The keys to marketing green building design
Jerry Yudelson, national faculty member for USGBC's LEED program, describes the seven keys to marketing sustainable design.
Editors Note: This article was originally published in Consulting-Specifying Engineer as a three-part series in May, June and July 2007. The sidebar about the author has been updated to reflect the October 2007 publication of his latest book, "Marketing Green Building Services: Strategies for Success."
Engineering firms are beginning to realize that the green building revolution is here to stay and that they should join in. In 2006, LEED-registered projects increased 50% over the previous year, and LEED-certified projects increased nearly 70%, which suggests that more firms are accumulating green building expertise with each passing year. My own projection of green building growth points to a cumulative total of 24,000 LEED-NC registered projects by the end of 2012—a six-fold increase in just six years.
Who will be the winners in the battle to serve architects' and owners' needs for integrated design and cost-effective MEP services? When will your firm have all principals become LEED APs? When will more than 50% of your professional staff become LEED APs? Clients are eager to know the degree of your commitment and competency, and they view LEED AP status as indicative of character and capacity to produce green buildings on conventional budgets.
This series explores what each engineering firm can do to meet the test of the green building revolution. It won't be easy. To date, engineers have not stepped up to the plate, and the world is waiting for zero net energy buildings, on-site energy production and a host of green building measures that are largely the province of the MEP engineer. This revolution is an unprecedented opportunity to craft leadership positions for MEP engineers. Unlike data centers in the 1990s, green buildings are not easily going to be replaced by cheap bandwidth and memory.
So, what's needed?
There is no single competitive response to the growing green building market that is right for every design firm, because much has to do with the 4 Cs—the clarity of the company's strategic vision, the firm's capability to execute its vision, the capital available for marketing and sustainability initiatives and the character of the principals—their willingness to “walk the talk” of green engineering. Nevertheless, a conscious choice among strategies, and a clear focus on one dominant approach, is vastly preferable to having none or just improving responses to opportunities. This series describes seven good ideas for developing a marketing strategy.
In today's environment, a company must be remarkable in the eyes of its clients and the media just to get some attention. How to make a purple cow out of a pink sow—something remarkable from something ordinary—is the perpetual task of the engineering firm's marketing arm.1Looked at in this fashion, the task assumes strategic importance, as firms struggle to retain both clients and key employees in the face of an increasingly competitive global marketplace for design and construction services.
The seven keys to marketing green building are a combination of two familiar principles of marketing, as shown in the STP formula (p. 30): Segment your market, target key segments and position your company, and then, use the building blocks of competitive strategy—differentiation, cost and focus—to achieve success.
1. Segment markets. Marketers try to understand and segment markets in order to focus on the most profitable or available segments. Segmentation variables include demographics, geographics, firmographics and psychographics.
In demographics, the focus is on the social and economic characteristics of buyers. However, one could see that change agents favoring green buildings are more likely to live in politically liberal states, in big cities and to have higher education levels, so some socioeconomic characteristics could be relevant.
Geographics—where people are locating and building—is certainly a prime variable to consider in deciding where to market green building services and products. There is plenty of evidence that green building activity is concentrated in the western, mid-Atlantic and northeastern states, with other nodes in the large cities of the South, Southwest and upper Midwest. Evaluating the number of LEED project registrations by state is one way to evaluate the impact of geographic location on the availability of clients for green engineering services.2Within each state with a large number of LEED registrations, one can then drill down in the data and find out which cities are the most amenable to LEED certification projects at any given time.
Firmographics is a term coined for business-to-business marketing, as an analog of demographics for individuals, to help marketers understand the nature of the client base. The distinctions are the size of the company or organization (annual revenue or turnover, number of locations, number of employees, etc.); private, public or nonprofit entity; industry type; and other data. USGBC data show that LEED registrations and project certifications are becoming more prevalent among private, for-profit clients, and relatively less so among public entities, institutions and nonprofit groups that made up a majority of projects through 2005.
