THE SOURCE - Fall 2017 - 36

marketing matters

What is Natural Gas Worth to a Home?
By Jon Christiansen, PhD
The Perpetual Question
Each industry vertical my company
serves seems to have that one question
that everyone is asking. The natural
gas utility industry is no different.
The questions vary slightly regarding
language or delivery, but the theme is
the same: what is my product (natural
gas) worth in the eyes of the consumer?
This question is a bold one, and
as expected, comes with many subquestions. What are the most attractive
products? What appliances tip the scale
of market preference and perceived
home value? And perhaps the first
question I remember hearing: What
is the optimal number of natural gas
burner tips to drive market preference
and perceived home value?
We felt this was the year to tackle
these questions.
All Things Held Equal
One home has all natural gas
appliances, while the other has electric
appliances. Which of the two is of
greater interest to the market among
homeowners? I don't think this article
would appear in a magazine targeting
natural gas professionals if the answer
wasn't natural gas. But how much exactly?
The answer is three times. Twothirds (66 percent) prefer the all-natural
gas home to 22 percent preferring the
all-electric home. Perhaps the bigger
question, however, is would the market
be willing to pay more for an all-natural

gas home? A substantially larger
proportion of homeowners would pay
more for an all-natural gas home than an
all-electric home, as noted in the graph
below. Additionally, more than a third of
the market (36 percent) would pay less
for an all-electric home.
Natural Gas Product Demand
Before launching into our experiment,
we first wanted to identify the most
attractive natural gas products that could
be newly installed or upgraded in the
home. As expected, the top two were
the water heater (38 percent market
attraction) and the stove/cooktop (34
percent market attraction), while the
home heater/furnace (29 percent market
attraction) rounded out the second
tier demand.
Isolating the non-users we hope to
convert makes the rank ordering look
slightly different. The home heater/
furnace was the most commonly
selected product (29 percent choice
share) that would most convince nonusers to convert to natural gas.
Natural Gas Economic Valuation
Now imagine you are a homeowner
that does not work in the natural gas
industry. Consider the following frame:
Imagine a neighborhood where the
average home value was $250,000. Some
homes in the neighborhood are worth
more than $250,000 while some are
worth less than $250,000.

INCREASE IN WILLINGNESS TO PAY STRONGLY FAVORS ALL-NATURAL GAS
36 THE SOURCE | THE VOICE AND CHOICE OF PUBLIC GAS

A home has the following appliances
installed:
* Water heater - natural gas
* Home heat/furnace - natural gas
* Stove/cooktop - natural gas
* Clothes dryer - electric
Is this home worth:
(a) More than the neighborhood average
home value of $250,000
(b) Less than the neighborhood average
home value of $250,000
(c) About the same
You will note there are three natural
gas burner tips. Perhaps you selected
the first option - more than the
neighborhood average of $250,000. It is
worth noting that $250,000 is the median
home value in the U.S. Roughly half (48
percent) of the market agrees, while
only 15 percent feels the opposite, i.e.,
that a home with three of four burners
is worth less than the median U.S. home
value median.
We replicated the same question with
most of the possible combinations of the
four primary products.
Let's first visit burner tip optimization.
There isn't an optimal number of burner
tips, per se. However, at three burner
tips, we see a substantial difference in
estimated home value than at two, and
especially so at zero or one. At two burner
tips, the home heat is the key appliance
that lifts the estimated home value. At
three burner tips, we see some variation,
but the bottom line is the lift is evident for
all three possible combinations.



