A bright future for LEDs equals an educated consumer

Education is the key to getting the general consumer to learn about and ultimately understand what LEDs can do for them.

Philip Smallwood, IMS Research (IHS Inc.)

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As I was walking through Home Depot the other day, I was pleasantly surprised by something that I saw in the lighting section. Philips had a dedicated “show and tell” section for their LED lamps. This may seem trivial to people who work in the lighting sector, since we all understand the benefits that LEDs bring to the table. This is not, however, the case for most general consumers who do not understand what a lumen is or the savings that they’ll see from switching from an incandescent to an LED. Education is the key to getting the general consumer to learn about and ultimately understand what LEDs can do for them.

The majority of general consumers make their lighting purchasing decisions based on price, creating a significant barrier for selling LED lamps that cost 20-30 times more than an incandescent. In order for LED lamp manufacturers to compete with incumbent technologies they have to be able to compete based on the idea that LEDs are the way of the new and improved lighting future.

Incandescent lamps are being phased out in the U.S. starting this year with the 100-W bulb. I dare say that many consumers are not even aware of this phase out, and will be shocked in 2014 when they can’t find a replacement lamp at the supermarket for their 60-W bulb. By making a big display case for LEDs, lighting companies are increasing the buzz around their product. So when the time comes for these people to switch, they will have three alternatives (CFLs, halogen and LEDs) in mind.

So does it make sense for manufacturers to incur the costs of educating their potential customers? The graph below shows the revenue forecast for 60-W replacement lamps in North America (U.S. and Canada) through 2020.

In 2014, when the phase out of 60-W incandescent lamps takes place, it is projected that revenues for LED replacements will be in excess of $1.5 billion. Even with halogen and CFLs projected to still play a role in the market, it is obvious that there is tremendous potential for profit to be made in the LED lamp market. It is also particularly important to have a presence early on, as the long lifetime of LED lamps and their decreasing prices will lead to the shrinking of the overall market.

Companies that are better able to market and educate consumers about their product and brands will be more likely to maximize profits, especially as they experience increased competition from new market entrants.