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Energy Marketing Challenge, Research Paper Example

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Research Paper

Challenges and Opportunities Related to Energy Marketing

The below paper is designed in order to determine the main challenges and opportunities that lie in today’s energy market. Focusing on household renewable energy marketing, the authors will first determine the challenges and identify the opportunities in order to develop and apply the 9-step problem solving method for creating a fully functional and result-oriented marketing plan for an energy company in Northern Europe.

Background Information

The current situation of the company is that they are looking to gain new customers by marketing their products that now consist of gas, fuel and electricity. The company has recently invested into some new renewable energy production units in Northern Europe, installed several wind turbines and solar panels. In order to be able to sell the excess energy produced by these power stations, the company needs to communicate its values and market approach effectively, sending out the message to customers that the firm cares about the environment. Unfortunately, in the past few months several green organizations have campaigned against the company as they have been involved in public court cases regarding the location of the wind turbines and the new power station’s impact on the natural environment. In order to be able to make a profit of the energy produced by the solar panels and wind turbines as well as to obtain an ROI of 20 percent the company has to set a minimum price per unit for the total kilowatts sold.

Market Analysis

The energy access market worldwide is growing. According to the International Finance Corporation (2011), the poor today spend $37 billion on poor-quality energy solutions to meet their lighting and cooking needs. While this is not the case in most parts of Northern Europe, it is evident that helping the poor with saving money and closing the energy access gap is a large market. In the United States, researchers have determined some important barriers to home energy upgrade. (Bianchi, 2011) While phasing out the new product that would include more of the renewable energy source’s energy and would be priced lower than completely “green” packages, the main challenge is that current energy analysis are not accurate enough to predict the savings. Therefore, in order to gain more customers the company needs to develop a system that would be accurate and help customers calculate upfront how much money they could save. This way, the company would be able to communicate its strategy and increase its reputation on the market as a responsible energy provider, creating a competitive advantage on the household market. (Building Technologies, 2011, p. 9.)

SWOT Analysis

According to the European Commission’s report (2005), in Europe the main strength of the energy sector’s renewable source development lies in the advanced research and knowledge background. The main weakness is limited market deployment. However, a good opportunity lies in the strong public support of the installment of renewable energy production plants. However, the main threat is the international competition: mostly located in Japan and developing Asian countries.

Strengths Weaknesses
Technological development Lack of market deployment and communication
Opportunities Threats
Public support and commitment Competition of Asian companies (lower price)

The Nine Step Model

Step 1: Describe the situation

As the company has been criticized before for its irresponsible selection of the power plant, it is important that the marketing message does highlight the developments and green investments made by the company.

Step 2: Frame the right problem

The marketing department’s task is to create a message that highlights the company’s commitment to the environment, bettering people’s lives and providing the best possible customer service. The marketing campaign would target young families that are committed to becoming greener. However, creating awareness of the development and price change requires a long term marketing communication that involves statistical data and savings predictions.

Step 3: Describing goals

In order to be able to increase household energy supply market share by 50 percent (the amount of excess energy produced by the new plants, the company needs to engage 5000 more customers to sign a long term contract with them. Increasing the reputation of the company should also be one of the main goals. A direct marketing campaign would access 150.000 households and a TV ad would supplement the campaign.

Step 4: Identifying Alternatives

While a marketing communication in letter would be the most effective way of contacting customers, it would not be relevant to the “green message”. Customers who are conscious about their energy consumption and carbon footprint would not all take the letter positively, as they would know that the paper was made cutting down trees. Another approach would be to focus on the company’s investments in Third World countries where they are supported by governments to provide low cost and effective energy solutions instead of the current poor-quality and efficiency resources in remote areas.

Step 5: Evaluating alternatives

While the TV advertisement combined with direct mail was the first marketing solution identified, it is evident that TV advertisements would increase marketing costs and possibly the cost of the new package as well. Therefore, the most feasible identified alternative would be a combination of marketing messages (less in the television, limited to the beginning of the marketing campaign) through media, online marketing, including social media and press release marketing communicating the green development, the new product and the involvement of the company in Third World countries’ green and efficient energy programs. However, without analyzing the risks and possible results, it is at this point impossible to make a decision on the length and details of the campaign.

