Impact of Green Building on the Marketing of product category

ShowJune 2008San Francisco, California

Metro Washington DCJuly 2008

Upper Marlboro, Maryland

Focus Groups andField Interviews

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Client wanted to learn:

How builders define “green”

What attributes of Product® are associated with “green,” or sustainable construction

How important are “green” benefits in purchase decisions

What segments are most attracted to “green” building

How can Client help builders increase profits by selling Product® as an upgrade

The sales process for new production and custom homes

The specific process design centers employ to sell upgrades

Potential programs or approaches Client can use to increase sales of Product®

Most trusted media, information sources, and formats (including the energy calculator concept)

Feedback Client gains from this inquiry can help in positioning and messaging campaigns.

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Executive Summary

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OPPOR-TUNITIES

BARRIERS

MIXED

1. Sales associates interviewed were better at reflecting customer wishes than their company’s interests—so there was not a clear read from them on the appeal of the energy calculator or positioning statements

2. Positioning statements using language “better than competitors” was not seen as appealing in terms of ways a builder can be unique

West Coast builders liked building materials that provided energy efficiency to customers, gave mixed responses about “green”, and did not seem to like some of the positioning statements

1.Builders and sales associates stated “green” can be customers’ euphemism to request energy-related cost savings, comfort

2.Builders believe energy efficiency is achieved, in great part, through a tight envelope, and to some degree because of product category

1.Builders in groups liked the energy calculator. They found it useful to engage and educate homeowners on energy efficiency

2.Many builders and sales agents mentioned assigning greater importance to the energy efficiency aspect of homebuilding

3.One participant said, “product category keeps your money in your house.”

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OPPORTUNITIES

BARRIERS

MIXED

1. Many builders believed they did not know the true performance or value of product category. They wished they knew how it was a green product or an energy efficient one.

2. Some builders had switched from Product® to other brands of product category to save money.

3. Other builders stopped using product category and started using rigid foam to gain R-Value.

East Coast builders typically used Product®, but questioned its energy-efficient and “green” qualities. Some builders used other ways to achieve x barriers or had switched from Product® to other brands of product category.

1.All builders and most sales associates wanted to learn more about best uses and performance of product category, especially Product®.

2.Nearly all builders wanted to examine, then market an x-barrier and energy-efficiency calculator to demonstrate the effect of product category on utility bills

3.For some builders, just protecting the structure of a home – durability – makes product category green

1.Builders believed product category contributes to energy efficiency of homes as an x-barrier, but did not perceive product category, a petroleum-based product, as “green”.

2.Many builders used Product® regularly, typically to match competitors or to make a house look “pretty” instead of for its performance

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Detailed Findings

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How do builders define “green”?

No builder in any group could confidently define what a green home is or what a green product category is. In fact, builders described the confusion surrounding green building and its many standards, guidelines and third-party assessors.

Many builders at first defined energy efficiency as green, so product category seemed like a green product.

When asked to clarify how green product category is compared to how energy-efficient product category is, builders’ responses varied a great deal. product category seemed less green, but still energy-efficient.

To be more green, product category would: Be made from recycled or sustainable materials (not carbon-based

ones) Be produced locally (not shipped from China) Biodegrade once placed in landfills For many builders on the West Coast, a product category would

have to be made from a “natural” product like wood

One sales agent in CA defined green as energy-efficient, able to contribute to the comfort of a home, and environmentally responsible. The agent’s definition synthesized homebuyer requests for green building.

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What attributes of Product® are associated with “green,” or sustainable construction?

Any product category, according to some builders, can be considered green because it protects the structure of a home from the weather. Protection was seen as an aspect of durability.

Product®’s was perceived as able to protect a home’s structure better than some competitors – Barricade, Fortifiber (WeatherSmart)

Product® offered superior protection related to: x – reduced chance of mold, so better protector of Indoor x Quality

(IAQ) Barrier Drainage plane for precipitation

Vapor – understood by builders as x with humidity – able to help a home “breathe” by letting toxic vapors such as Volatile Organic Compounds (VOCs) escape from the home

x – protected the R-Value of insulation. Fiberglass, builders explained, can slow the penetration of x and energy loss, but cannot stop it. A Product® x barrier, builders offered, can ensure the intended R-Value of insulation is actually achieved

“The first line of defense” – Group 4 metro DC

In CA, GreenGuard® “sounded better” because it had green in the name.

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To many builders, it seemed accurate that product category contributes energy efficiency to a home, but they were not sure if product category contributed to the “greenness” of a home.

By a show of hands, 2 builders believe Product® is not green, 6 builders don’t know.Group 1 - Show

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How important are “green” benefits in purchase decisions for builders?

