Analysis Of Renewable Energy Sector In Australia Marketing Essay

Introduction

In this century, the water usage of households is increasing in a rapid rate. This implies that hot water usage would increase directly as well. Electric and gas water heater are the common heating system, and renewable energy is not commonly used. Due to the high level of usage of electric and gas water heater, unwanted gas emission increases rapidly and killing the earth. Therefore, people are encouraged to be more environmental friendly to save the earth by reducing gas emission. To replace electric and gas water heater, solar water heating systems and heat pumps are encouraged to be used, as they are using the renewable energies that are available in Australia to generate electricity without causing any harm to the environment.

Part 1. Industry Analysis of Renewable Energy Sector in Australia.

This section includes the macroenvironment and microenvironment of Australia’s renewable energy devices.

Macroenvironment

Microenvironment

Company

Supplier

Distributors

Competitors

Customers

Political/Legal

Environment

Economic

Social

Technological

The Marketing Environment

Macroenvironment can be very large and can be grouped with the PESTLE model (political, economic, socio-cultural, technological, legal and environment). – West, D, Ford, J & Ibrahim, E 2010

Legal:

According to Kent, A & Mercer, D 2006, a political organization, Australia’s mandatory renewable energy target (MRET) has been established since April 2001 in order to encourage the additional generation of electricity from renewable sources, reduce emissions of greenhouse gases and ensure that renewable energy sources are ecologically sustainable (Renewable Energy (Electricity) Act 2001, s3).

The legislation (the Renewable Energy (Electricity) Act 2000) places a legal liability on most wholesale purchasers of electricity and large users to contribute proportionally towards the annual targets that increase to 9,500 GWh in 2010 and remain at that level until the measure expires in 2020. If they fail to meet required targets of renewable energy purchase, they face a penalty. Penalty could be avoided by purchasing renewable energy certificate through the market.

Political:

Political issues such as the changes of political party or decisions could bring influence to an industry.

According to Reuters, the parliament had passed the amendments to the nation’s renewable energy target scheme, splitting it into by small-scale and large-scale. The large-scale Renewable Energy Target will benefit renewable energy companies that have stockpiled cheap certificates.

Small-scale Renewable Energy Scheme (SRES) has been introduced to help household and small businesses with installation of eligible renewable energy systems, such as solar water heater (Department of Climate Change and Energy Efficiency 2010). The Solar Homes and Communities Plan helped Australian homes and communities reduce their energy use and bills and better the environment. It successfully installed more than 100,000 systems as of the end of April 2010 and helped to increased accredited solar panel installers over the last year to more than 1,900.

Technological Factors:

Report from Ferguson, M, 2010; In order to support Australia’s response to climate change, the Australian Government announced it will provide $652.5 million as Renewable Energy Future Fund (REFF); to provide additional support for the development and deployment of large and small scale renewable energy projects.

There are also further investment decisions of $110.5 million for existing renewable energy programs such as $92 million for Australian Centre for Renewable Energy funding for solar projects under the Renewable Energy Demonstration Program to build a 23MW1 solar boost to coal-fired turbines in western Queensland; and build a 40MW concentrated solar thermal demonstration plant in South Australia, by using Australia’s own “Big Dish” technology; and $18.45 million for Australian Solar Institute as fund for research into advanced solar energy technologies.

Moreover, Australia has one of the best renewable energy resource bases in the world such as solar, wind, geothermal, sugar cogeneration and ocean technology. Australia has been the industry leader in a number of solar technologies – such as Photovoltaics(PV), solar thermal technologies and solar concentrator systems. Australia also provides support for International Renewable Energy and Energy Efficiency Initiatives.

Economic Factors:

Energy Matters 2009 shows that Australia’s renewable power generation provides around 8% of electricity consumed in Australia, gas provides 14%, oil 1% and coal 77%.

In capacity terms, 8,229 MW of renewable power generation (254 projects) were in place at 31 December 2005 that was 16% of total installed capacity in Australia. According to a 2005 survey undertaken by the Business Council for Sustainable Energy (BCSE), the renewable energy industry in Australia supports the direct employment of nearly 6,000 people.

