ICPA & NORA – Building With Oil

1. ICPA & NORA– Building With Oil

2. Connecticut’s New Housing Construction Market FUEL19902000VARIANCE Propane 23,595 31,092 + 7,497 Utility Gas 323,226 377,550 +54,324 Electricity 185,340 190,146 + 4,806 Fuel Oil 669,328 682,434 +13,106 [16%] TOTAL 1,201,489 1,281,222 +79,733

3. Focus Groups With Builders/Contractors…What Did We Learn? #1 Gas Preference in New Homes – Because It’s There Gas seems to be chosen most often, simply because it is there in the street. That is, if the pipe runs in front of a house, consumers and building professionals expect to connect to it. Oil is most often used only where gas is not available. This presumption directs choices, for the most part it does not appear that fuels are evaluated and then chosen based on their merits. #2 Gas Preference in New Homes – – Lower Installation Cost Builders preferred gas for a practical reason. Gas was seen to be less expensive to install, requiring no tank and with direct venting, no chimney. #3 Gas Preference in New Homes – One Fuel for Cooking and Heating Gas is seen as a preferred choice for cooking, and is a fuel of choice for a common option in today’s homes - gas fireplaces. In addition, in some homes gas is being used for outdoor grills. Where gas is to be used for fireplaces or cooking, building professionals appear to prefer to have one fuel source to stick with natural gas or propane for heating.

4. Focus Groups With Builders/Contractors…What Did We Learn? #4 Gas Preference in New Homes – Air Conditioning and Gas Go Together. Many consumers are considering air conditioning for their new home and it appears that many building professionals associate air conditioning with gas heat. Natural gas is seen as appropriate for a hot air system, which can also be used to distribute cold air (even though natural gas can be used to fire a hydronic system). Oil heat appears to be associated with hydronic heating systems, which require a separate distribution system for cool air (even though oil can be used to fire a hot air system). #5 Gas Preference in New Homes – Advantages of Gas Perceptions of the advantages of gas was easily accessed by participants – convenience (always there), clean (no soot), low maintenance (no yearly cleaning) and odor free (compared to oil). The most compelling argument for oil was safety; many were concerned about monoxide and explosions. Since most participants did not understand price differences between the fuels this was only an advantage for some.

5. Focus Groups With Builders/Contractors…What Did We Learn? #6 Making A Fuel Choice – The building professionals in the groups would willingly place the responsibility for the choice of the fuel system on the consumer. That is, if a consumer requested a certain fuel type, they would meet that request, both to avoid losing a sale and to avoid the responsibility for making a choice that did not work out. Participants noted that today’s consumers are better informed (largely due to the Internet), and more likely to ask about details and to have established preferences. However, most builders were the ones who chose the system and did so based on their needs -reducing costs. #7 Incentives? – Not one participant mentioned incentives provided by gas companies for the use of gas in new homes. It seems very unlikely that the building tradesmen in the groups would not have heard about this if had been offered. If it were being offered, it would be of tremendous interest. Other factors appear to be behind the increase in market share for gas in new home construction [Ease of installation, Readily Available, Multiple Uses, Perception of Environmental Advantages, etc]

6. Focus Groups With Builders/Contractors…What Did We Learn? The Lessons – Of the building professionals in the focus groups, it appeared than only the builders would have a material effect on what heating system is chosen. They prefer gas because it costs them less to install. HVAC and plumbing contractors have little to no influence and architects even less so. All of the building professionals noted that that today’s consumers can be a quite well informed and opinionated. Further, building professionals say they would rather respond to a consumer’s preference than risk a long term dissatisfied customer. These builders were very busy folks - and getting information about new developments and products was haphazard. They appear to primarily rely on building magazines and home shows. Some also mentioned participating in seminars sponsored by manufacturers such as one offered at hotels with breakfast or lunch. It doesn’t appear that telemarketing is particularly effective as builders are hard to reach. The most effective means of reaching builders is through personal contact.

7. Putting The Lessons Learned to Work Beginning in November, 2003, the ICPA commenced a $75,000 program using 2003 NORA funds to employ the “Build with Oil” program in several ways;   *Direct mail pieces to the database of builders and contractors we have acquired, taking advantage of the national “Build With Oil” materials;   *Attend homebuilder trade shows, such as the statewide show being held at the Mohegan Sun resort in January. ICPA will use the “Build with Oil” booth and staff it with volunteers and hand out materials as well as 24” pieces of 2” x 4” ‘s embossed with the advantages of oil heat as giveaways to the attendees in exchange for filling out surveys for us;   *Advertise in the major trade publications used by builders and contractors;   *Join the major, statewide builder/contractor trade associations and take advantage of as many venues of communication we find with each group to continuing spreading the “Build with Oil” message.

8. The Only Thing That Is Missing is…Personal Contact ICPA believes there to be great merit in embarking on a more aggressive effort with builders and contractors by employing an individual to provide face to face communications with the major builders and contractors in the state. One of the issues learned in the focus group is that builders generally do not pay great attention to direct mail. The person would need to possess sales skills, knowledge of the industry and its equipment and products, have some background in the builder/contractor trades in order to maximize the effectiveness of the communications across both oil and builder disciplines. The project would last between 24 [twenty-four] and 36 [thirty-six] months and be under the direct supervision and review of the ICPA Advertising Committee, who would report periodic findings to NORA.

9. ICPA/NORA Builder Pilot Program Initially the person would take our large builder/contractor database, pare it down to the “major” players in the trade and then begin establishing contact with those companies. This person would coordinate ICPA’s outreach efforts with builders and contractors and our presence within the builder and contractor community while encouraging the state’s oil dealers’ active involvement with this program. Send a solicitation to ALL oil heat dealers in Connecticut (NORA contributors) outlining the benefits of Builder Program to the dealer, and to the industry. Offer each dealer a chance to be a partner in the Builder Program. There is no charge for membership. Create a partner’s list of dealers interested in the Builder Program. When of Builder Program point person gets a builder interested in speaking to someone directly, he can give a members list to the dealer. You can now discriminate, and give the lead only to partner members of the Builder Program, with instructions to proactively follow up with the builder.

10. ICPA/NORA Builder Pilot Program This position would need to be fully supported by an amount for salary and benefits, travel and all administrative support to achieve success. ICPA requests an additional $120,000 annually to fund this position and its support needs. ICPA’s Advertising Committee intends on using its some of the funds to measure the degree to which builders and contractors attitudes towards oil heat shift and the degree to which we either do or do not see a measurable change in the new homes built with oil. We also need to gauge the response of dealers in their participation in such a program as we consider direct dealer participation as the key to successfully changing the current picture of oil heat losses in the new home construction market. To do this successfully we believe at least 24 [twenty-four] but not more than 36 [thirty-six] months should be given to adequately assess the pilot program’s results.

11. ICPA/NORA Builder Pilot Program…What We Intend to Accomplish With Your Help • Targeting major builders and engaging in personal contact with those builders – the most effective manner in which to communicate with them; • Bringing all oil heat marketers into a statewide effort to communicate with the builder community and engage marketers in education and communications efforts between the oil heat industry and the builder/contractor community; • Coupled with our on-going efforts in consumer education to build an effective message for oil heat, use this position to build more enthusiasm for Building with Oil in Connecticut and use the experiences gain from the endeavor to inform other states; • Reverse the trend of losing new housing construction market by a factor of 8 to 2 in the 90’s in order to ensure the next generation of oil heat marketers has a market in which to operate. WIN!