Psychographics refers to segmenting by lifestyle, including propensity for risk-taking and tolerance of ambiguity. In segmenting the market for green buildings, a marketer looks for a risk-tolerant personality, typically found in industry leaders and innovators. Most firms target industry leaders with new ideas, knowing that the vast majority of decision-makers want to see experimentation done successfully using someone else's money before they commit.
2. Choose competitive targets. Targeting is a process marketers must use when deciding to focus on one or a few segments. Targeting is a critical component in setting marketing strategy because it limits the number of competitive targets in order to focus on those most likely to be successful. Most engineering firms specialize in one or a handful of client types (public, private, nonprofit), project sizes (less than $10 million, $10 to $100 million, more than $100 million) and market segments (K%%MDASSML%%12 education, museums, libraries, urban offices, historic preservation and adaptive reuse, health care), so the choice of targets is necessarily limited by the company's prior experience, financial capability and the project resumes of key individuals.
Many engineers aim to take greater market shares in given industries or extend the geographic reach of their successes in tackling certain types of clients, but most focus on increasing revenues from current relationships to grow their businesses. Engineers who have built a reputation in a particular market segment and have a history of successful projects are often invited to compete for projects far from home, often associated with architects from a local design firm, and they are often successful in this endeavor. Clients want the best engineering firm for their green projects.
Prime targets for green building marketing share these characteristics:
They are early adopters of new technology
They may be potentially significant users of a new approach (for example, they control multiple properties)
They may be opinion leaders (and therefore willing and able to sway others, both inside the organization and in a larger community of peers)
They can be reached at low cost (for example, already are clients of a firm or customers for a product).
Few prospects share all of these characteristics. Marketers must choose a segment to target based on a consideration of each of these factors along with some intangibles, which might include existing relationships, stakeholders pushing prospective clients to choose green buildings, and market forces pushing local entities to keep up with innovative companies.
3. Position your company as a leader. Positioning is the third activity of the STP formula. It takes segmentation and targeting analyses and turns them into messages that go out to clients and prospects. The textbook definition of positioning is the act of designing the company's marketing offering and image so that they occupy meaningful and distinct competitive positions in the target customers' minds.3Positioning is a communications activity that aims at changing a target prospect's view of an engineering firm in such a way as to create a difference that makes a difference.
These differences should have one of more of the following characteristics:
Important benefits delivered
Something that not every competitor can claim
Superior to other ways to get the same benefit
Communicable and somehow visible to prospective clients or buyers
Pre-emptive—not easily copied by competitors
Affordable—little price difference to get this superior benefit
Profitability in this market segment.
Firms that position themselves successfully as green building experts by publicizing project successes find it possible to maintain this positioning even as more companies try to emulate them.4
Positioning, then, is what a company does to take real facts and position them in the minds of the targeted prospect. In marketing green buildings, positioning is an essential component of an engineering firm's communications strategy and needs to reinforce a single powerful message. Because green buildings are a new industry, they offer the positioning strategy of grabbing a new, unoccupied position that clients and prospects value.
For example, a company could claim the most LEED-registered projects in a given industry or location, or the most LEED APs, or the most LEED Gold projects with a certain technology. Among engineering firms, most are trying to get 30% or more of their technical staff LEED-accredited. In Portland, Ore., two MEP firms show this tendency: Glumac has 49 of 200 total staff LEED accredited; Interface Engineering has 35 of 146 total staff.
In this second installment, I will continue with a discussion of the remaining keys.
4. Differentiate your green development offerings. Differentiation is a marketing approach that takes decisions regarding segmentation, targeting and positioning variables and focuses them on particular markets. This approach must be coupled with a specific project type, owner type, geographic or other focus. Focused differentiation is the main approach used in professional services, and the main green building differentiators for engineering firms include:
High levels of LEED project attainment
Demonstrated ability to deliver green building projects on conventional budgets
High number of LEED Accredited Professionals, or percentage of total staff as LEED APs.
An engineering firm needs to show high levels of attainment on several of these key variables.