Moreover, according to the Climate Institute, 26,000 job opportunities would be available from the $31 billion worth of renewable energy investments planned for Australia. This includes almost 2,500 new permanent positions, over 15,000 construction jobs and more than 8,600 indirect jobs in supporting sectors.

Barton, ACT 2004 mentioned that Australian Government had spent about $50 billion on energy each year, while energy exports earn more than $24 billion a year. The sector involves massive, long-lived capital items such as electricity plants, transmission lines, coal, oil and gas production facilities, pipelines, refineries, wind farms as well as a multitude of smaller facilities such as wholesale and retail distribution sites.

Following West, D, Ford, J & Ibrahim, E 2010, Porter’s five forces model used to illustrate the microenvironment:

Competitive Rivalry: There are several successful firms in renewable energy industry.

(taken from Australian Business Council for Sustainable Energy, 2006)

Solahart Pty Ltd is the first manufacturer and a recognised leader in the field of solar water heating. It was the first product that carried the European Solar Keymark label. Solahart has been officially recognized by the Australian Government with Export Dedication and Enterprise Awards (Australian Business Council for Sustainable Energy, 2006).

According to Warren, M 2007, Solahart heavily dominates about 70 per cent of total Australian solar hot water market share through its leading brands Rheem, Solahart and Edwards. The next biggest player is household consumer supplier GWA International with its Dux and EcoSmart brands and followed by Rinnai/Beasley.

Substitutes:

A guide from choice online 2010, states electric and gas water heater as substitutes. Electric water heater prevails because electric supply is on 24 hours with day-rate systems which only receive power during the day. There are also night-rate systems, receiving power only during the night, suitable for households with solar-powered systems to avoid paying high day-rate tariffs. Gas is also a substitute available throughout the day and it can replace heat losses in a short time.

Buyer:

(Graph taken from Clean Energy Council 2009)

(Graph taken from Clean Energy Council 2009)

(Graph taken from Clean Energy Council 2009)

The graphs above show that only 7.6% of Australian households are using solar water heating, with Northern Territories leading at 55%, followed by Western Australia at 21.8%. This data indicates solar usage at rural areas where access to gas and electricity supply can be limited. Therefore, they are compelled to use solar power rather than it being optional like their city counterparts such as Victoria (3%) and New South Wales (5.7%).

The majority of the nation is using electricity (46%) or gas (37%) to heat up their water. This is both costly and a waste of unrenewable resources such as coal, which is heavily used to generate electricity in Australia (World Nuclear Association, 2010). In line with the Australian Government’s initiative to reduce carbon emissions, this shows promising potential for solar water heating seeing as solar power is a green and renewable source of power (Department of Climate Change and Energy Efficiency, 2010).

Part 2. Segmentation

Cluster analysis is a group of multivariate techniques which main purpose is to classify objects in such a way that within-group differences are minimized and between-group differences are maximized according to some grouping variable. Cluster analysis is used in this segmentation part in order to define the clear and distinct consumer needs; also to list in order of importance the attribute or needs of product for Solarhart’s heat pump to consumer.

Demographic

Family Size of Australia’s Household

(graph taken from Australian Institute of Family Studies 2006)

A research from Australian Institute of Family Studies shows the average household size and number of households between 1911 to 2006. The graph shown that the average household size is in decreasing rate, while the number of households is in the rising rate.

(table taken from Australian Institute of Family Studies 2006)

The statistics above show that the number of household size in 2006 is about 7,596,000 which is almost 2,000,000 more compare to 1991. The average household size is remain constant since1996 which is around 2.6 person per household.

