I came across an article that discusses issues consumers in Massachusetts are having receiving their government-promised rebates for energy efficient products. The story reminded me of the example Professor Neidermier used in his Pricing lecture when he explained that it is hard to convince consumers to purchase products that use value-based pricing, such as new energy-efficient lightbulbs that are priced based on the economic value to the customer. Though the new lightbulbs are more energy efficient and will probably save the consumer money in the end, most consumers can not justify spending more than double a normal light bulb for the new ones.
This problem arises frequently in our increasingly environmentally-conscious society: products that are "greener" are generally more expensive. Though it is admirable that the government has attempted to step in and help change consumer patterns by offering rebates on "green" appliances, clearly the rebate system is flawed. If the government is truly committed to encouraging consumers to purchase more environmentally-friendly products, it should try a different tactic and subsidize the production and distribution of these products so they are no more expensive than the older, less environmentally-friendly products. Hopefully, once consumers become attached to the "green" products and recognize their benefits (the new light bulbs, for example, are last much longer than the old ones) the government could slowly remove itself from the equation and the price of the products could steadily increase.
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I haven't heard anything about the rebate troubles, but I would imagine that the problem stems from changing consumer behavior in the current economy. Rebates are generally offered to make the purchasing price seem less expensive because consumers subtract the value of the rebate in their minds. However, few consumers actually take advantage of the rebates. (I know I usually forget to mail them in!) With the current state of the economy, I would bet that more people are actively approaching rebates. If the seller (or in this case, the government) does not budget appropriately, the rebates will leave profits in the red.
ReplyDeletePromotion or Information? Given the choice between these two, it is obvious that the government has pursued the option of the former. While promotion is useful to use the pricing incentive to encourage a consumer to purchase a product, I question whether it is truly as effective. Energy efficiency is a very “qualitative” image in the eyes of the consumer as humans usually have a short-term outlook with the use of comparison. I mean, if one product was priced at $10, and another at $5…and you tell me that the $10 works for twice as long, I will always be a little skeptical.
ReplyDeleteTo reduce this skepticism which hinders the motivation to purchase a new product, education is a necessary component of the marketing wheel to introduce a new product. Marketers call it “building primary demand” and it can be an advertising tool that adds informative information. Images speak a thousand words and if you can effectively convey the benefits that will leave a lasting impression in the eyes of the consumer, then anything can be possible. So informing the public is one way, advertising the benefit is another [but remember, you want images that stick, not a long drawn on mishmash of scientific information].
I typically disprove of governments meddling with competition, but it such instances it is necessary that it does so. The purchase of "Green" products is a must; it is time consumers acclimate themselves with the effects their favorite products have on the environment. The government's use of pricing tactics, such as rebates and coupons, are excellent promotional moves. People need to be first educated a about the issues. These tactics also push them reject prior loyalties to other brands, motivate them to purchase the eco-friendly products, and encourage them to be repeat buyers.
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