Step 6: Identifying and assessing risks

There are several risks associated with the campaign alternatives. First of all: the company has been criticized before and it is likely that a higher level of media presence would increase its vulnerability to further attacks. Therefore, there is a need for developing a marketing and corporate communication structure that would address potential risks and areas that green organizations in the country would be focusing on. Further, it is important that the budget of the marketing campaign would be targeted and communicate the fact that the energy company is committed to the country’s natural assets, to give customers a strong enough reason to choose company over Asian firms offering lower priced packages.

Step 7: Making a decision

Based on the analysis above, the following marketing plan is developed:

Length Media Message Cost
2 months Television Renewable energy lower prices 100.000 Euro
6 months Online media Renewable energy lower prices corporate responsibility, new package, online accurate savings calculator 10.000 Euro
Ongoing Direct mail Emails collected through campaign and social media sign ups 2.000 Euro
Periodic Road shows, sponsorships Sporting events, presentations and workshops in schools promoting green future 4-5.000 Euro
Ongoing Press releases Green future, achievements, research and development, price reduction, new package negotiable

Step 8: Developing and implementing solution

Implementing a community-based approach in the marketing strategy of the firm, it is evident that the above plan would solve all the initial problems related to the introduction of the new lower priced product. While the company is unable to compete in price with many Asian firms, it is able to gain a competitive advantage through its reputation increase and the higher consumer awareness level created by the campaign. Mayer et al. (1997) “green customers” can become committed to projects and companies on an emotional level, and if the company is able to develop a sense of community ownership in the target audience through its marketing messages, roadshows and media communication, the firm is able to target the emerging “green population” in Northern Europe. According to Mayer et al. (1997, p. 9.), the most committed group of green-thinking people are the “True-Blue Greens” They are” three times as likely to refuse to buy products from a company with a negative environmental image10 and twice as likely to buy greener products.” However, the rest of the population can also be targeted using the price advantage over non-green products.

Step 9: Evaluating results

Based on the campaign and cost analysis above, it is predicted that the company will be able to reach more than 500.000 households, out of which 5000 new customers will be gained thanks to the marketing campaign. The firm would also obtain a ROI rate of 20 percent on the green development and increase its market share significantly.

Conclusion

According to the Main(e) International Consulting LLC (2009), the competitiveness of green energy on the global market is weak. Therefore, there is a need for a strong marketing campaign that is targeting a group of customers committed to protecting the environment for their children. This is why the above plan is based on communicating investment, efficiency and the long term benefits of renewable energy, instead of trying to take on the competition with suppliers offering a lower price.

Answers

1.Why are marketing channels and intermediaries necessary in the energy sector? What is the most important function carried out by intermediaries in the energy sector? Explain why. Why must channel arrangements sometimes be modified over time in the energy sector? 

A: Intermediaries in the energy sector support distribution, market research, marketing and communication with consumers. Channel agreements need to be modified and reviewed on a regular basis because the sector changes, new entrants appear and competition is high on a global scale. The assessment of  cost of marketing, pricing, administration and finance would be the responsibility of the intermediary company. Consultants, brokers and agents are able to negotiate deals and predict market changes providing essential information for the production company.
2.What are some factors energy-focused companies must consider before attempting to enter foreign markets? Assuming you were setting up a market program for an energy-related product in a foreign country, what must you take into consideration? How might international marketing benefit a previously domestic energy-related organization? 

A: International marketing can create a greater awareness and increase the reputation of the firm globally. As the energy sector is highly competitive and vulnerable to criticism, it is important that the firm develops an international marketing communication message that is distributed on a global scale. An international marketing campaign would help the firm find new markets and tap into emerging energy consumption regions in the world where demand is growing at a high rate. However, companies need to analyze the demand and competitiveness of the new market before entering and create a country- or area-specific competitive advantage.

References

Bianchi, M. (2011) Technical Barriers, Gaps, and Opportunities Related to Home Energy Upgrade Market Delivery. National Renewable Energy Laboratory

Mayer, R., Blank, E., Udall, R., Nielsen, J. (1997) Promoting Renewable Energy in a Market Environment: A Community-Based Approach for Aggregating Green Demand. Land and Water Fund of the Rockies/U.S. Department of Energy Report

Boulder, Colorado

International Finance Corporation. (2011) From Gap to Opportunity: Business Models for Scaling Up Energy Access. Online.

U.S. Department of Energy. Renewable Energy: Market Opportunities for Wind, Solar and Geothermal in the United States of America. A Report compiled by Main(e) International Consulting LLC April 2009

 

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