Builders varied a great deal in how they were willing to purchase and offer green materials and systems in their homes

The greatest range green product adoption appeared on the West Coast. One sales agent of a production builder explained her company was not

a green builder but was considering becoming one

A builder of custom homes had just become LEED certified and was actively promoting himself as such

In the metro DC area, most builders described their green approach by the green building materials they purchased and featured in the envelope and inside the home.

Many had green packages – some standard to the home and some as options – Energy Star appliances, low-e windows, insulation and SEER above code, and heating alternatives such as geothermal. Several featured product category, often Product®.

Some builders purchased materials that increased the energy efficiency of homes and tried to reduce waste on the jobsite, but wondered if their customers would notice or want to know

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How important are “green” benefits in purchase decisions for homebuyers?

Homebuyers, according to sales agents in CA, asked about green, but really wanted the benefits of energy efficiency, especially if they could experience a quick payback (in about two years or monthly).

Before knowing the price of green, homeowners frequently requested solar panels and tankless x heaters from sales agents and custom builders in CA, but did not consistently purchase them.

Homeowners in metro DC, according to builders, focused on energy efficiency. It appeared homeowners used “energy-efficient” and “green” interchangeably in their inquiries concerning monthly savings on utility bills.

In metro DC, homebuyers appeared to follow builders’ counsel about green and energy efficiency rather than initiate specific requests about green materials or practices.

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What segments of builders are most attracted to “green” building?

Builders most attracted to green building are those seeking certification in programs such as LEED or green building programs as defined by local and/or state jurisdictions or utilities such as Pacific Gas and Electric (PGE)

Builders attracted to green products Want to do the right thing – at no additional cost Want to offer green packages and options they believe their

customers are willing to pay for One production builder in CA was about to complete a

project of “extreme green” homes – Zero Energy Homes, but as yet had no buyers

One production builder in CA included solar panels as standard features in every new home as a way to differentiate itself

Many builders were willing to market themselves as green if they thought it would attract customers

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Builders described their “shades of green”

“It was a natural transition for us.” – Group 2 Show

“I don’t know if Green is profitable,environmental – yes for all of us, dollar-wise – don’t know”– Group 4 metro DC

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What segments of homebuyers are most attracted to “green” building?

Homebuyers attracted to green, builders and sales agents reported, primarily want energy efficiency, but they also want comfort. An added benefit is “to do the right thing” – at no, or relatively little, added cost.

Homebuyers’ attraction to green does not match their education on green materials and practices according to builders

Homebuyers often requested green or energy efficient materials, but did not fully understand how they worked. Builders stated that homebuyers asked whether or not builders included green features or materials in their homes – and seemed satisfied with a simple “yes”.

Some builders reported having customers that were “the engineer types” who believed themselves to be very informed. Builders, in those cases, simply included products those informed customers were willing to pay for

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How can Client help builders increase profits by selling Product® as an upgrade?

As a standard among production buildersTHE OFFER to builders –

“You can protect your framing and walls until buyers specify interiors”“Your houses can offer the same quality as higher-priced custom homes”

BENEFITS homebuyers receiveAn affordable green and energy-efficient improvement we believe in that gives immediate and monthly returns.

As a standard among custom buildersTHE OFFER to builders

“You can be proud of the quality of your homes – and everyone will see it”“You can demonstrate the quality of your homes during construction to prospective

buyers”“You can prove you protect and deliver all possible benefits of all of the other green and energy-efficient products in the home including the insulation”

BENEFITS homebuyers receiveProtecting your investment in the home

Getting the best return on your other green and energy-efficient investments. “It’s the first line of defense on protecting your investment”

Your R-Value in the walls will not be eroded, so your furnace and x conditioner will not be overly burdened

Monthly savings on utility bills

Product® can be sold in at least three ways:

#1

#2

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How can Client help builders increase profits by selling Product® as an upgrade?

As an option among production and/or custom buildersTHE OFFER to buildersIncludes all offers as standard features and adds:

“You can contribute points to LEED or Green Building certifications when you use Product®”

“You can be confident you are doing the right thing in the marketplace and improving the industry”

“You can demonstrate your experience and association with a well-know manufacturer”“When you use Product®, your customers know you are a quality builder, and will follow your council on other matters, so you can spend time efficiently with customers”

BENEFITS homebuyers receiveIncludes all benefits associated with standard features

Product® can be sold in at least three ways (continued):

#3

If all three sales approaches are to function optimally, builders and their sales associates must be•Informed and confident in their knowledge of product category’s effectiveness as a weather, x and x barrier•Equipped to demonstrate how product category works•Be convinced that Product® is superior in performance through data

Also, information builders and sales agents can source from Client is best when it•Adds credibility, leveraging a well-known brand, to the “pitch” builders and sales agents use•Documents the performance of Product® with both test results and common language

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Builders give advice to manufacturers of product category

1.Show me the benefit, product information, proven abc – benefits, insulation value, x barrier, testing documentation, x vapor and x

2.If it’s gone through testing, show all that data. – x, vapor and x, R-Value

3.Good display, show by wrapping, retain heat, rain deflects it (suggested as a display sales agents can use in design centers)

4.Building science consultants to endorse it – LEED seminars. Get LEED and Green Building to give a point for it

5.Show me the payback. This is what this product does – vapor or x filtration. Not insulation at all. Very clear-cut about this.

