Several weeks ago, I wrote a blog about the Energy Star program and introduced a survey to gauge whether participants would be willing to pay to keep the program alive in the face of proposed budget cuts outlined in the recent White House budget plan. If the proposed plan passes, Energy Star would become a “pay-to-play” or “PTP” program with only $46 million allocated prior to the PTP fees being applied.

So far, the survey indicated that only 40 percent would be willing to pay additional amounts beyond what it currently costs them to stay in the program. Roughly 7 percent of those willing to pay would still try to phase out of the program over the next several years. But the disturbing fact is that the respondents that indicated that they would be willing to pay to play indicated that they would only be willing to allocate several thousand dollars to stay in the program. No one is willing to even consider a program that charges participants a fee based upon a percentage-of-sales formula.

Forty percent of respondents feel that losing Energy Star would have no impact whatsoever on the industry with another 40 percent feeling otherwise. Half of latter group, or 20 percent overall, feel that the loss of Energy Star would have negative consequences for the door and window industry, with consumers lacking a fair and credible way of evaluating the energy performance of different offerings. The other half of this group feel that the industry would suffer in the short term, but manufacturers would counter with increased marketing efforts that would eventually overcome any negative consequences of not having an Energy Star program. Six percent feel that only part of the market would suffer, which would be the demand for higher-performance doors and windows.

In the course of my travels, I’ve been having private discussions with customers regarding this PTP option, and the ones who indicate that they do not want to pay to participate also admit that if their competition decides to stay in the program, they may be forced to participate as well or risk losing sales. Some get quite emotional about it, and it is obvious that they do not want to pay any more than it is currently costing them, but they see the program as a necessary evil.

One thing that manufacturers seem to forget is that these proposed budget cuts affecting Energy Star are coming in the wake of a historic tax cut that will improve the bottom line of their businesses by significantly lowering the corporate tax rate. Also, the new tax code will allow generously accelerated depreciation of equipment investments, which will also significantly benefit the bottom line. So, Energy Star or not, door and window companies should be poised to spend significantly more on improving efficiencies (which boost margins) and marketing campaigns. Getting back to good ole fashioned marketing would be super refreshing in my view of things instead of relying on a label to sell windows as long as everyone uses the standards that the Energy Star program developed over the years.

The survey will still be active through the end of the month, so feel free to weigh in here.

1 Comment

  1. Jim, thanks for tracking this. We appreciate your research and the time you invest into investigating topics of importance to our industry. One point I’d like to make about your comment in the last paragraph regarding the corporate tax cut. There are some changes that will impact everybody (e.g., accelerated depreciation). However, the actual tax rate reductions will impact C-corps the most. Companies that are either S-corps or a LLC’s aren’t dramatically impacted from the corporate tax cuts like a C-corp will.

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