Optimising Value Propositions for Energy Efficient Renovations
Lead Research Organisation:
University of East Anglia
Department Name: Norwich Business School
Abstract
The 2010/11 Energy Bill currently before Parliament includes provisions for a Green Deal designed by DECC to "encourage energy efficiency improvements paid for by savings from energy bills, avoiding upfront costs to households ...". UKERC has solicited research to "assess the design and effectiveness of new business models for household energy services provision, in the context of the Green Deal and other developments".
Short of regulatory mandate, energy efficiency improvements can only occur if homeowners decide to undertake energy efficient renovations. The critical measure of 'effectiveness' for Green Deal-enabled business models is therefore whether they stimulate and facilitate homeowners' renovation decisions while increasing the conversion rates of prospective into actual renovators. 'Effectiveness' does not only mean profitable and financially attractive to UK homeowners. Human decision-making is complex; renovation decisions are no exception. Understanding multiple, pertinent attitudinal/behavioural antecedents, decision barriers, and intervening factors are essential for stimulating energy efficient renovations. Homeowners are customers for industry renovation service providers. The value propositions (bundles of product and service attributes offered by service providers to homeowners) are therefore integral to the success of the Green Deal.
We focus on the attractiveness of existing and new product and service attributes offered to homeowners to support 'market-ready' activity by service providers following the Green Deal launch in autumn 2012. The involvement of B&Q as an industry partner in our proposal is crucial for ensuring our research is oriented around actionable findings. Only the involvement, practical experience, and ongoing market activity of an industry partner of B&Q's profile allows testing and evaluation of Green Deal-enabled value propositions during the project's 2011-2013 timeframe given the Green Deal's expected launch only in autumn 2012.
Through our mixed-methods approach, we will:
- develop a rigorous, integrated cross-sample research design to assess key attitudinal/behavioural variables, decision antecedents, and intervening barriers to UK homeowners' renovation decisions (10/11-6/12);
- consolidate current knowledge and conduct in-depth qualitative interviews with homeowners in B&Q's current 2011 Pay as you Save rollout field trials, as well as homeowners in a matched control group (9/11-2/12);
- measure homeowners' preferences under realistic market conditions through B&Q's planned 2012 field trials of Green Deal-enabled value propositions and, in parallel, measure homeowners' responses to a far wider set of value propositions through a large-scale discrete choice experiment on an independent random UK sample (7/12-12/12).
- collect survey data on a comprehensive set of attitudinal and behavioural variables from all sampled homeowners generating a set of common variables to link samples and integrate field trial and choice experiment findings (7/12-12/12).
- design a state-of-the-art quantitative model of real and potential choices of UK homeowners from different socio-economic backgrounds and regions, simultaneously with extra preference, attitudinal, and other latent variables (10/11-6/13);
- integrate the renovation decision model into a market simulator tool for optimising value propositions, testing the impact of financial and pricing strategies, and evaluating marketing outcomes (2/13-6/13).
- extensively transfer knowledge directly and indirectly to service providers and academia.
Short of regulatory mandate, energy efficiency improvements can only occur if homeowners decide to undertake energy efficient renovations. The critical measure of 'effectiveness' for Green Deal-enabled business models is therefore whether they stimulate and facilitate homeowners' renovation decisions while increasing the conversion rates of prospective into actual renovators. 'Effectiveness' does not only mean profitable and financially attractive to UK homeowners. Human decision-making is complex; renovation decisions are no exception. Understanding multiple, pertinent attitudinal/behavioural antecedents, decision barriers, and intervening factors are essential for stimulating energy efficient renovations. Homeowners are customers for industry renovation service providers. The value propositions (bundles of product and service attributes offered by service providers to homeowners) are therefore integral to the success of the Green Deal.
We focus on the attractiveness of existing and new product and service attributes offered to homeowners to support 'market-ready' activity by service providers following the Green Deal launch in autumn 2012. The involvement of B&Q as an industry partner in our proposal is crucial for ensuring our research is oriented around actionable findings. Only the involvement, practical experience, and ongoing market activity of an industry partner of B&Q's profile allows testing and evaluation of Green Deal-enabled value propositions during the project's 2011-2013 timeframe given the Green Deal's expected launch only in autumn 2012.
Through our mixed-methods approach, we will:
- develop a rigorous, integrated cross-sample research design to assess key attitudinal/behavioural variables, decision antecedents, and intervening barriers to UK homeowners' renovation decisions (10/11-6/12);
- consolidate current knowledge and conduct in-depth qualitative interviews with homeowners in B&Q's current 2011 Pay as you Save rollout field trials, as well as homeowners in a matched control group (9/11-2/12);
- measure homeowners' preferences under realistic market conditions through B&Q's planned 2012 field trials of Green Deal-enabled value propositions and, in parallel, measure homeowners' responses to a far wider set of value propositions through a large-scale discrete choice experiment on an independent random UK sample (7/12-12/12).
- collect survey data on a comprehensive set of attitudinal and behavioural variables from all sampled homeowners generating a set of common variables to link samples and integrate field trial and choice experiment findings (7/12-12/12).
- design a state-of-the-art quantitative model of real and potential choices of UK homeowners from different socio-economic backgrounds and regions, simultaneously with extra preference, attitudinal, and other latent variables (10/11-6/13);
- integrate the renovation decision model into a market simulator tool for optimising value propositions, testing the impact of financial and pricing strategies, and evaluating marketing outcomes (2/13-6/13).