6.Can’t think of any product without marketing, if you have convinced a small group of people to use it, then others will follow

7.Be part of Extreme Makeover

GROUP 1 - Show

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Custom homes

Homebuyers meet with sales agents, owners or construction supervisors. They meet in builders’ offices, showrooms, in coffee shops or on the jobsite of other homes under construction

Sellers provide brochures, website addresses, fact sheets

Sellers describe winning differences between their homes and competitors’ including their beliefs and approaches to homebuilding.

When on the jobsite sellers point out building materials and methods they use as differentiators.

It is frequently at this point in the sales process that topics such as green building and energy efficiency come up

What is the sales process for new production and custom homes?

Production homes

1.Homebuyers meet with sales agents in either model homes or retail locations such as a store in a shopping mall

2.Sales agents provide brochures, website addresses, fact sheets

3.Sales agents describe winning differences between their homes and competitors’

4.Sales agents demonstrate those differences using photos or vignettes such as a burning light bulb behind a traditional window and behind a low-e window so homebuyers can experience winning differences

5.Sales agents also review options and upgrades homebuyers can select from samples.

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What are the specific processes production builders employ to sell upgrades?

Design centers can be located in malls and, from the outside, look very similar to stores

Design centers can be located in model homesKitchensHome officesRepurposed basements or garages

In both location types, product samples are on display. They typically include:Carpet and flooring samplesCabinetsPlumbing fixtures such as faucets and shower headsPhotos of homes available for saleTile and countertop materials

Options are discussed with sales counselors who review selections and pricingIn CA, a fixed display called “My Earth, My Home” included options of green

building and energy efficiencyIn metro DC, sales counselors discussed green options, sometimes as part of why

a builder is different (and better) from competitors, sometimes in response to homebuyer questions

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What are the specific processes custom builders employ to sell upgrades?

Design centers can be showrooms located within the business offices of custom builders.

In CA, one custom builder used a DVD to review options and upgrades in a conference room. This custom builder’s conference room was also web-enabled so builder and homeowner could search the internet together to collect more information about processes and materials

In CA, one custom builder (LEED certified) pointed out upgrades and options included to meet LEED standards at a jobsite. He used phone conversations with customers, architects, and building scientists to determine which processes or materials to use.

In metro DC, custom builders tended to rely on conversations with customers to determine options and upgrades

In metro DC, one custom builder mentioned he planned to build a new showroom to display options and upgrades. Currently, he uses brochures and print-outs from the internet to show customers the processes and materials he believes are the best answers to customers’ requests. He currently meets with customers in their homes.

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What potential programs or approaches can Client use to increase sales of Product® for builders?

Greater knowledge and familiarity with the product Exactly how product category works as a x, vapor and x barrier How to compare Product® against competitors using a common set of

criteria How product category, as a category, could be green

Whether or not Product® was made of recycled material, if it could biodegrade in landfills, if it saved more energy than it required to produce, how much gasoline was expended in bringing it to suppliers and to jobsites?

How Product® was manufactured – how did Client handle toxic materials, energy use and waste?

Knowledge gained from a factory tour, builders said, would make them more confident in their answers about Product® with their customers

Cost structure – quite a few builders described Product®’s marketing success as “a racket”

Greater demonstration tools such as the energy calculator or mock-ups of walls with product category.

Many builders and their sales agents requested marketing copy homebuyers could access independently, such as DVDs and hand-outs from manufacturers. Sales agents, in particular, wanted to piggy-back on the credibility of well-known manufacturers.

“I think there is a lot of room for competitors.” – DC builder

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Which trusted sources of information do builders use?

Builders rely on a whole host of sources of information.

They actively evaluate new products and materials at trade shows, in trade press, and share experiences among peers and subcontractors in associations and informal exchanges

Many builders attend classes or seminars at trade shows or at their local home builders associations

When their interest is piqued about a new product or specific point of interest, they:

“Google” it Ask an expert

“I know this architect in Baltimore who is a new product junkie, and he will tell me.”

“Our framer brought this (liquid applied product category) to my attention.

“I’ll ask Joe Lstiburek”

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As a source of information about product category, nearly all builders and sales agents were willing to use an energy calculator. Many wanted to demonstrate it to homebuyers

As described, the energy calculator was frequently misunderstood. Quite a few participants associated an energy calculator with a hand-held device.