Five of the top 10 differentiation activities for professional service firms are most often used by engineering firms to assist with their green building marketing efforts:
Advertising campaigns to establish or maintain positioning, done in less than 20% of the firms, according to a 2006 survey.6
Improved relationship management programs to strengthen bonds with current clients; this is by far the most common, cheapest and fastest way to get results, in my experience.
Manage a public relations campaign to highlight achievements and reinforce green market positioning.
Hire specialized individuals, often with control of key relationships, which is done in less than 25% firms, according to the survey.
Improve or evolve the company's current services, particularly in setting up a separate green building consulting division.7
Research shows that the leading firms are particularly adept at using differentiation strategies such as advertising, public relations, new visual identities and attracting key people. Improving or evolving the company's services typically takes place over the course of several green projects.
When embarking on a program of focused differentiation, remember that existing clients already know your firm and appreciate its strengths. Communicating a new message about green building should not be at the expense of these relationships and needs to reinforce current perceptions of your firm as a cost-conscious, schedule-conscious, client-focused organization. Key relationship managers need to be detailed to meet with existing clients and explain how the new people you're hiring, the newly accredited LEED APs and the new green building focus of the firm will benefit clients and their projects. In turn, this requirement implies a need for strong internal communications before embarking on new green building marketing initiatives.
5. Become a low-cost provider of green design services. Given the tight budgets of many building projects and competitive environment in most urban areas, the ability to compete on price is a valuable asset. These costs may be based on prior project experience, accurate product knowledge, research, local or state incentives or a willingness to pay to get the experience. Low cost of operations does not necessarily mean low profitability; instead, it gives a firm more flexibility to negotiate profitable fees for green building projects, even in a very competitive environment.
For example, being creative with green building value engineering for energy and water savings, along with high levels of indoor air quality, might help an engineering company to create far more valuable green buildings for the same fee as a more conventional company. The ability to specify building-integrated PV systems would fall into the same category.Knowing the costs and the engineering details for PV systems would help an engineering firm convince owners to move forward with these systems.
A good example of the competitive advantage of lower cost of operations is the almost unblemished success record of Southwest Airlines. For Southwest, the low prices made possible by reduced operating costs have become a primary brand. Southwest has been profitable every year since 1972, a record unmatched in the airline industry.8
One example of a developer focused on low cost as a basic competitive strategy is Workstage, LLC, which is focused on the corporate build-to-suit market, primarily in the Midwest. Based in Grand Rapids, Mich., Workstage aims to wring out costs of doing green buildings by standardizing every element of the design and construction process. It uses interchangeable modules (a kit of parts) and like-minded architect-engineer teams for each project.9Its corporate and institutional clients want green buildings, but it does not want to spend an extra penny to get this benefit. Workstage's approach is not to change architects or engineers, but to work with the same designers on the same project types, as a means to wring out costs from the system. If an engineering firm wants to engage such clients, it needs to understand how to produce standard designs that can be customized quickly for each location and its specific program requirements.
6. Have focused differentiation/relationship management. The essence ofmarketing is knowing which markets to compete in and which to ignore, which clients to keep and which to leave. Marketers need to combine a laser-like focus on market segments, and key targets within those segments, with either low cost or differentiation. Points of focused differentiation include:
Regional vs. national. Design firms often compete nationally by narrowing their focus to one target market; or by trying to dominate a local niche. Firms that are much focused locally are often able to compete against much larger national firms, or else to team with them on larger projects.
Client types. This focus can include smaller clients, psychographic profiles of larger clients, or those distinguished by strong cultures and values of sustainability. Architects focused on winning design competitions, for example, clearly seek out adventurous decision-makers for projects that embody a community's or an institution's highest aspirations. And they need creative MEP engineers to help them realize their visions. When the Dutch firm, Office of Metropolitan Architecture (OMA), was chosen to design Seattle's dramatic new main city library in 2002, it consciously decided to place this building on the world stage, much as was done with the city's Space Needle for a World's Fair forty years earlier.
