LED Companies Find Business Models for a Product That Won’t Wear Out
Purveyors of light-emitting diode (LED) fixtures are coming to grips with a serious threat to their businesses: If they’re offering a durable, astonishingly energy-efficient light bulb that rarely needs to be replaced, how will they keep selling new units after everyone has the lighting they need?
Author J.B. MacKinnon posed that question in an article in The New Yorker in July. A couple of “newer, smaller firms” came back with answers, both saying they’re in the business of selling “light” rather than light bulbs.
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Durham, North Carolina-based Cree LED lighting told MacKinnon its goal is not just to sell energy-efficient bulbs, but better lighting. Its basic product is a $5 bulb with a 22-year lifespan that offers almost the same illumination—but not quite—as a $20 unit. From that starting point, the company hopes to offer improvements and features that will encourage customers to upgrade their bulbs, as they do their smart phones.
“We’re not inventing this consumer behaviour. It’s what technology companies do,” said Chief Marketing Officer and General Manager Betty Noonan. “I have replaced more damned flat-panel TVs in my home, just because they got thinner and brighter, then I care to even tell you.”
In Dublin, meanwhile, UrbanVolt is selling LED lighting as a service, rather than a product. “We started with a really simplistic thing on the back of a napkin: If we were giving these away for free, would everyone do it?” explained co-founder and CEO Kevin Maughan.
“Changing to high-quality LED lighting normally cuts these companies’ energy use by 80%, but the expense of making the swap in the first place can be prohibitive,” MacKinnon writes. “UrbanVolt solves the problem by replacing its customers’ lights at no initial cost; each client then pays UrbanVolt a monthly share of the savings on its electrical bill.”
While a residential offering may be in UrbanVolt’s future, so far the company “is working only with businesses, ranging to date from a coffee shop to a million-square-foot shopping mall.” (h/t to Environment News Bits for pointing us to this story)