the city of Ann Arbor’s Energy Office implementing various efficiency and alternative-fuel programs. For two years, she acted as the state of Michigan’s biomass energy coordinator, and she spent another two years helping design clean-tech and economic development programs for the Department of Labor’s WIRED entrepreneurship grant in mid-Michigan. She received a PhD in political science and a master’s degree in resource policy and management, both from the University of Michigan.
Melanie Wemple maintains DSMdat, the comprehensive E Source database tracking energy-efficiency and demand-side management initiatives in the U.S. and Canada. She previously worked with Standard Renewable Energy, a company focused on lowering consumers’ utility bills through energy efficiency and renewables. Melanie has a background in writing and was published in two editions of National Geographic during an internship at the magazine’s Washington, DC, headquarters. She received a BA in geography with a minor in environmental science from the University of North Carolina at Wilmington.