Will you buy an Energy Star rated product?

-Chris Voong

What factors will influence you, as a consumer, to purchase an Energy Star product? Will it be the bright blue and white star logo? Maybe the estimated cost of energy you could be saving on your next utility bill? As part of the House Bill HB3693 in 2007, Texas Legislature established the Texas Energy Star sales tax holiday under the Texas Administration Code Rule 3.369 and implemented in September 2010. As discussed in my previous article (See: ENERGY STAR Sales Tax Holiday for Energy Efficient Products (Rule 3.369)), during every Memorial Day weekend, Rule 3.369 gives consumers a break from state and local sales and use tax on certain marked energy efficient products. As for this article, we will be discussing certain influences, strategies and concerns that may or may not give that Energy Star logo slapped on that appliance the bright beacon of hope and comfort.

Influence

Social Status

In today’s world, you either have an Apple or Android cell phone glued to your hand or sitting on the table. Some will argue and label Apple iPhone users are the much wealthier and higher up on the social totem pole as opposed to say a Samsung Galaxy loyalist. The same goes the Energy Star efficient products. Most Energy Star products may cost a bit more because they contain a “new” technology and have a couple more features such as an LED display on the refrigerator or Wi-Fi On/Off capabilities on certain light bulbs to give it a more enticing appeal. It’s a great feature to have to impress for when you have guests come over to your home or business, but at the end of the day, like the cell phones, they do the same function as the lesser competitors; Only difference is might save a few more dollars on you next utility bill. But who wouldn’t like to have a TV on the fridge or turn on and off your lights from the palm of your hand? Having the latest technology makes you seem hip and give the illusion of aristocracy.

Wealth

There are copious and various amounts of reasons out there on whether or not you should pick up that wallet and trade in that relic of a stove or refrigerator today, but for the average American in today’s economy, we usually take a day or two to ponder on the idea to make a sound judgment. The average household income, according to the 2013 United States Census is around $50,500 (Medium wage in US per person is $26,695). [6] When you factor in a mortgage, car payments, living essentials, credit card payments, it doesn’t really seem like there is a whole lot left to upgrade your home or raise your property value. The dilemma here is should you fork up a little more in the initial cost to save a little in the long run or purchase a lesser value, decent brand that may or may not hold you over to get by. Theory suggest that a majority of consumers will likely invest in an energy efficient product to an extent where marginal returns from the investment equal marginal cost. What does this mean? It means why pay a little extra if the savings don’t come close to the sacrifice.

Strategies

Marketing

To have a good marketing strategy, you have to have a good plan of attack. This involves good market research, price and appeal. For marketing research, you have to realize who your target demographic is and how informed they are in that category. In terms of Energy Star products, the majority of the demographic, which is primarily the middle to upper middle-class, just see the sticker and have some idea that it may cost more but it’ll pay off in the long run. The idea of saving some money on the next bill and doing your part to make the environment just a little better sounds good to the ear and relieving to the wallet. But the key problem here is the research information. Information is identified as the top failure in the energy efficient market. The majority of high-quality insufficient information can distort the market and inhibit consumers and retailers from understanding possible marginal benefits and costs.

For an example, if consumers do not have quality and quantity of information, this can distort the market by skewing consumers understanding of the marginal benefits and cost from an energy efficient product. If the information exists but is extremely costly to obtain, this puts more of a dent in the consumer’s pocket to purchase independent research to distinguish the cut above the rest.

Price and appeal can teeter one way or the other on the scale but the key is to find a perfect balance of price and ascetics. Rule 3.369 is an example of a way to balancing that scale. The price might outweigh the appeal as it might look similar to all the other appliances in the isle, but the appeal comes in the form of legislation; the Energy Star Sales Tax. There are times when the appeal might outweigh the price, but that goes back to how informed and the quality of information that is published to the public. In this case the appeal is an illusion. Whether it’s the Energy Star logo sticker or the additional features that sets that product above the rest without the sticker such as a freezer drawer or the fact that it has components inside that make it efficient.

