Wes Hartmann
The John G. McCoy-Banc One
Professor of Marketing
Stanford Graduate School of Business

• Research
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• MMC
• Res Water

Marketing for Measurable Change: Residential Water Conservation

• The inability to redefine water rights and price water to respond to demand and supply shocks has led governments to impose restrictions on residential water use. As local utilities seek to adapt, they face the challenge that those consumers who use the most water often value it the most and are therefore most difficult to motivate toward conservation.

Types of Change

• This project created a partnership between a smart irrigation controller company and a local water utility to help heavy residential irrigators to conserve.
• Our partner, Rachio, was founded on the premise that wifi enabled irrigation controllers could both avoid waste of traditional timers and create value through control and information for customers who wanted to better care for their irrigable landscape zones. This is a profit driven business that also helps customers more responsibly consume what they want.
• Residential water consumption is an insufficent share of the broader drought problems to meaningfully affect the aggregate social problem around water.

The Process

Step 1: What alternatives do consumers choose during drought?

• Brown Lawns
• Turf Removal
• Persistence of Past Irrigation Behavior

Step 2: What attributes explain why customers choose each existing alternative?

• Brown Lawns: Social compliance plus either desire for long-run lawn or deterred by costs of change
• Turf Removal: Social compliance, lawn likely a legacy, desire for valuable outdoor space
• Persistence of Irrigation: Present desire for lawn (aesthetics or recreation) or strong non-monetary costs of change

Step 3: Which alternative can we shift customers away from to best further our vision for change?

• Persistence of Irrigation: very high water usage per capita

Step 4: How will we enact change? New products, partnerships, incentives, or communications?

• Solutions: Retain desired lawn and/or address non-monetary costs of change
• We found an existing solution (Rachio's controller) that upon a personal test suggested potential for water savings without changes to the landscape or deterioriation in appearance.
• Our focus was therefore to find a partnership to test the robustness of the water savings and what it would take to grow adoption.

Step 5: Positioning and creating a vision

• A smart irrigation controller allows you to keep your lawn and save water
• Our vision involved how a partnership of a disruptive startup, a local water utility navigating water conservation and academics designing credible tests could evaluate the new technology's ability to generate conservation from those most challenging, while also avoiding luring conserving customers away from abstinence solutions.

Step 6: How to navigate customers through the decision-making process (i.e. down the conversion funnel)

• Need or Problem Recognition: Government and media heavily publicize water shortages. This may be sufficient for problem recognition, but politicization of the topic might alienate some heavy water users. Outside government efforts, problem recognition would align with exactly what the profit driven company faces in initiating interest in replacing legacy irrigation timers which can last decades before replacement is required.
• Consideration Set Formation: If drought based needs draw customers into the conversion funnel, then communications from the water utility help place the smart irrigation controller in the consideration set for water conservation. We therefore contacted customers by email and/or postcard. If not drawn in by drought, then SEM, SEO, retail placement or integration in other smart platforms can help place the device in the consideration set.
• Evaluation: Experiment 1 in this research paper tested the extent to which price discounts or professional installation would help convince customers to adopt the device now, rather than never or sometime in the future when their existing controller needed replacement.
• Purchase: To facilitate purchase at discounted prices, customers were given a link to a Shopify enabled site where they could quickly order and arrange shipping and/or installation of the device. This removed typical rebate adoption frictions such as filling out forms and waiting for reimbursements.
• Usage: We were able to track activation of most devices though when we offered free controllers in Experiment 2 (research paper), we found some devices were more likely to be left idle.
• Post-Purchase Evaluation: Digital devices allow us to track whether usage continues (revealing post-purchase satisifaction). More important, our strategic partnership allowed us on the academic side to help our utility partner evaluate the conservation impact of these devices.

Step 7: Monetization

• Devices in this initiative were funded by a combination of research support from the local utility and discounts from Rachio. While it is complicated to quantify the value of reduced water consumption to a utility whose revenue is funded by selling water, the impacts described below illustrate that the savings in water costs to residents would justify them paying for the devices.
• The challenge with trying to capture the water savings in the price is that, ex-ante, customers do not know whether their savings will be high or low.
• In the long-run "me too" competition will drive prices toward the marginal (hardware) costs and potentially approach the price of traditional controllers. However, this software involves ongoing fixed costs of updating the software of the devices to evolving operatings systems etc.. The ongoing costs suggest a need for subscription or some form of ex-post monetization, but it is unclear an ongoing price is justifiable. Realistically, I expect the software updates to be executed and funded by platforms offering a variety of devices requiring similar updates rather than each software company incurring separate fixed costs to continue servicing devices.

Step 8: Impact and a model of growth for mission and/or profit

• Our research paper outlines the experimental design and broader empirical strategy to measure the impact per device and the effectiveness of various factors in accelerating adoption of the device.

Step 9: A development roadmap

• This exhibit details the distribution plan and the obligations of each party.