February 2011

5 things to understand about the green(ish) consumer

By Biljana Cvetanovski and Venkie Shantaram

Green is good.

British consumers agree with that sentiment—as long as going green isn’t expensive. Or complicated. Or inconvenient. Or time consuming.

As part of our work on the “Smart Home of the Future” initiative, McKinsey has undertaken extensive research to understand attitudes and behaviors towards energy use. Our goal: To find out what might induce consumers to change their energy habits.

The time is right for such work because the context is changing fast. The UK government has passed new energy-efficiency requirements for producers and utilities, as well as new incentives to promote cleaner energy. Among consumers, awareness of environmental issues is higher than ever. Following the recent economic crisis, many are also keenly interested in saving money.

What are people thinking? What can induce them to change their behavior? How do they see the future? These are among the questions McKinsey asked during in-depth interviews and at-home visits in dozens of British homes. We believe these insights, while drawn from Britain, are broadly applicable, and will be useful to companies who want to get a piece of the green dollar, euro or yen.

We discovered that, while in principle consumers overwhelmingly supported the idea of cutting energy use, in practice, they were not willing to do much or to incur additional costs.

Here are five important insights we gleaned from our work:

1. Cost comes first. Saving energy for energy’s sake is a low priority. But if there is money to be saved, people get more interested. When it comes to buying a new appliance, for example, customers have a “but ... and” mentality. That is, if other attributes of a proposed purchase, such as aesthetics, price and size work out, only then will consumers factor efficiency into their decision. We observed no willingness to pay over the odds for energy efficiency, and consumers just aren’t willing to sacrifice performance—irrespective of the green benefits. “I had an energy-efficient kettle,” one frustrated mother told McKinsey, “and it just didn’t work. I sent it back twice.”

2. Consumers believe they are doing their bit. But they admit that they “think small” day-to-day. The most common actions taken are turning off lights and half-filling kettles. Even when they can save some money, they will not put much energy into the quest. They do little research about how to save energy; don’t check their bills to see how much energy they use; and couldn’t define “kilowatt” to save their lives. They don’t talk about it, either. “We don’t discuss it at the school gate,” one woman told us. “I think probably you would be looked at strangely if you brought up the topic."

3. People value control. One promising market is in the area of home automation—remote and wireless systems that can control household devices and adjust heating from outside the home. People are intrigued by the idea of controlling their home environment—in part because they can control their energy usage, and ultimately their costs. Current users report good experiences with these systems; their bills were lower and they found they changed their habits for the better easily.

4. People evaluate a wide range of trade-offs. One is comfort vs. cost. Some consumers will sacrifice comfort and lower the thermostat in order to save money; others will not. Then there is the style vs. efficiency trade-off. A number of households reported desiring massive American-style freezers; they are not going to stop shopping for them just because these appliances consume more energy. And there is also the time vs. investment trade-off. Most British consumers have a transient mentality, and don’t assume they will be at their current address for the long term. So they are skeptical about buying expensive things like insulation or solar panels, concerned that they will never see a return on their investment.

5. People are confused. The British press—newspapers, TV, Internet—relentlessly push a green message, but volume has not translated into clarity. For example, consumers are rightly muddled about the differences between LED (light-emitting diode) vs. CFL (compact fluorescent light) vs. high-efficiency light bulbs. Then there is the element of trust. Though utilities put out a great deal of information, their customers are dubious about their motives, believing they have a conflict of interest when it comes to energy efficiency. Even when it comes to areas where there consumers show genuine enthusiasm, for example, around home automation, take-up is likely delayed by concerns that such systems are difficult to set up.

The lessons for companies, then, are clear-cut. Simplify your message. Money matters. Create products that have a short- to medium-term impact. Make appliances attractive. Improve and emphasize performance. Keep things simple.

When energy efficiency becomes cheap and easy, in short, there will be more of it.

Biljana Cvetanovski is an expert in Consumer & Shopper Insights in McKinsey’s London office. Venkie Shantaram is a partner in McKinsey’s London office and a leader in the Electric Power and Natural Gas sector.

This article is adapted from McKinsey’s Smart Home of the Future initiative, which focuses on forecasting the sizing, profitability and competitive dynamics of energy management products and services.


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Consumers talk about their energy choices