Impact of household size, behaviour and geographic to Usage Rate of Hot water

Refer to Harrington, L 2010, Hot water consumption is also affected by a whole range of demographic factors. Household size is the main factor as it refers to age of household members. For instance, teenagers tend to have a longer shower time. On the other hand, the presence of kids in households also consume a high level of water due to the use of bathtubs and also more washing loads compared to households without young children. However, household income could affect the level of use of water. Other factors that affect the hot water consumption include the behaviour of household members. For instance, the showering frequency and the flow rates and duration. The more frequent the household members shower and if the flow rate is set on the highest and also they are showering for a longer time, the level of water usage would be very high. In addition, the frequency use of dishwasher, the water levels settings and the preferred washing temperatures on the clothes washer will also affect the hot water consumption in household. On the other hand, the selection of hot water system could be influenced by some minor demographic and geographical factors such as households, which have access to gas, they would prefer to have gas heaters.

The water levels settings and the preferred washing temperatures on the clothes washer will also affect the hot water consumption in household. On the other hand, the selection of hot water system could be influenced by some minor demographic and geographical factors such as households, which have access to gas, they would prefer to have gas heaters.

Furthermore, large household would need more hot water supply and therefore, large hot water systems would be preferred. Whereas, for those rental houses, they tend to focus on high operating rates and therefore, they would choose to get other conventional systems with low purchase cost.

Restricted choices are available for apartments as solar systems are impossible. However, households which are located in a hotter place would prefer solar water heating.

Behaviour of Consumer making purchase decision

According to The ACRS Research Team 2010, different types of consumer have different behaviour. Firstly, the value consumers are those who spend their money wisely and smartly by focusing on what they need instead of what they want. Therefore the product must be worth for its cost.

Secondly, the busy consumers are those who simply seek for convenience, speed and simplicity, as time is the most valuable thing to them. And the green consumers are those who are more concerned about environment. This type of consumers is environmental friendly consumers and they are willing to spend more to go green. They also gain some advantages such as traveling less to reach the product. Also there are also the bored consumers who are exposed and buried by various choices as the number of advertisements and promotions are increasing rapidly today. They tend to seek for a more unique products and services. And lastly, the digital consumers are those who are spend most of their time interacting through internet. The sources that could be found through internet improvise the way consumers approach retailers, and they are clear with what they are looking for.

Part 3. Targeting

Undifferentiated targeting strategy would be used in Solar targeting progress. According to Solahart, consumers of the solar heater water market are mainly household users. A marketing mix (Leader, WG & Kyritsis, N 1990) will be designed for the solar water heater product to target all household users in Australia, aiming to increase the market share and to fulfil the government’s renewable energy policies to increase the substitution of households with renewable energy devices. The marketing-mix will be tailored to the behaviours and demographic of consumers such as usage rate, income, and consumer behaviour in product attributes. The place and promotion strategy will focus on drawing consumers to approach this renewable energy product and simultaneously increase consumer awareness to green issues.

According to consumer behaviour in 2009, consumers tend to be more aware of value; seeking for convenience, speed and simplicity, uniqueness and environmental friendly.

The marketing mix strategy will relate to the key components of marketing: product, price, place and promotion. First is the product, encompassing packaging, labelling, product performance or service support. The solar heat pump has several advantages; it is fast and efficient with synergy’s large compressor that gives quicker recovery, providing hot water faster; easy to use and installation as no solar panel is needed and is equipped with an electric booster to provide a continuous supply of hot water for the cooler climates; valuable in saving electricity bill in the long-run; and lastly environmental friendly as it converts heat from the air to deliver hot water, reducing electricity usage or fossil fuel energy use and the pollution and greenhouse gas emissions associated. This is in line with the efforts of State Governments across Australia in banning the use of electric hot water systems in new homes.

Second, the place to distribute the solar heat pump will be through retail chain such as Harvey Norman and Dick Smith. This is known as one level distribution channel (Mantau, U, Merio, M, Sekot, W & Welcker, B 2001), where the distribution activities will move from manufacturer to retailer then to consumer. For example, Harvey Norman (intermediary) with a positive retail image could help build consumer trust in a product. Besides that, Solahart (manufacturer) could force goods through channels by giving intermediaries incentives such as higher margin to boost the sales of product. This is known as Push Strategies (Gillespie, A 2001). Intermediaries will be in charge of product service and advertisement efforts. They may also help consumers with claims under the government’s renewable scheme for the purchase of solar heat pump.

