Tiered Pricing for Energy Audits Professional content

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By Peter Troast - June 11th, 2013

We've long been advocates for the concept of "tiered" energy audits (think "standard," "gold," "platinum") for driving revenue and expanding customer bases. Our thinking on this topic stems from a few challenges that will be well known to you, dear readers.

  1. Energy Audits are not well understood by homeowners, and are further confused by so many different approaches, from clipboard walk-throughs to utility bill analysis to green consultants to un-trained charlatans to infrared drive-by's to online surveys. We're somewhat stuck with this, so it's vital that we define what we mean.
  2. A quality, whole house audit is an incredibly valuable thing to a homeowner, providing a roadmap of improvements that can last for years. Energy audits are the smartest investment you can make in your house, and we need to put them on the pedestal they deserve.
  3. One size does not fit all. Even among those of us committed to the whole house concept, there are many deviations to what takes place in an audit based on house size and type, climate zone, energy systems, and various other factors.
  4. Very few of us are getting fairly paid for true value and time that goes into a thorough whole house audit. 
  5. Pricing strategy tells us that using a tiered approach will cause people to buy up--meaning people will flock to the middle when offered good, better, best options. 

With these challenges as our roadmap, here's why we like a tiered audit structure:

It allows you to serve different homeowner needs 

People sign up for energy audits for a huge variety of reasons, and it's important to keep that in mind when marketing and advertising your services. Is there a utility rebate people want to take advantage of? Do you serve a progressive, upper-income, environmentally-conscious geography? Is there a popular weatherization program in your area? There may be a combination of any of these factors driving energy audits in the area, and it's not a bad idea to cater to each.

It also serves multiple customer demographics 

Another factor that may have some impact on what customers are willing to pay for an energy audit, and what type of energy audit they're looking for, is basic demographics. Upper income or low income? Baby boomer, or new homeowner? Prius-driving, environmentally conscious household, or truck-driving conservative household?

Each of these target markets may be looking for something slightly different, and at different price points. An environmentally conscious upper-income baby-boomer interested in a deep energy retrofit of their Victorian farmhouse, for example, would be more apt to pay a premium for a "platinum" style energy audit that goes far beyond what a typical weatherization customer would be looking for. A lower income homeowner interested in taking advantage of a utility rebate or a weatherization program, however, may be looking for the most basic audit that will offer a path to improved comfort and lower energy bills. In many drafty homes, this basic energy audit could suffice. You don't want to lose potential customers because your one-size-fits-all, all-the-bells-and-whistles, comprehensive energy audit is too expensive.

It lets you differentiate between Energy Audit types

So what would be the distinctions among different energy audit types? It's up to you, but here are a few ideas for a premium energy audit that goes above and beyond the bare minimum "economy" audit:

  • Infrared & blower door may be reserved for premium audit (with a basic weatherization audit being strictly visual)
  • Full energy modeling
  • HERS Rating
  • Indoor air quality analysis including mold testing, etc.
  • Renewable energy site evaluation
  • Electricity analysis (electricity monitoring)
  • Filing paperwork for rebates, Energy Efficient Mortgages (EEMs), etc.
  • Manual J
  • Duct Testing

It positions you as a true expert

Even if you never sell your super platinum version, the fact that it exists and you offer it tells your customers and potential customers that you are more advanced, better trained and different that your average Joe. People may not buy a full HERS Rating, but when they ask you what it is, this is a chance to show your stripes. 

It will improve your revenue from audits

A well structured pricing tier will pull customers up from the bottom and grow your average revenue per audit. While customers tend to flock toward the middle when given a "good, better, best" option for a product or service, even one or two sales at the high end will increase your average. Customers who choose the "good" option are likely customers that you would have otherwise missed, because the pricier alternatives are too expensive for them. Allowing customers to choose what works best for them, rather than forcing on them a price ultimatum ("this is the price; take it or leave it") tends to put them at ease and more apt to purchase. The Harvard Business Review has a good article about "good, better, best" pricing with some compelling real world examples from other industries.

Some Companies Doing it Well

Our friend DeWitt Kimball of Complete Home Evaluation Services in Brunswick, ME has taken this route successfully, offering a very basic "consultation audit" geared at DIY-type homeowners, a PACE/Powersavers audit specifically designed for homeowners looking to take advantage of those loans, and an energy modeling audit that includes all the bells and whistles.

