The Source - Fall 2008 - (Page 34)

marketing matters Why marketing works By Jeffrey M. Tuttle In 2004, CPS Energy was faced with some tough issues. Average gas sales per bill were steadily declining (17 percent over the past 20 years), single-family market penetration for new homes fell from 79 percent to 13 percent (more than an 80 percent drop), the use of gas in new multi-family units was around 5 percent, the net growth rate for the gas system was 0.4 percent (while the electric system was growing by more than 2 percent annually), cash flow deteriorated because of a decline in sales, and no base rate increase had been granted in more than 15 years. All of these factors indicated that the company was not focused on its gas business. In late 2004, CPS Energy began developing a plan to turn things around by focusing on three primary areas: growth, aggressive cost-cutting and efficiency gains, and rate relief. Incentives for homebuilders The near-term strategy was to build gas penetration in single-family and A case study from San Antonio’s CPS Energy multi-family residential construction. The target was 50 percent market penetration in 36 months, which was slightly higher than the Southern United States average of 41 percent. To achieve this goal, one of the first strategic moves was providing an incentive for builders to install gas infrastructure. CPS Energy’s electric line-extension policy required developers to pay the full cost of putting in electric infrastructure, and it devised a policy whereby up to 50 percent of the electric-infrastructure trenching cost would be credited if gas was installed. The amount of the credit depended on the types and number of gas appliances in each home. The largest credits would be allocated to space and water heating, with significant credits also provided for gas dryers and cook tops. By increasing the number of burner tips in each home, gas appliances rebates also have helped enhance multi-family market penetration. CPS Energy introduced rebates of $100/unit in single-family homes and $50/unit for multi-family dwellings for new gas water heaters. Recently, rebates for gas dryers and water heater replacements were introduced. The gas dryer rebates have been well-received and have run counter to traditionally low market penetration for such appliances. Smart Energy is smart marketing In 2003 CPS Energy also developed and launched the Smart Energy™ program, which provides cooperative advertising funds for builders who install space and water heating in their homes. The more homes that are built, the more funds are available for advertising. The key message to homeowners is that a Smart Energy™ home will save them more than 20 percent annually on their total energy bill. Smart Energy™ homebuilders benefit from substantial advertising within CPS Energy’s Web site, television commercials, and numerous print and electronic ads, along with billboards, Key Performance Metrics (Percent Increase Since 2005) 25 builders) gram (# of Top Pro Smart Energy (# of builders) nergy Program Smar t E rowth New System G Penetration amily Market New Multi-F t Penetration -Family Marke New Single 0% 34 THE SOURCE | THE VOICE AND CHOICE OF PUBLIC GAS 50% 100% 150% 200%

Table of Contents Feed for the Digital Edition of The Source - Fall 2008

The Source - Fall 2008 Contents First Person APGA Awards APGA Events Overview Up Next in THE SOURCE Grassroots Connections Climate Change Legislation Market Transparency: An Insider's View Legislative Outlook The Pipeline Marketing Matters Advertisers' Index At Last

The Source - Fall 2008

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