Marketing 18th Edition by William Pride,Ferrell

Exercise 3

Pricing Renewable Energy Projects: Think Long-Term
John Miggins, a sales representative for Standard Renewable Energy in Oklahoma, tells customers to think long-term when they're thinking about buying renewable energy equipment for residential or commercial use. Although solar panels or a wind turbine will allow customers to generate enough power to replace much or all of the electricity they currently buy from a utility company, the out-of-pocket cost is hardly a quick fi x for kilowatt sticker shock. Installing a wind turbine can cost $17,500, and a solar power set-up for an average home can cost up to $40,000.
Still, demand for renewable energy equipment has been steadily rising for more than a decade as consumers and businesses have become interested in environmentally friendly power sources. Manufacturers around the world are constantly introducing new, high-effi ciency offerings for homes, factories, and other buildings. At the same time, the combination of technological advances, higher supply, and increased global competition has put downward pressure on prices. At one point, so many manufacturers were making so many silicon solar panels that the glut and the competition pushed panel prices down by 50 percent in one year.
These dramatic price drops, and a variety of governmental tax incentives for buying energy-efficient products for homes and businesses, are bringing the cost of renewable energy much closer to the cost of energy from conventional sources, such as coal and nuclear power. As prices move ever lower, the market expands, because more consumers and business buyers see solar and wind generation as viable alternatives to their current power sources. These days, small and mid-size solar panel installations and wind turbines are popping up in many places, like homes and individual businesses. In addition, power companies are installing renewable energy equipment to generate electricity on a large scale.
John Miggins warns his customers against expecting a quick return on their investment in renewable energy equipment. He says businesses that install solar panels usually get 60 percent of their investment back within six years and 100 percent back within 10 years. Consumer installations don't earn back their cost as quickly as commercial installations, simply because homes don't use as much electricity as businesses. Miggins also recognizes that customers care about things other than price-they also want a feeling of security and a sense of confidence in the seller who provides their new energy equipment.
Because Miggins works for Standard Renewable Energy, his prices take into account the company's buying power and sales volume. The pieces of equipment he orders for customers are bundled with larger deliveries to the company's facilities, which reduces the shipping costs paid by individual buyers. And toward the end of a month, when Miggins wants to close deals and make his sales quota, customers are likely to get an even better price when they place an order.
Does geographic pricing affect what business customers pay for a wind turbine they buy from Standard Renewable Energy compared to prices paid by nonbusiness customers? Explain your answer.