Building or project types. Likely to be affected in the future by higher peak-period electricity rates, some buildings, including office and institutional, might be good candidates for energy-efficiency investments, particularly in states or utility service areas with significant incentives. A green engineering firm can identify such clients, make energy-efficient buildings its major marketing focus, and direct most of its communications to their needs.
Signature green measures. While it can be risky for developers and engineers to bring certain technologies to their projects, it is more dangerous not to be known for anything in particular. Branding a company in the green building arena with specific technology solutions for particular building types and sizes can be an effective marketing measure.
Project size. This also can be a focus, allowing smaller green engineering firms, for example, to compete with larger and more capable competitors. An example might be a focus on maintenance and operations facilities for public works, that is, a type of project that is typically smaller than most office buildings, but can occasionally exceed $10 million in construction cost.
7. Build a brand image. In today's commercial world, a major task is to create a brand that incorporates the key differences in an engineering firm that make a difference in the mind of a buyer. An engineering firm might want to be thought of as a leading-edge technology company or as dominating a large product category.
To understand the branding opportunity, consider the following statement: All marketers are liars.10One way to read this statement is to understand that we are all creating stories about projects, capabilities, values and interests for ourselves and our clients on a regular basis.
Deliver a story
You must shape the story that's told about your projects: if your story is significantly different from the contractor's experience and the owner's experience and the occupant's experience, then one of you is a liar. The point is that green building branding is best done when it is a story about project successes and lessons learned, and one that all key parties agree with.
The essence of a brand is incorporated in how you deliver your services, in your firm's personality and core values (which in turn determine whom you hire and whom you encourage to seek another place to work), your culture (collaborative or confrontational, or something in between) and all of the promises you want your clients to believe (clear and frequent communications on each project, the highest level of expertise and technological competence, etc.) A brand is something that creates a strong personal and professional relationship between your people and the clients' staffs, to build loyalty and lasting relationships.
The marketing benefits of branding are multiple. It can shorten the decision cycle of a client and reduce your cost of marketing. If you are always short-listed by certain clients and client types, you have a brand. It gives you some pricing flexibility. After all, if clients really want you, they'll pay for all of the special things you bring to the project, within reason. Branding helps you attract the kind of people who in turn reinforce the brand.
This point deserves the strongest emphasis: Marketing and recruiting are two sides of the same coin. The same values and branding attributes that attract clients attract good people, and a professional service firm is nothing if not a talent agency. Without the talent, you have nothing to sell, and you will never be a market leader. You can see, therefore, that this is a positive feedback loop.
The more clear you are about your market positioning and values, the more likely you are to attract the talent that will help you grow market share and dominate various green building niches. And the successful execution of your brand generates loyal clients, which in turn builds your business. Because many clients perceive engineering services as a commodity, and because many engineering firms deliver engineering services as a commodity, a brand differentiates your services in a significant way from those of the also-ran firms.
What makes a brand?
What makes a brand in the green building marketplace?
• A brand is a story told between marketer and consumer, between architect and client, between developer and tenant or buyer. The story must resonate with the client or buyer to be effective. The storytelling focuses on the features of the project, but translates those features into benefits that the recipient clearly can appreciate. Who tells your story when you don't attend project close-out meetings because you're “out of fee?”
• A brand sells an experience or a series of benefits to the consumer. People must be led from understanding the value of the features to understanding how they will benefit from them. Think of Starbucks: It sells a commodity product you buy in thousands of locations in any town, and at a significant price multiple. Starbucks has managed to create more than 10,000 permutations on the basic “cuppa java” to give you a unique taste experience.
• A brand delivers on its promises. For example, in my own LEED Gold-certified apartment building in Portland, Ore., the presence of a trash room with recycling bins just down the hall, and on every floor, and the enforcement of the required no smoking policy, both reinforced daily the promise that the green building experience in this place would be something different.
• A brand walks the talk. Consumers expect sellers to live by the values of what they are selling. A green engineering firm should have offices in a green building. A green firm should craft a LEED-EB, LEED-NC or LEED-CI certification for its own offices. TKG Consulting Engineers in San Diego did just that: a LEED Gold-certified new building, the first Gold building in town. A green engineering firm should be promoting sustainability in all of its activities, not just in an isolated project now and then.