Minnick's Heating and Cooling offers a variety of energy audits including a comprehensive "Total Energy Solutions Audit," an energy audit specifically geared towards assessing heating and cooling equipment, and more.

Revival Energy offers a free home energy "review" and health inspection, a basic "comfort assessment" energy audit that looks at heating and cooling, an energy modeling audit, an indoor air quality analysis, and a premium option that combines a comprehensive home energy audit with an air quality analysis.

All thoughts welcome. Do you offer, or have you considered offering, different flavors of energy audits? Feel free to chime in in the comments.


Comments

Nice post Peter. Hal Smith was a big advocate for this before the state paid for audits. It was nice to tailor diagnostics to meet specific needs.

"Thermal imaging" "duct score" or "we'll leave an AirAdvice for a few days" was really nice to have in the quiver.

Wish duct leakage testing wasn't so expensive to perform, or that the state would help with that cost, I think that diagnostic is really helpful and way, way under utilized in East Coast Home Performance (Retrofit).

Posted by Ted Kidd on Jun 14, 2013 5:47am

I will often do total BTU delivery test instead of duct leakage testing in when the client is leaning toward a system replacement. Results are typically 30 - 40 % of capacity and clients typically can understand waist. In a typical house it only takes about 20 minutes to perform.

Posted by Tom Demaranville on Jun 14, 2013 8:37am

Tom, that sounds fantastic! How does that work, is that like a "duct score"?

Any idea how to tie it back to projected results?

If so, what confidence or variance do you have in those projections?

Posted by Ted Kidd on Jun 14, 2013 10:14am

There are about five great ideas on handling audit (assessment) pricing that would have taken years of more trial and error for us to have figured out. Thank you Peter.

Maybe the the intermediate audit could be called a BPI audit because it would fulfill all the BPI audit requirements.

As for the premium audit, hell someone might bite, and then we would have the fun of doing a really deep assessment.

Posted by John Sutter on Jun 14, 2013 10:39am

Thanks for the comments, all. What each of you has added further affirms my conviction that the array of services offered during an "audit" can continue to grow and expand along with the price. 

I think you all know that I am an advocate of the term "energy audit" because it is one of the few in our #homeperformance universe that has traction in search, but it occurs to me that since we're delivering so much more than an audit of energy, perhaps those other features (CAZ, IAQ, etc) that we're doing anyway can be leveraged for premium. 

@John Sutter: on your point of "hell someone might bite": exactly! When they do you'll have a case study. Even if they don't people will know that you're the real deal. 

Posted by Peter Troast on Jun 14, 2013 10:55am

It's hard to come by experienced people on this topic, but you seem like you know what you're talking about!
Thanks

Posted by solar air heater on Jul 9, 2013 1:21pm

Ted, in response to your question. You measure the return temperature, measure air flow and temperature at each supply grill then measure the return temperature again. Total delivered BTU is = to delta temperature difference (between supply and averaged return temps x 1.08 x air flow. Add all together is total delivered BTU. Variances are conductive loss on ducts depending on outside temperature and the equipment used to measure air flow. ( Equipment measurements can vary alot, but it's still better than not measuring)
If you test on a day that outside is near inside ambient, results will be higher delivered BTU than a day with extreme temps. But this is still a more accurate account of how a system is performing than just a duct leakage test because of taking in account for all of the systems performance losses. Cheers

Posted by Tom Demaranville on Jun 14, 2013 6:58pm

Sounds likes duct score. anybody know if these are the same thing?

Posted by Ted kidd on Jun 14, 2013 7:31pm

Another advantage of the many reasons why magician Kauai vacation
rentals abode are offering you a place to stay.

Posted by Magician NJ on Apr 2, 2014 6:33pm

Sounds likes duct score. anybody know if these are the same thing?

Posted by Ted kidd on Jun 14, 2013 7:31pm

Sounds likes duct score. anybody know if these are the same thing?

Posted by Ted kidd on Jun 14, 2013 7:31pm

Sounds likes duct score. anybody know if these are the same thing?

Posted by Ted kidd on Jun 14, 2013 7:31pm

Peter, that was one post from mobile.

This is from my iPad, in case it occurs again...

Posted by Ted Kidd on Jun 14, 2013 9:35pm

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