We’re Doing Residential Energy Efficiency All Wrong

Utilities are now spending nearly $7 billion a year on energy-efficiency programs. It seems we have little to show for it aside from expensive consultants who will model any results you would like.

These programs tend to focus their marketing on the energy savings or money savings from the projects. Consumers don’t care. If they did, we would see geometric growth instead of a resounding "meh."

Others focus on better financing products, slicker sales pitches, faster energy audits, higher rebates or any of a myriad of other things.

In the residential sector, none of these are the problem. The lack of sales is the problem.

Projects are not being sold and implemented in substantial numbers. We need to slow it down, build relationships with consumers and educate them, learn and think systemically about the problems they have, and arrive at solutions that fit homeowner budgets.

Despite huge amounts of money spent on programs, I’m unaware of any program (state or utility) that has broken the threshold of 10,000 home performance projects in a year. Many cities, not to mention states, have that many replacement furnaces installed in a month.

Every new furnace or air conditioner is a unique chance to make substantial improvements to the efficiency of a home, when paired with air sealing and insulation. Yet these upgrades are seldom performed simultaneously because consumers do not know that many of the problems in their home (hot/cold rooms, asthma, allergies, icicles, frequent illness, etc.) can be substantially reduced with a carefully designed upgrade. Because of this lack of knowledge, home performance projects simply aren’t sold in large numbers.

If poor home performance sales is the problem, what is the underlying cause of this lack of sales? Two primary things come to mind: 1) consumer issues are not being solved, which creates 2) a lack of trust.

Lack of problem-solvers leads to consumer issues not being addressed

When I first got into the insulation contracting business, I thought that consumers would care about the money they could save, the energy savings that came with it, and saving the earth. I was wrong. Very wrong. Those are higher-level, esoteric problems, not the kinds of things consumers actually care about. At least not enough to spend big money on.

What do consumers care about? Ground-level problems. Ice dams -- melting snow turning into icicles and leaking into the house -- are the largest driver of work for us here in Cleveland.

Comfort issues are another major driver. It sucks when the second floor of your home is 82 degrees while the first is 72. Asthma, allergies and general indoor air quality are concerns that are worth real money to consumers as well.

Being able to look a consumer in the eye and tell her honestly that your solution has a very high likelihood of solving her problem is the most effective sales tactic of all.

The trouble is, very few people understand the complex interactions between systems in a home that are required to start solving these problems. There are 10 to 20 HVAC companies within 10 miles of me that profess to be comfort experts. How many of them can explain mean radiant temperature, air flow, humidity, and the other factors that determine true comfort? Likely not many.

These "comfort experts" cannot define key aspects of comfort. Even fewer are likely to own a blower door to test the air leakage of a home, which is typically the most critical piece to solving homeowner problems.

If most contractors cannot even define or explain key concepts like this, how likely are they to solve problems or predict solving them with any accuracy?

And how many follow up to see if their "solutions" worked -- to learn from their successes and failures?

"None" is the answer I get from clients. And hence, not many problems are solved. Very few projects are sold that truly solve consumer problems. Instead, contractors run around selling haphazardly designed small jobs with low closing ratios and disappointing outcomes.

How do I know this? I used to be one of them. Before switching to a comprehensive consultative design process, I ran around selling small projects. It burned me out, and too often I heard the problem wasn’t solved.

Now my business is running a 47 percent lead-to-project closing ratio with an average job size above $15,000.

It can be done. We look homeowners in the eye and tell them how far they need to go achieve satisfying results. If they aren’t willing to pony up enough money to solve the problem, we tell them to expect disappointing results. They tend to pony up at that point.

Great results are arriving -- check out our reviews on Google and Angie's List.

Building science can solve consumer problems. But it will continue to wallow in mediocrity if contractors don't figure out ways to adequately address those problems.

Lack of consumer trust: Stop lying about savings opportunities

I got a postcard last year stating that if you installed a sealed and insulated garage door, you could save thousands on your energy bill. The average annual U.S. energy bill is about $2,000. So that garage door will zero out my bills! Where do I sign up?

Most folks don’t heat their garage. There’s nothing to be saved. For those who do, the temperature is usually low and the square footage isn’t that big, so it’s a small piece of their bills.

