by: David Wigder
Answer: We may never find out as long as the sales model remains flawed.
Fluorescent light bulbs have proven difficult to market. First, consumers have not demonstrated a strong willingness to pay a price premium for the bulbs. (While the price has fallen in recent years, the cost of a fluorescent bulb is still more than 3x the cost of comparable incandescent bulbs.) Second, despite the fact that each fluorescent bulb can save between $30 and $100+ over its lifetime, consumers resist paying today for promised savings in the future.
Yet, such high potential savings for consumers may open up a game-changing opportunity for green marketers and investors: Instead of having consumers pay for the bulbs upfront, have consumers pay later through installment payments that are tied to energy savings. To make this a reality, consumers must be willing share a portion of the cost savings to cover the cost of financing the bulbs until repayment, as well as associated transaction fees, bad debt and program administrative costs.
Despite the higher costs and risks associated with such a program, this business model is feasible for several reasons. First, the payback period to recoup the cost of the bulbs is short, ranging from 4-12 months. Not only does this minimize the financial risk of such a program but it also reduces any pric epremium required - over and above the cost of the bulbs - to cover added expenses and hedge against risk.
Second, consumers have a significant financial incentive to sign up for such a program: a typical household could realize more than $1,000 in savings over a 7-9 year product lifespan by simply changing 20 incandescent bulbs to fluorescents. As such, even with an added premium to enable an installment plan, consumers will generate significant savings from this program over time.
While many companies and industries could take advantage of this opportunity, those with existing recurring billing relationships – including utilities and mortgage companies and even cable and telephone providers - are perhaps best situated to do so. An installment plan could be tacked on to existing monthly bills and only offered to creditworthy customers to reduce risk. Retailers could leverage credit cards as a payment vehicle, but would likely have to charge higher premiums to consumers in order to cover higher transaction fees and possible allowances for card churn.
Of course, marketers will have to address inevitable concerns given that consumers are currently not accustomed to deferring payment or monitoring recurring billing on small ticket items. Moreover, consumers may simply forget that they signed up for such a program leading to a poor consumer experience, or perhaps be skeptical about how much energy they are actually saving given the difficulty of tracking such savings when bills fluctuate month to month. As such, marketers may consider product and customer satisfaction guarantees to help overcome reservations.
Green marketers - think outside the current way of doing business! Seize this opportunity and create a win-win-win for business, consumers and the environment.