Table of Contents for the Digital Edition of THE SOURCE - Fall 2017

First Person
APGA Events
A Conversation with an APGA Member: Southeast Gas
Update on DOE’s Furnace Rule
The Second Annual NGV Road Rally
Levelized Cost of Energy (LCOE) and How it Affects the Direct-Use of Natural Gas
APGA Strategic Planning: What’s Next?
Growing Revenue Without Capital - Combined Heat and Power
APGA Endorses Leading Home Repair Provider
Legislative Outlook
The Pipeline
Marketing Matters
At Last
THE SOURCE - Fall 2017 - intro
THE SOURCE - Fall 2017 - ebelly1
THE SOURCE - Fall 2017 - ebelly2
THE SOURCE - Fall 2017 - cover1
THE SOURCE - Fall 2017 - cover2
THE SOURCE - Fall 2017 - 3
THE SOURCE - Fall 2017 - 4
THE SOURCE - Fall 2017 - 5
THE SOURCE - Fall 2017 - 6
THE SOURCE - Fall 2017 - 7
THE SOURCE - Fall 2017 - First Person
THE SOURCE - Fall 2017 - 9
THE SOURCE - Fall 2017 - APGA Events
THE SOURCE - Fall 2017 - 11
THE SOURCE - Fall 2017 - A Conversation with an APGA Member: Southeast Gas
THE SOURCE - Fall 2017 - 13
THE SOURCE - Fall 2017 - 14
THE SOURCE - Fall 2017 - 15
THE SOURCE - Fall 2017 - 16
THE SOURCE - Fall 2017 - Update on DOE’s Furnace Rule
THE SOURCE - Fall 2017 - The Second Annual NGV Road Rally
THE SOURCE - Fall 2017 - 19
THE SOURCE - Fall 2017 - Levelized Cost of Energy (LCOE) and How it Affects the Direct-Use of Natural Gas
THE SOURCE - Fall 2017 - 21
THE SOURCE - Fall 2017 - APGA Strategic Planning: What’s Next?
THE SOURCE - Fall 2017 - 23
THE SOURCE - Fall 2017 - 24
THE SOURCE - Fall 2017 - 25
THE SOURCE - Fall 2017 - Growing Revenue Without Capital - Combined Heat and Power
THE SOURCE - Fall 2017 - 27
THE SOURCE - Fall 2017 - APGA Endorses Leading Home Repair Provider
THE SOURCE - Fall 2017 - 29
THE SOURCE - Fall 2017 - Legislative Outlook
THE SOURCE - Fall 2017 - 31
THE SOURCE - Fall 2017 - 32
THE SOURCE - Fall 2017 - 33
THE SOURCE - Fall 2017 - The Pipeline
THE SOURCE - Fall 2017 - 35
THE SOURCE - Fall 2017 - Marketing Matters
THE SOURCE - Fall 2017 - 37
THE SOURCE - Fall 2017 - 38
THE SOURCE - Fall 2017 - 39
THE SOURCE - Fall 2017 - At Last
THE SOURCE - Fall 2017 - 41
THE SOURCE - Fall 2017 - 42
THE SOURCE - Fall 2017 - cover3
THE SOURCE - Fall 2017 - cover4
THE SOURCE - Fall 2017 - outsert1
THE SOURCE - Fall 2017 - outsert2
THE SOURCE - Fall 2017 - outsert3
THE SOURCE - Fall 2017 - outsert4
https://www.nxtbook.com/naylor/PGAQ/PGAQ0218
https://www.nxtbook.com/naylor/PGAQ/PGAQ0118
https://www.nxtbook.com/naylor/PGAQ/PGAQ0417
https://www.nxtbook.com/naylor/PGAQ/PGAQ0317
https://www.nxtbook.com/naylor/PGAQ/PGAQ0217
https://www.nxtbook.com/naylor/PGAQ/PGAQ0117
https://www.nxtbook.com/naylor/PGAQ/PGAQ0416
https://www.nxtbook.com/naylor/PGAQ/PGAQ0316
https://www.nxtbook.com/naylor/PGAQ/PGAQ0216
https://www.nxtbook.com/naylor/PGAQ/PGAQ0116
https://www.nxtbook.com/naylor/PGAQ/PGAQ0415
https://www.nxtbook.com/naylor/PGAQ/PGAQ0315
https://www.nxtbook.com/naylor/PGAQ/PGAQ0215
https://www.nxtbook.com/naylor/PGAQ/PGAQ0115
https://www.nxtbookmedia.com