LED Bulb Marketing Plan: Industrial B2B Strategy

Executive Summary

LED technology has made many breakthroughs in recent years, the most notable of which is its level of cost effectiveness. However, the initial investment required to implement LED light bulbs still exceeds that of alternative market choices, even though the total cost of ownership offers consumers sizable gains. The market segment this marketing plan is designed for is composed of industrial firms that purchase items in quantity and evaluate them in terms of total cost of ownership. It is reasonable to expect that this segment will be the most receptive to LED technology.

Marketing Situation Analysis

The current marketing situation for any green product represents one of the most significant challenges that anyone familiar with both marketing and environmental issues will attest to. Generally, marketing concerns itself with promoting relevant products in the most beneficial manner possible. However, when the ecological damage being caused by modern societies is taken into account, the challenge is heightened to an unfamiliar level. Marketing is not only a profession but also a lifeline to the future of humanity. Promoting products that make a difference to the future of the planet and the species that inhabit it is a responsibility on another level altogether.

Climate change, driven by anthropogenic activities, poses a real challenge to all species on this planet, both now and into the future. Exponential increases in greenhouse gas emissions since the pre-industrial era have led to an atmospheric carbon dioxide concentration of roughly 390 parts per million (CO2 Now 2011). This figure is enormously disturbing given that some scientists have estimated 350 parts per million to be the threshold point (Hansen 2008). Furthermore, the Intergovernmental Panel on Climate Change (IPCC) estimates that at 450 parts per million there is only a 52 percent chance that catastrophic climate change will not occur (IPCC 2007). There is ample evidence for concern — our planet is in peril.

Unfortunately, in many nations, the political determination to introduce the required emissions regulations has been slow to keep pace with scientific findings at the international level. During the last international convention, optimism persisted that an arrangement would be reached, but the conference was unable to establish a new agreement to replace the Kyoto Protocol. One estimate, produced using data from each country's current pledged emission path and run through MIT's most sophisticated climate model, predicted that atmospheric carbon concentration in the year 2100 would reach 770 parts per million (McKibben 2009) — far greater than any responsible observer would consider safe.

There is some evidence, however, that this trend may change in the near future. Ethics and social responsibility are increasingly attracting the attention of individuals, organizations, and societies across the globe. Ethical considerations for future generations have also become more salient as organizations expand their definition of stakeholders to include those yet to be born. Organizations should therefore initiate conversations about how they will address future challenges in the form of regulations, as well as pressures from employees, customers, and other stakeholders. This also poses a heightened challenge to marketers who are concerned but have yet to be given a consumer market that values environmentally conscious products at the level the science demands. The market must therefore be educated and marketed to simultaneously.

The consumer market for environmentally friendly products has yet to reach its full potential. Public opinion regarding climate science has not reached the same consensus as the science itself has (von Storch and Krauss 2005). As a result, the segment of perceived value among consumers is not consistent with the current state of the science. Marketers face a tremendous challenge — not only must they create value for their product against market competitors, but they must also foster demand for their type of product compared to cheaper, less efficient alternatives that consumers are already accustomed to.

In the lighting industry, LED bulbs suffer from the fact that they require a significantly higher upfront cost than lower-cost alternatives. Traditional incandescent light bulbs can be purchased for a dollar or less, while compact fluorescents (CFLs) are considerably more expensive; LED lighting is more expensive still. The total cost of ownership — which accounts for the lifespan of the bulb as well as total wattage required for daily lighting — paints an entirely different picture from the initial investment. However, this calculation is lost on most consumers, with the exception of the most environmentally conscious.

The greatest weakness of the LED bulb is its initial price. It exceeds competing choices by a considerable margin. While the price difference between CFLs and incandescents is not insurmountable for many environmentally conscious consumers, the price of LED equipment compared to incandescent technology can deter the majority of casual shoppers. Moreover, the total lifecycle cost advantage of LEDs over CFLs has not yet produced a sufficiently clear distinction between the two (Richard 2009). The strengths of LED technology lie in lighting quality and total cost of ownership; some estimates give 60-watt LED bulbs a useful lifespan of over six years (Angelie 2010). The quality of light LED bulbs produce also more closely resembles natural daylight than any competing light-emitting product.

The external environment suggests that LED technology will eventually become ubiquitous — the main question is when that threshold will be reached. The ecological consequences of fossil fuel consumption, including coal, natural gas, and oil, are becoming increasingly clear to scientists, though consumer segments are slow to keep pace. The greatest threat to the future of LED lighting is that the industry may be slow to reach critical mass, which could cripple producers who chose to manufacture LED products before the market was ready. If the market does not support early adopters, this could result in a major setback for the entire industry, causing many firms to deteriorate rapidly.

Desired Outcomes

The greatest opportunities for such firms, however, are represented by policy makers. If policies are introduced that increase the costs associated with electricity consumption or subsidize the initial costs of LED technology, consumer demand could spike rapidly, resulting in a quick industry boom in which product differentiation becomes more critical than the technology itself. The potential for this outcome is increasingly likely as scientific understanding drives public support among certain demographics. The key to leveraging such an opportunity lies in timing — ideally building sufficient capacity just before consumer demand spikes.

This marketing strategy is heavily grounded in a triple bottom line framework that considers an extended set of stakeholders. Not only must investors be financially rewarded, but employees and the planet should be equally considered. A product like LED bulbs makes it possible to satisfy the higher requirements inherent in such a sustainable business model. The desired outcomes include three primary factors: the bulbs must provide a return on investment to the firm's investors, the company must treat its employees with dignity, and the product must offer a more sustainable alternative to competing product lines at a reasonable price.