• A brand communicates its differences effectively. A common saying is that the average adult is subjected to about 2,000 commercial messages daily. Getting through the fog with effective communications is a great art. Most savvy firms engage a strong public relations firm to tell their story and support a continuing dialogue with the marketplace as an integral part of their marketing effort.
Of course, one can create differences for each market segment that one chooses to address: some might value innovation, while others value low-cost or specific technological choices, such as geothermal heat pumps, photovoltaics or roof gardens.
There are few established consumer brands in the green building marketplace today. Without a leading brand (and with due apologies to the major companies involved in this business), the average client will not have a basis for making a purchase. Even in commercial situations, the lack of a brand can have drawbacks. For example, imagine the confusion in the commercial air-conditioning market without major brands such as Trane, York and Carrier.
While a home builder can sell ENERGY STAR, GE or Whirlpool appliances to residential buyers, the lack of name recognition for most green technologies forces the engineering firm or the developer to become the brand. This is a heavy burden for a service firm, but one well worth the effort. Expect it to take three to five years to bear fruit.
Marketing as an evolving strategy
Practitioners need to understand how their marketing must evolve in order to compete effectively:
• They must choose a strategy that incorporates high levels of differentiation or lower overall costs, with explicit focus on particular market segments that might include geography, project type, owner type, psychographic profile, project size, specific technological approach or signature green measures.
• This strategy must be reinforced internally and externally so that it becomes recognizable as a brand identity. Internal reinforcement includes training and certification of employees as LEED Accredited Professionals. External reinforcement includes activities to increase the visibility of the firm and its key professionals in the chosen market niches.
• Larger engineering firms should consider developing their own proprietary tools for managing sustainability goals in their projects as part of a branding approach. Along with these tools, firms should develop methods to successfully execute LEED projects without additional fees.
• Engineering firms must form close working alliances with their contractors and clients. This helps ensure the firms' green building projects will be built according to prevailing budgets, times, technology options and resource constraints.
Understanding demand for green buildings
Now that we've presented how an engineering firm should market green design services, it also is important to recognize that a clear analysis of current and potential clients and future project opportunities is critical to refining the marketing message. This said, how should companies think about marketing and selling high-performance buildings and developments? In all cases, the answer comes down to these questions: Who is the buyer? What are their characteristics, motivations, and unmet needs? What elements of green buildings do current and potential buyers value most? What do they think they are really buying? How do various customer segments differ in their priorities? What changes are occurring in these priorities? Do the customers for high-performance green buildings fall into any logical groups based on needs, motivations or characteristics?
At this stage of market development for green projects, the private-sector buyer or owner will be an innovator or early adopter (in diffusion of innovation terms) and somewhat of a risk taker who is willing to balance the strong case for financial and organizational gain against the risk and possibly higher costs of this new approach to building design and construction. In my opinion, innovators tend to be high-status individuals with higher education levels than later-stage adopters. This type of buyer will respond well to a factual presentation of benefits, will see the longer-term picture, and will likely have done considerable homework before considering the green building approach.
The institutional or government-sector buyer is more likely to be an early adopter of new technology driven largely by policy initiatives, supplemented with the perspective of a long-term owner-occupier-operator of buildings. The higher-level institutional owner is able to look beyond payback of energy-efficiency measures, to the higher value of such buildings and the positive feedback from the stakeholder base: public officials, employees and the public. These owners typically are more risk-averse than innovators and tend to rely on social networks for information. They want to see solid cost data and preferably local examples of successful projects. They will not be the first to act, but even though they are not spending their own money, they are willing to take only carefully calculated risks. The nonprofit sector has an additional motivation that is driving green projects forward: Identifying with green buildings has proven effective in raising money for building projects and in differentiating organizations in the crowded market for grants and charitable contributions.