To deal with Internet buyers, Harvey Norman’s online store could help to promote the product online. Therefore users can easily obtain the specification and information of the solar heat pump and even purchase it on net.

Furthermore, Solahart could promote their product through personal selling. The company itself can organize promotion fairs in shopping centres that are always full of potential consumers. This activity could involve salespersons interacting with consumers to bring their attention to environmental issues and supplying product information. Additionally, salespersons can better understand consumer needs and play up the benefits solar heat pumps can offer such as electricity bill-cut to persuade consumers to make the switch.

Educating household users with environmental knowledge is important to increase the market share of the product. Solahart could advertise through media such as TV advertisements, newspapers and online websites such as Facebook, Yahoo, CNET Australia, eBay etc. to attract consumer awareness. This could also help portray a positive image for the company and build up brand reputation.

4. Positioning

Positioning refers to the placement of product in the perception of product, brand or company in the mind of consumer. (West, D, Ford, J & Ibrahim, E 2010)

A new position statement Solahart needs to make:

[Convince] consumers that they are a green power brand, pioneering in solar water heater industry and the product is extremely energy efficient and of highest quality.

[That] Solahart’s heat pump is environmental friendly, secure, durable, with long life-span and effectively provides hot water to household when needed with the most reasonable price.

[Because] Solahart is an Australian-owned environmental-friendly brand which is also world recognised as a leading water heating company to fulfil needs of hot water system for consumers with the lowest, most cost-efficient and effective way.

Successful criteria for positioning must include the four Cs of positioning such as Clarity in terms of market targeting and differential advantages. The positioning statement above clearly states that Solahart is a pioneer and innovator brand, giving credit to their professionalism and reputation in the product line of solar water heaters (Haig, M 2007). Solahart’s innovation could help households to cut both their utility bills and dependency on gas or electric based heater for hot water.

There must be Consistency in conveying the message to consumers, including the positioning statement. Solahart is truly an innovator brand, being the first manufacture of solar water heating. It has also been recognized officially by the Australian Government with Export Dedication and Enterprise Awards. Consumer perception of Solahart’s Credibility is also important. The company’s 55-year experience in supplying thousands of households across 70 has helped build up its brand reputation, where consumers trust the brand in what they are doing.

Solahart also has Competitiveness where the company’s differential advantages surpass its competitors. Solahart provides extended warranties to their users and provide excellent after-service to their consumers to insure their buyer policy. To increase competitiveness, Solahart could further develop their line to enhance performance or providing more functions and even enhancing appearance to lead to a new fashion of life style in the industry.

High Recognition

Low Recognition

More Market Share

Less Market Share

* Solahart

* Edwards

* Rheem

* Dux

*EcoSmart

*Rinnai

* Quantum

* Solco

Perceptual map of Brand Recognition and Market Share of Water Heater Market

(West, D, Ford, J & Ibrahim, E 2010) A perceptual map could be used by the company to assess its perceptual position in its consumers’ mind. The perceptual map above shows a variety of water heater brands to give the perception of that particular market segment. The perceptual axels are Brand Recognition Level and Market Share of the main competitors. There are three major groupings shown on the perceptual map. Solahart, Rheem and Edwards are companies in the high recognition group, owning the major market shares in the solar water heater industry. The moderate recognition group are companies with moderate market shares such as Dux, EcoSmart, Rinnai. The last group is the low recognition group with minor market share companies such as Quantum and Solco.

Conclusion

In conclusion, the industry analysis is to help the company to understand the macro and microenvironment of the renewable energy device market. It shows that there is a large potential of market share in renewable as the Australia Government is very concerned about reducing the gas emission by providing a rebate scheme to support household user to switch to renewable energy device as it is environmental friendly. Besides that, the segmentation, targeting and positioning strategy drive the company to target the right market with right marketing mix strategy and to make sure the company is in appropriate perceptual positioning in consumer minds. As the consumer needs are met, the demand towards the renewable energy devices would increase. Therefore, the aim of the government that is encouraging the use of renewable energy instead of electric and gas will be achieved.

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