The problem is that consumers are inundated with junk like this constantly. Many think windows are the best way to save energy. The truth? They typically achieve a 2 percent to 7 percent energy savings. Our projects generally aim for 30 percent to 70 percent energy savings.

Those who actually measure know this. But very, very few people measure. With measuring comes accountability. Many can only see the costs; they can't see the tremendous benefits of accountability. Accountability is a large component of trust.

Until we begin to measure, we are not going to gain consumer trust.

Trust is a difficult thing to build. Author Stephen Covey talks about "smart trust," which is developed over time and with analytical rigor. You have to put in the hours to create real trust.

It’s not unlike building a relationship with a future spouse. You don’t decide in your mind to get hitched on the first date, or usually not even the 10th. You have to spend a lot of time together to gauge whether this person is someone you can spend the rest of your life with. That’s developing the high propensity to trust.

At the same time, you have to work through the analytical things: Do you want to have kids? How many? Is someone going to stay at home? What kind of lifestyle do you want to build? Do you have similar financial habits? Can you put up with each other's family? And so on.

Once the relationship is strong and you’ve worked through the details, you’ll both feel comfortable about getting married. You have smart trust. It’s very similar, but on a smaller scale, to selling home performance projects.

Home performance requires a relationship with the client. It is not selling hamburgers. Our process builds relationships by design.

Smart trust is not built in a day. Nor is it built in a single sales call. I’ve always been a relationship guy. Back when I sold fiberglass insulation to contractors, I took my time to build trust. I found out where I could help them and how. I held good margins because the relationships were built on trust and collaboration, not low price. That took time.

Often my first sale took six to 12 months. Very few clients got stolen back from me over price because of that relationship. My territory went from $400,000 to $2.75 million in under two years. I’m still friends with a number of my customers six years later. This is not done in one call.

The same story applies to selling comprehensive energy-efficiency projects. We define comprehensive home performance projects as the spectrum between a simple attic insulation job and a deep energy retrofit. These projects typically run in the $10,000 to $50,000 range and deliver 30 percent to 70 percent energy savings. Saving energy is seldom a primary goal.

In fact, through our interview process we usually find saving energy doesn't make the list of the top five priorities.

We take our time with clients, often bringing out the home performance geek within them. We gently educate them, feeding as much building science as they can handle at each sitting. By the end, they may become pretty expert and quite giddy at the results.

This ensures there is little friction in the sales process. Clients understand what we are doing, so we don’t fight over what we do. The budget is jointly arrived at, so we don’t fight over money. The actual project work scope is built collaboratively, so it is their work scope and project, not ours.

You’re probably wondering how we can afford to spend this much time with each client. We purposely structure the sales process so we get paid at every step. We are consultants, not salespeople. The diagnosis and planning stage typically costs between $800 and $1,200. This is no $199 energy audit. It is not a loss leader.

Real job satisfaction

I’ve sold a lot of things through the years, from mechanic’s creepers to Toyotas, and fiberglass to insulation jobs. Home performance projects are the most fulfilling of anything that I’ve sold by an order of magnitude.

I never fight with clients. I never feel like a sex worker. (I've wanted to work that phrase into an article ever since Ira Glass managed to do it.) I don’t get nasty callbacks. I have predictable income several months out. I work many fewer hours than I previously did.

I actually cried a few weeks back over how fulfilling this new path is. It’s that good. Furthermore, I’m now actually making a living at it.

How did Energy Smart accomplish all this? As I explained, we solve consumer problems and build trust.

I know it works in the residential market, and we’re working on a few commercial projects too. By doing this, we sell substantial, effective projects that put food on multiple tables. And we have a hell of a lot of fun doing it. It’s early, but I have absolute confidence that this path and method is scalable: it doesn’t require $100,000-plus in sales talent to do it either.

Until efficiency and building-performance projects are sold as a way to solve consumer problems, the industry will continue to go nowhere -- and the billions of dollars in ratepayer funds will continue to be poorly spent. No amount of slick financing, sales pitches, rebates or other tomfoolery will change that.

We must sell something consumers want. It’s very simple to figure out what that is. Ask them. It’s the first step down the path to solving problems and gaining their trust. Once we do that, we can sell more projects and build a real market for energy efficiency.