Energy-Efficiency Segmentation: Results from the Residential Products and Services Survey

Alexandra Behringer | Nov 23, 2010

Energy marketers know intuitively that certain residential customers are much more inclined to pursue energy efficiency than others. But what exactly differentiates the doers, from the potential doers, from the people who are unlikely to participate in utility programs? E Source recently partnered with Nielsen Claritas on an extensive national survey of 32,471 respondents in the U.S. that focused on products and services, including energy efficiency, rate options, and green energy. We analyzed this data to better understand residential attitudes, actions, and energy use.

Four Segments of Energy-Efficiency Buyers

We segmented U.S. households by their readiness to participate in demand-side management (DSM) programs, particularly energy efficiency. Utilities and efficiency implementers can use the four resulting segments to better understand the motivations of the consumers in each segment.

EE Achieverstm (12 percent of the population). The EE (energy-efficiency) Achievers segment includes those customers most engaged with DSM programs. They have demonstrated willingness to participate in more than one DSM activity or action. E Source considers this the prime segment for marketing of additional DSM programs.

EE Anticipatorstm (26 percent). The EE Anticipators segment is dominated by customers who are very inclined to participate in DSM programs but have not yet done so in an extensive manner. They have some of the same demographic characteristics and attitudes as the EE Achievers, and they say they will start participating in the coming 12 months. We consider the EE Anticipators a strong secondary audience for DSM programs -- one that is more than twice as large in number as the EE Achievers.

EE Uncommittedstm (25 percent). Although consumers in the EE Uncommitteds segment show high interest in saving money through saving energy, they are not ready to commit to participating in utility programs at this time. EE Uncommitteds appear to have significant barriers to participation and could be a good segment for low-cost and no-cost approaches to energy savings.

EE Indifferentstm (37 percent). The EE Indifferents, our largest segment, is the least promising group of customers from a DSM program marketing standpoint. They are doing very few, if any, DSM actions. They also are the least enthusiastic about stating interest in saving money through energy savings.

Demographic and Regional Characteristics of Segments

As part of the survey, we collected detailed demographic data of respondents, including age, income, education, household characteristics, and geography. We found substantial differences among the four energy-efficiency segments.

Age. Customers who are more engaged with efficiency and load management are also more likely to be younger -- 41 percent of EE Achievers and 47 percent of EE Anticipators are under 45, compared with 36 percent of EE Uncommitteds and 35 percent of EE Indifferents.

Homeownership. Although most survey respondents were homeowners, EE Achievers (83 percent) and EE Anticipators (76 percent) are distinctly more likely to be owners. In addition, EE Achievers are highly represented among respondents who bought a home in the past 12 months and among those who plan on purchasing a home in the next year.

Household income. Results show that higher-income customers are more interested in DSM programs. The two segments most interested and involved with DSM activities, the EE Achievers and EE Anticipators, have higher income levels than the other two segments. Forty-two percent of EE Achiever households earn more than $75,000 a year. In comparison, the majority of EE Uncommitteds and EE Indifferents (58 percent and 53 percent, respectively) earn less than $50,000 a year.

Household size. More-involved segments are more likely to have three or more people in the household and are much less likely to have only one person in the home. EE Achievers tend to have higher incomes and larger households, and they have the most electronic plug loads in their households. EE Anticipators are also more likely to have more electronic plug loads in their homes in general than EE Uncommitteds and EE Indifferents. Yet people in the less-involved segments also have nearly as many electronic plug loads, which may mean opportunities for utilities to focus some of their DSM efforts on efficient plug-load programs.

Average electric and gas bills. EE Indifferents have smaller electricity bills on average than other segments, but overall the distribution of bill amounts is remarkably similar across segments . This suggests that increased incentive to save money is not the only driver of engaging or desiring to engage with DSM programs.

Census division. The Pacific Census division stands out with the highest percentage of EE Achievers as compared to other Census divisions. This probably reflects the longstanding existence of DSM programs in most parts of the region along with high awareness levels. The West South Central and East South Central regions of the U.S. have lower percentages of EE Achievers.

It is interesting to note that the EE Anticipator segment has a more even distribution across Census divisions, reflecting the existence of a customer base across regions that may have a strong desire for DSM program participation in the near future.

