HPAC Magazine
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Know Your Target

Marketing geothermal heat pump systems to residential customers


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March 1, 2014 by DENIS TANGUAY AND JEFFREY BRAUNSTEIN

Figure 1 Steps to building a marketing plan
Figure 1 Steps to building a marketing plan

Mechanical firms specializing in geothermal have experienced the ebb and flow of subsidies and incentives. As a result, owners of these firms deal with changing market conditions as a matter of course. Reconsidering and improving marketing strategies is key to helping companies ride out or even take advantage of these changing conditions.

This is the first in a series of articles designed to help small business owners  take a fresh look at marketing as a tool to grow their business and improve professionalism in the ranks. Topics include strategy, building a brand, education, sales, reputation and promotion. Marketing is far from an exact science. There is no recipe for success and there are no definitive rules of practice. However, there are certain practices and processes that can increase the chances of success.

MARKETING STRATEGY

Ground source heat pump (GHP) companies, like all other companies, work with limited budgets, information and resources. GHP systems, however, are practical for most demographic groups and building types in Canada.

Suppliers are therefore left with the quandary of trying to target everyone, while having a limited ability to supply to everyone. Different for every company and in every region, no single correct market segment exists for the GHP industry. Identifying a specific market segment(s) to give your business a focused direction and defined goals for marketing strategies is an important first step (see Figure 1).

For example, a company targeting small business owners in an urban setting would not promote GHP in the same way as a company targeting large homeowners in a rural setting. It would be extremely difficult, as well as inefficient, to try to target both of these market segments at once. Targeting more than one related segment, such as small rural businesses and small rural homeowners, is certainly possible and can prove extremely efficient. When doing so, your company’s long-term vision, strengths of the management and employee team, and available resources must be considered very carefully.

In order to identify target groups, determine who is most likely to purchase your service or product. Many factors account for this, including geography, income, age, family size and so on.

Psychographic factors – mapping how customers think – take segmenting tactics one-step further. These analyses of lifestyle and behaviour trends, such as interests, values and habits, can be used to determine how to best appeal to the market segment you have chosen. For example, high-income suburban households may be identified as a market segment for a particular organization based on location and customer ability to sustain the high fixed costs of a heat pump installation.

Once a target group and psychographic factors are established, it may be useful to understand some of the research behind segmentation and product adoption.1

There is much debate about how mature the North American geothermal industry is overall. Canadian GeoExchange Coalition (CGC) believes there is a difference between the residential market and the commercial market and that there are important regional differences. Some of this is driven by electricity and natural gas/home heating oil prices. Overall, the residential market is fairly well developed, while the commercial market is still at a very early stage.

In theory, those who purchase systems first can be referred to as “innovators” or in some cases “early adopters.” These early adopter and innovator
consumers of GHPs are likely to be environmental enthusiasts. The selling point for them is that geothermal HVAC is a renewable energy technology that can decrease residential greenhouse gas emissions. These consumers are also more likely to seek information on their own, based on personal interests and will therefore only need to be convinced that it is the wave of the future when referring to renewable home energy technologies.

Later adopters will be increasingly interested in a system’s financial savings. While the environment is likely to remain a decision factor (similar to the way finances remain important for the early adopters), the technology’s selling point shifts from lower environmental impact to grants, tax relief and savings in monthly heating and cooling bills.

In order to properly develop a detailed company strategy and determine the language with which to communicate to potential clients, the market segment(s) must be identified and the needs and demands of those markets understood. Once this is complete, you can develop a proper marketing plan for your business. A marketing plan begins with building a brand.

BUILDING A BRAND

There are two ways to build a brand: brand awareness and brand image. Industry associations attempt to build general brand awareness of the industry and technology (the GHP brand) through promotional tactics and advertising campaigns for the general public, industry publications and through participation at trade shows.

Quality control programs contribute to improving the GHP brand image. Brand reputation is advanced in part by governments and utilities that approve grants and funding on the basis of specific certification and training programs. This differentiating factor has proven very important to homeowners and businesses alike, not just from a financial risk perspective. Beyond these issues the industry’s brand image lies largely on the shoulders of the GHP supplier.

For the individual owner, educational presentations, media advertisements, references to your own website, or industry associations are all ways of first building awareness of the industry and the technology, and secondly, building awareness for your specific company.

In order to build a brand, a company must first develop its brand elements. These include a name, logo, slogan and/or anything else that could be used to identify your firm and create positive associations. It is also very important to make sure these associations are the right ones. Naming a company “Joe’s Geothermal” may be a very effective way of establishing a personal touch to smaller installations, but as a company grows it will likely want to drift away from this image and have a larger and more professional association. However, it is extremely difficult to change brand elements once they have been established and when recognition of these elements is growing. Building a brand is something done through investment and, particularly in the HVAC/R industry, brand value has a very strong local component.

When developing these brand elements, plan for the long-term to avoid the future difficulty and cost of changing established brand elements and losing existing brand equity. Before changing your name or brand, consider all the effort and financial resources that were invested in building this recognition. You do not want to lock yourself into a situation where your marketing and business decisions are dictated by a third party. Though you should stand out for your own quality work, the value of your company’s branding should not be used to enhance the value of other companies within the larger supply chain. The point here is to differentiate your brand in the customer’s mind.

Consistency must also be a focus when building a brand. When extending brand elements onto business cards, pamphlets, vehicles, company website, and so on, the message must be clear, memorable and consistent. Once a company name is chosen, that is the name tha
t should be used and repeated on all marketing materials.

When it comes to other brand elements, such as slogans and logos, firms often change too much, too quickly. In order to build recognition and awareness, a consistent and repeated message is necessary in different forms throughout the client interaction.

Once your firm’s strategy, marketing plan and brand have been established, the focus for GHP companies is best placed on educating the consumer. Look for more on this topic in upcoming issues. <>

Denis Tanguay is president and CEO of the Canadian GeoExchange Coalition (CGC). Jeffrey Braunstein, a McGill University student who worked with CGC in the summer 2009, provided the research for the original text that this article is adapted from. Contact Tanguay at denis.tanguay@geo-exchange.ca

1 See the book by Everett Rogers Diffusion of Innovations. Glencoe: Free Press. 1962, for more detail on the topic of customer phases and types.


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