- extensively transfer knowledge directly and indirectly to service providers and academia.
Planned Impact
The two main beneficiaries of the knowledge generated by our research will be: service providers in the UK energy efficient home renovation market; local authorities and UK government departments, principally DECC and DCLG, seeking to improve the efficiency of the UK housing stock.
Our research will provide a robust, formalised understanding of home renovation decisions calibrated to both observable market outcomes and a representative national sample of UK homeowners. A clear understanding of how decision variables, decision outcomes, and intervening barriers inter-relate will help service providers improve the value propositions they offer to homeowners. Service providers whose future business growth relies on offering attractive value propositions to homeowners include whole home renovation contractors, specialist contractors (e.g., windows, heating systems), energy advisors, energy utilities, and local authorities. According to the Energy Efficiency Partnership for Homes, the home renovation industry has a current market value of over £9bn and supports 77,000 UK manufacturing jobs. It is a growing market both domestically and internationally.
Our project team includes a major service provider, B&Q, the UK's largest home improvement retailer, and also the Low Carbon Innovation Centre (LCIC). Based at the University of East Anglia, LCIC has worked extensively with service providers and local authorities, and is involved in the project to exchange findings and feedback through their existing business relationships. B&Q have been involved in the research design from the outset. A close working relationship between the research team and B&Q at both management and operational levels is central to the implementation of field trials throughout this project. B&Q anticipates findings feeding back into their future activity in the Green Deal-enabled market, ensuring a direct and immediate pathway to impact (see also B&Q's letter of support).
This impact will be supported more broadly by a user-friendly market simulator tool integrating the project findings on renovation decision making with data on the UK housing stock and market segments. This will allow service providers to design, test and optimise value propositions for energy efficient renovations, explore the impact of different financial and pricing strategies, and test potential market segmentation approaches. The market simulator will be freely-downloadable from the project's webpages, with 600 copies distributed free to members of the Energy Efficiency Partnership for Homes network. This network comprises organisations from the private, public and voluntary sectors involved in the delivery of energy efficiency to the UK consumer; B&Q is an active member.
Energy efficiency also yields substantive environmental, social, security, and economic benefits including reduced energy use and greenhouse gas emissions, and improved welfare and health in renovated homes. The government's Low Carbon Transition Plan requires 29% emission reductions from 2008 - 2020 in households, achieved principally through efficiency measures. DECC aims to have 7m homes offered 'whole house' renovation packages by 2020, and all lofts and cavity walls insulated where practical by 2015. In the ~70% of the UK housing stock which is owner-occupied, the achievement of these intentions depends on homeowners' decisions to renovate. Here, the interests of service providers and policymakers align: the design of attractive value propositions supports both commercial and public policy objectives. Our research will provide additional benefits for policymakers by assessing the market potential 'unlocked' by the Green Deal, and hence the need or potential for further regulatory change in pursuit of the Low Carbon Transition Plan objectives.
Our research will provide a robust, formalised understanding of home renovation decisions calibrated to both observable market outcomes and a representative national sample of UK homeowners. A clear understanding of how decision variables, decision outcomes, and intervening barriers inter-relate will help service providers improve the value propositions they offer to homeowners. Service providers whose future business growth relies on offering attractive value propositions to homeowners include whole home renovation contractors, specialist contractors (e.g., windows, heating systems), energy advisors, energy utilities, and local authorities. According to the Energy Efficiency Partnership for Homes, the home renovation industry has a current market value of over £9bn and supports 77,000 UK manufacturing jobs. It is a growing market both domestically and internationally.
Our project team includes a major service provider, B&Q, the UK's largest home improvement retailer, and also the Low Carbon Innovation Centre (LCIC). Based at the University of East Anglia, LCIC has worked extensively with service providers and local authorities, and is involved in the project to exchange findings and feedback through their existing business relationships. B&Q have been involved in the research design from the outset. A close working relationship between the research team and B&Q at both management and operational levels is central to the implementation of field trials throughout this project. B&Q anticipates findings feeding back into their future activity in the Green Deal-enabled market, ensuring a direct and immediate pathway to impact (see also B&Q's letter of support).
This impact will be supported more broadly by a user-friendly market simulator tool integrating the project findings on renovation decision making with data on the UK housing stock and market segments. This will allow service providers to design, test and optimise value propositions for energy efficient renovations, explore the impact of different financial and pricing strategies, and test potential market segmentation approaches. The market simulator will be freely-downloadable from the project's webpages, with 600 copies distributed free to members of the Energy Efficiency Partnership for Homes network. This network comprises organisations from the private, public and voluntary sectors involved in the delivery of energy efficiency to the UK consumer; B&Q is an active member.
Energy efficiency also yields substantive environmental, social, security, and economic benefits including reduced energy use and greenhouse gas emissions, and improved welfare and health in renovated homes. The government's Low Carbon Transition Plan requires 29% emission reductions from 2008 - 2020 in households, achieved principally through efficiency measures. DECC aims to have 7m homes offered 'whole house' renovation packages by 2020, and all lofts and cavity walls insulated where practical by 2015. In the ~70% of the UK housing stock which is owner-occupied, the achievement of these intentions depends on homeowners' decisions to renovate. Here, the interests of service providers and policymakers align: the design of attractive value propositions supports both commercial and public policy objectives. Our research will provide additional benefits for policymakers by assessing the market potential 'unlocked' by the Green Deal, and hence the need or potential for further regulatory change in pursuit of the Low Carbon Transition Plan objectives.