Segments' Participation in DSM Programs

Respondents were asked if they had participated in any of the following DSM programs:

  • Appliance rebate
  • Equipment rebate
  • Appliance recycling rebate
  • Whole-house audit
  • Online audit
  • Weatherization
  • Load management
  • Overall, only 16 percent of customers participated in any DSM programs through their utility in the previous 12 months, and only 4 percent participated in two or more programs. EE Anticipators were more likely to participate in online audits and home weatherization than other DSM programs. Notably, EE Indifferents and EE Uncommitteds participate in load management in higher proportions (10 percent and 6 percent, respectively) than any of the other DSM programs.

    Our research shows that after participating in one DSM program, the chances that a customer will participate in another DSM program nearly doubles -- and keeps increasing over the next several programs in which they participate. Customers participating in weatherization, whole-house audits, or online audits are much more likely to also engage in another of those services. Similarly, consumers who participate in appliance rebates, equipment rebates, and appliance recycling programs are more likely to participate in another one of the services in this group. Yet customers who participate in a load management program are only modestly more likely to participate in other utility-sponsored DSM programs.

    Of the DSM programs we asked about, appliance rebates are the most popular both for those saying they have participated in the past year and for those who say they are likely to pursue one through their utility in the next 12 months. Curiously, although load management had the second-highest penetration of any of these programs, it is also the least popular choice for something to subscribe to in the next 12 months.

    Using Segmentation to Target Energy Efficiency Buyers

    The results of this survey identify key marketing opportunities for energy-related products and services, and reveal a relatively large population of high-potential customers for target marketing. Utilities or other entities can enhance the data on the four segments of energy efficiency buyers by matching them with geodemographic market segmentation systems (such as Nielsen Claritas PRIZM) to target those consumers that are most likely to participate in DSM programs.

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    Fascinating data in this article, and probably quite useful to utilities with limited budgets to market DSM programs.

    Of huge significance would be to study and compare such data before and after an electricity rate increase. Here in Ontario Canada it has been publicized lately that our rates are expected to rise approximately 50% over the next 5 years to pay for infrastructure upgrades and renewable energy sources coming on line. The Ontario public is outraged at this painful prospect, and I'll bet the data in Ontario would show the Achievers and Anticipators groups growing steadily in numbers at the expense of the Uncommitteds and Indifferents.

    Ontario’s rate growth is now purported to be much faster than inflation for the next five years. I’ll bet the same situation is in store for many other jurisdictions in North America, sooner or later. So Ontario might be a good place to gather consumer behavioral data like this to form the basis of consumer predictions for the rest of Canada and the US.

    Very interesting if quite predictable. I am surprised you didn't dig into socio-economics of education, type of employment that I would expect to have particularly strong correlations. I was involved in qualitative and psychological studies in this area and a strong finding was that people more or less agree with the motherhood-and-apple pie aspiration but are not inclined to take action themselves. They expect others to do things for them - by regulation, or practice. Perhaps a combination of carrot/stick + make it easy to do will work. Utiliies are in a position to do that with price breaks and penalties. We concluded that promotion using role models would be a key ingredient for behavioural change.

    Here is something on Energy Effeciency-
    The best approach to think about it is to make all energy related effecienct devices cheaper
    so that it is affordable and to make energy costlier for a short period so that people are lured to it.First is that people are not willing to spend money on devices to make them more efecient unless it is cheap and workable.TV sets left working at all times can be contrlled by a simple timer provided it can be programmed by remote and easy to operate .Same applies to water heaters. Simply devices that are cheap and easy and have uniformity woill go a long way in improving energy effeciency.Call it demand management if yoiu like but it effeciency in usage of energy.There is much scope there on this.Then gain insultation of wall and doos will save energy but this is both at buiklding time and at normal opertational maintainence.I thing we miss lot of points when we tlk about energy effeciency.A stove left operating while we attend to other work in Kitchen is a waste of energy and a simple device that can stop flow of gas if there is no utensil on stove can save lot of energy. Photo cells in the yard that switch off electricity to outside lighting will save energy, they must be cheap and quick paying.

    Very good article. Our analysis and experiments showed about 10 % of home owners are good candidates for Customer Behavior Change Programs. at this time (2009-2010)

    Our experiment shows a good Customer Behavior Change Program could add another 7-10 % reduction in energy. Smart Meters can accelerate Customer Behavior Change, but they are not necessary.

    Hossein Pakravan