The marketing task for building engineers and facility professionals is to respond to clients' unmet needs by considering high-performance buildings for their next projects. In many cases, however, these needs are not articulated well enough to compete with other priorities. It makes sense to use something like the LEED or ENERGY STAR rating system to evaluate a project's design and elevate these concerns to the same level asesthetic or other functional criteria.
It often happens that, during the course of design and construction, high-performance measures are often value engineered out of the project owing to higher initial cost projectsions. Many LEED projects have been found that the client's strong requirement to achieve a certain level of LEED certification forces the design team toward an integrated approach that places the desired LEED rating at the same level as other budgetary concerns. As a result, the team looks for cost savings in areas other than energy efficiency or indoor air quality, effectively preserving those environments. Often, early-stage eco-charrettes or visioning sessions can help to articulate key stakeholders' unmet needs.
Marketing materials for green building services
Engineers need to sell their choices to others. Often it is necessary to make a convincing case to those who hold the purse strings before embarking on the design and construction of a high-performance building. But as most salespeople know, they have to keep selling even after a contract is signed, or run the risk of buyer's remorse after the initial sale.
Architects and engineers need to equip real estate brokers with an understanding of the green features of the project, communicate why they are important and specify what benefits they create, so that they will be able to present them to prospective clients or tenants.
Brokers specialize in negotiation and communications, so some thought has to be given to integrating the green features into the marketing and sales materials for the building, especially if the developer is trying to recapture some of the investment in energy efficiency with higher rents, for example. Because brokers are not going to become specialists in green buildings, these marketing materials have to be straightforward and readily understandable by those without technical training.
The best approach is to make the literature about the features of green buildings fit in with the marketing literature for the project. In some ways, this is uncharted territory, especially in the speculative commercial building world. Nonetheless, the basic lesson of sales remains: Sell the sizzle, not the steak. For technical features of green buildings, this means spelling out and selling the benefits rather than the features.
For example, if a project is saving 40% more energy than a commercial building, then the pitch to a conventional CEO or COO might be that you have just made one-third of the operating costs (in a typical building) 40% less expensive to operate and you have created a high return on incremental investment that offers some protection against future uncertainties in energy prices.
If the buyer is a tenant, then the healthier indoor air quality or daylighting needs to be marketed in terms of reduced absenteeism due to illness or disease; if the tenant pays the energy bills, then part of the sale is the reduced total operating cost for rent and utilities. Convincing a tenant is a harder sell in terms of risk that the tenant will not value the benefit appropriately, so some form of certification is helpful.
Ensuring satisfaction after occupancy
In an institutional setting, the facility manager and engineering professionals often share the responsibility for occupant satisfaction. Many stakeholders in a high-performance building (from top executives down to the file clerk) need to know what they are getting in their new building, what the expected benefits are to them and to their organization and, in some cases, how to make it work. For example, in a building with operable windows, who will actually operate the windows? In humid climates, how will people learn when they are allowed to open the windows? When people work side by side, disagreements happen. Research suggests that people will often tolerate greater temperature swings from normal if they can control the environment. In the case of natural ventilation, employees need to be prepared to dress cooler in the summer and warmer in the winter.
Without a strong pre- and post-occupancy sales effort, it is entirely possible that the benefits of the building will go unappreciated and unutilized.
In one LEED Gold project in Portland, Ore., the Jean Vollum Natural Capital Center, the building owner (an environmental nonprofit organization) included a lease provision that the allowable temperature band for the building was 68°F to 76°F, putting tenants on notice to dress for the season.
LEED provides one point for committing to a “post-occupancy survey” of building occupants to find out their satisfaction with thermal comfort. Wouldn't this survey be a good marketing tool for an engineering firm to use, in securing future business? The key point here: marketing is a continuing process, even for completed projects.
Author Jerry Yudelson is a professional engineer and a former national board member of the U.S. Green Building Council He currently serves as a national faculty member for the USGBC's Leadership in Energy and Environmental Design (LEED) program. Since 2001, Yudelson has trained nearly 3,000 people in the LEED system. He also serves as chairman of the 2007 Greenbuild International Green Building Conference and Expo, the world's largest, to be held in Chicago in November.