Concerns

According to the 2013 report of the National Awareness of Energy Star, the majority of consumers that made a purchase that has an Energy Star rating were aided through the blue and white sticker. 80% of household had a high or general understanding of the label’s purpose. Furthermore the proportion of households that demonstrated a general understanding was small compared with the proportion that demonstrated a high understanding (10 percent versus 70). [4] Of all the household that consented to the survey about 65% of households associated with the ENERGY STAR label with “efficiency or energy savings.” [4] My only concern for this is, if the majority of the populous that can identify the Energy Star sticker to energy efficiency, why does Rule 3.369 only apply on the Memorial Day weekend? If the whole point is to improve the environment for a better world to live in through lowering energy emissions to power everyday appliances and machines, why not make the tax break year round? Unlike a Black Friday sale where almost all electronics, Energy Star rated or not, are discounted that draws blockbuster crowds, the Energy Star Tax break weekend won’t. But studies have shown, that if you recognize and can identify with the sticker having a decent understanding of what it brings to the table on your next purchase, they’ll buy it. Baby steps have been taken. The leaps will be taken, I believe, when you give a permanent sales and use tax exemption to force other competitors who design and carry products that aren’t up the standards that of Energy Star rating to become energy efficient. Texas is just the fourth state that adopts this tax break. [5] When and what will it take for every single home in the United States or even the world to adopt and improve smarter energy consuming appliances?

Conclusion

Rule 3.369 does have it’s up and downs, but for the everyday consumer it’s all up. Money is saved, emissions are lowered, and you’re doing your part for a better tomorrow no matter how big or small it is. Marketing research could be improved a little more in terms of quality instead of quantity that might overwhelm the everyday consumer. As for the price and the appeal, in today’s economy the price is the appeal. If the price is too high it’ll seem like Energy Star products are only for the wealthy. I personally see Rule 3.369 as just baby steps to making it the standard, but it’ll only be baby steps until more people are educated about the environment wanting to make a difference to take leaps.

Reference:

· [1] “Texas Administrative Code RULE §3.369 Sales Tax Holiday — Certain Energy Star Products.” Texas Administrative Code. N.p., Sept. 2010. Web. 19 Feb. 2015. <http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=369>.

· [2] “Texas Comptroller of Public Accounts, Glenn Hegar.” Texas ENERGY STAR Sales Tax Holiday Information for Sellers (96–1331). N.p., n.d. Web. 19 Feb. 2015. <http://www.window.state.tx.us/taxinfo/taxpubs/tx96_1331/>.

· [3]”2013 ENERGY STAR Sales Tax Holiday.” Citizens Environmental Coalition. N.p., 24 Feb. 2013. Web. 19 Feb. 2015. <http://www.cechouston.org/CEC/event/2013-energy-star-sales-tax-holiday/>.

· [4]”Facts and Stats.” Facts and Stats. Energy Star. Web. 16 Apr. 2015. <http://www.energystar.gov/buildings/about-us/facts-and-stats>.

· [5] Mate, Rosamond. “What Factors Influence Consumers’ Decisions to Purchase Energy Star Appliances?” What Factors Influence Consumers’ Decisions to Purchase Energy Star Appliances? Rosamond Mate, 1 May 2012. Web. 11 Apr. 2015. <http://digitalcommons.macalester.edu/cgi/viewcontent.cgi?article=1048&context=economics_honors_projects>.

· [6] “How Much Do Americans Earn? What Is the Average US Income and Other Income Figures. Fiscal Cliff Talks Only Useful in Context of Incomes.” My Budget 360 RSS. Mybudget360, 1 Dec. 2013. Web. 16 Apr. 2015. <http://www.mybudget360.com/how-much-do-americans-earn-what-is-the-average-us-income/>.

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