Participants misconceptions, however, still contained expectations of information needed. They expected:

A set of performance attributes of product category such as permeability rating for x and x, thickness, exposure (to elements) tolerances, monthly savings on utility bills

A way to compare two identical homes – one with product category and another without

A way to compare brands of product category against each other – typically Product® to others

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Several participants described their wishes for an energy calculator or comparison tool of homes with and without product category

“Show some statistical data of a house with it (product category) and without it, and show some typical energy savings.” Group 2 – Show

“It would be interesting to see the cost savings of an actual test between actual houses. Next to each other in the same environment, same climate. Then see what the bills come out to be. How much does Product® really save?” – Group 3 metro DC

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Observations and Implications

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Perceptions and Uses of product category

There is a lot of confusion among users and non-users of product category, be it among builders or their sales agents

Client can consider an education campaign that includes best uses, test data and demonstrations. Client seems to have the best chance to dominate as there is room for increased usage and brand awareness is high.

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For builders on both coasts, the use of Product® is discretionary.

On the West Coast, the use of product category is very limited, but when used, the product category is typically Product®

Title 24 of California State Building Code mandates only a building paper, so Product® is an upgrade

Certified LEED and Green Builders may or may not elect to use product category of any brand. They decide how to accumulate and allocate points

On the East Coast, the use of product category is widespread, and many builders use Product®

To save money, some builders have switched brands To get a better performing product category, some builders have switched

away from Product® To get a greater R-Value in the walls, some builders have stopped using

product category and use insulated rigid foam in between the exterior cladding and the OSB or plywood

Client can consider a promotional campaign that explains the value of Product®, including the cost of design, manufacturing,

and other associated costs compares Product® to other brands and their respective performances,

including alternatives such as rigid foam board

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Some builders have conflicted views of how tight a house should be

Some builders strive for a very tight house Some builders believe a house “has got to breathe”

Client can consider enlisting respected building scientists to explain how tight a home should be through seminars about the building envelope and product category

It is likely that not all building scientists will support Client’s positioning of Product®

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Perceptions of Energy Efficiency and Green

On the West Coast, some builders believed green must be natural, where natural meant unprocessed.

Client can consider demonstrating that green also means Produced in the US in

contrast to overseas Protection as an

aspect of durability

In metro DC, some builders wanted to know the life-cycle costs of energy related to the “greenness” of product category.

Client can consider demonstrating that green also means Durable

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Green is growing in importance, but seems less important than energy efficiency

Even though homebuyers request “green,” many simply want energy-efficiency. Most homebuyers and builders prefer to select energy-efficient materials, but favor those that are also green - provided there is little to no cost difference.

Client can consider an educational and promotional campaign of Product® that stresses and proves its energy-efficiency and also includes a secondary benefit of green. Its price can be higher than other options.

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Discovery – Can consumers generate pull?

In conversations with Client, we learned that particular attention was being paid to consumers

Can consumers pull Product® through builders? How aware are consumers of Product®? What is their brand loyalty to Product®?

On the West Coast, consumer awareness of product category is reported to be low because few builders use product category.

Builders and their sales agents on the West Coast have high awareness of Product® – in fact many use “Product®” to mean product category

In metro DC, consumer awareness of product category is reported to be high as many builders use product category, and Product® is commonly used

Builders and their sales agents in metro DC have high awareness of Product® and report their customers specifically request it, though brand loyalty seems low as builders report homebuyers accept substitutes

Feedback Client gains from this inquiry can help in positioning and messaging campaigns.

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Discovery – Can consumers generate pull? (continued)

Product® is a recognized brand of product category. It seems the possibility to gain market share on the West

Coast is high. According to custom builders on the West Coast, there is

an opportunity to position Product® as a building material that is green and promotes energy efficiency.

In contrast, the possibility to lose market share in metro DC is high.

According to custom builders in metro DC, there is a risk that consumers can be easily convinced that the mere presence of product category is sufficient, and that any brand will suffice, or that different brands (or methods such as foam board) may be better

In metro DC, custom builders also began to show a suspicion that Product®’s premium pricing was not justified

Feedback Client gains from this inquiry can help in positioning and messaging campaigns.

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Discovery – Can consumers generate pull?Video clips

Feedback Client gains from this inquiry can help in positioning and messaging campaigns.

“’People hear it (Product®) and say, ‘I want that same thing on my house.’”

”No, product category is not a green product now, but I think they have a great opportunity to pitch it that way.” –

Builder Group 1 Show

“People (homebuyers) knowing about it (Center Shield)? In terms of performance, it’s at the top of the chart – it’s an elastomeric paint”

- Builder Group 4 metro DC