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Philips Pushes Energy-Saving Bulbs:
Why This Bright Idea Is a Hard Sell

By LEILA ABBOUD
December 5, 2006

EINDHOVEN, Netherlands -- Philips Electronics NV, the world's largest lighting maker, is wrestling with a riddle: How many marketing campaigns does it take to get consumers, companies and city governments to change a light bulb?

Over the past 20 years, Netherlands-based Philips has pioneered numerous ways to make lighting brighter, more energy-efficient and environmentally friendly. But despite spending millions on research and development, most of its top-flight technology remains on the store shelves, while consumers instinctively reach for the older, iconic bell-shaped incandescent bulbs. Two-thirds of lighting technology used in homes and offices dates to before 1960, the company estimates.

[before and after]
London's Redbridge borough before (top) and after installing a Philips system

"There have been huge advances in lighting, but the old technology never fades away," said Harry Verhaar, head of energy efficiency at Philips's lighting unit.

Convincing people to switch to more energy-efficient lighting is a problem that has bedeviled environmentalists and policy makers for years. Despite the energy-saving benefits, the high upfront costs of the lights put off buyers. And, though makers say the light from energy-efficient compact-fluorescent bulbs is indistinguishable from incandescents, some consumers still associate them with harsh office settings. These days, energy concerns are getting even more attention with oil prices high and concerns about global warming growing. Switching to compact fluorescents would cut world-wide electricity demand by 18% and reduce emissions of greenhouse gases, according to the Paris-based International Energy Agency.

Now Philips is promoting energy-saving lighting with a massive marketing campaign. It has lobbied European city governments about the benefits of energy-efficient street lighting. Television commercials in Europe and China aim to educate consumers about how using compact-fluorescent bulbs can combat global warming. It has used direct mail and print ads in trade publications to reach architects who install lighting.

In the U.S., Philips and Viacom Inc.'s Paramount Pictures have teamed up with Wal-Mart Stores Inc. on store displays for the DVD release of Al Gore's documentary on global warming, "An Inconvenient Truth." Philips compact-fluorescent bulbs are displayed for sale alongside the DVDs, and the company offers coupons and mail-in rebates tied to the purchase of the DVD.

Philips isn't alone in this push. Its main competitor in the U.S., General Electric Co., also teamed up with Wal-Mart recently on a campaign to educate consumers about compact-fluorescent bulbs, with the aim of selling 100 million of them in the next year, doubling such purchases at the retailing giant. Germany's Siemens AG, the other big global player in the lighting industry, has offered rebates on energy-saving bulbs through Shaw's Supermarkets Inc., Lowe's Cos. and other U.S. retailers.

[compact-fluorescent bulb]
A Philips compact-fluorescent bulb

For light makers, it's not just about the environment. Promoting a shift to energy-efficient lighting is one way they see to increase their market share.

"There is more technology know-how that goes into these products, so there are fewer competitors. It helps us improve our margins," Theo van Deursen, chief executive of Philips lighting, said in an interview. "Energy-efficient lighting is an important piece of our strategy for the future."

Philips invented compact-fluorescent light bulbs in the early 1980s. Unlike incandescent bulbs, which produce light by running electricity through a filament wire, compact fluorescents feed electricity through a glass tube filled with gas and a small amount of mercury, creating ultraviolet light that turns visible when it hits phosphor coating on the inside of the bulb. The bulbs can be used in standard fixtures.

Though incandescent lights are inexpensive -- a 60-watt bulb costs as little as 25 cents -- they are inefficient. Only 5% of the energy they consume is converted to light; the rest is lost as heat. Halogen lights are in the middle on the energy-efficient scale, but many people like the warm bright light they give off. Meanwhile, compact fluorescents emit the same amount of light as incandescent bulbs but use 75-80% less electricity.

Philips's overall lighting sales of €4.8 billion ($6.4 billion) accounted for 16% of Philips's revenue last year. Lighting will become more important in the future, as Philips sold its semiconductor unit this year.

Two years ago, Philips decided to devise a plan to boost sales of 25 "green flagship products" -- including increasing sales of its compact-fluorescent bulbs to 300 million units this year, a target the company says it's on track to meet. It expects sales of compact-fluorescent bulbs to rise to 325 million pieces next year -- up from 65 million bulbs in 2001.

Over the past five years, Philips has spent about half of its annual lighting research-and-development budget of €250 million on developing energy-efficient products. It is investing heavily in next-generation lights that have computer chips in them, known as light-emitting diodes.

Many consumers are put off by the higher price of compact-fluorescent bulbs -- they can cost anywhere from $3 to $6 each in the U.S. and even more in Europe. Incandescent bulbs usually last six to 12 months, while compact-fluorescents last about five years or longer.

"People decide what to buy based on upfront cost. They don't calculate what they could save later in energy costs," Mr. van Deursen said.

Shopping for light bulbs in a Castorama store in Paris recently, Philippe Mintz, a 32-year-old teacher, chose a two-pack of 75-watt GE incandescent bulbs for €1.10, or about $1.50, passing over energy-efficient bulbs selling for €8.10 apiece. "The difference in price is just too big," said Mr. Mintz. "I don't think it's worth it."

[Less is More]

Compact fluorescents also face an image problem. When they first came out, the light they gave off was colder than that of incandescent bulbs. Even Mr. van Deursen admits his wife refused to let him put them in their house because she didn't like the way the light looked. It was only several years later when Philips came out with smaller, better versions of the bulbs that his wife agreed to use them.

Alice Venot-Pian, a 42-year-old Parisian who uses compact fluorescents in her home, said she was initially afraid they would look cold and industrial. "But once I tried them, I realized that they look good. I can't tell the difference from the old bulbs I used to buy," she said.

Nevertheless, major challenges remain. As electricity bills are paid by the tenant, building owners have little incentive to install efficient lighting systems, with their higher upfront costs. "They are just looking to keep costs down, not install the best product," said Isabelle David, a lighting designer for offices and stores in Paris.

Philips has stepped up its efforts aimed at lighting offices and other public buildings, which account for 43% of electricity consumption globally per year. Philips has courted architects with a newsletter called "Lamps and Gears" and a road show in which a shipping container was decked out with new lighting.

Philips staffers began making rounds of city governments, including those in Madrid, Stockholm and Glasgow, Scotland, touting a street-lighting system called CosmoPolis, which is 30% more efficient than the 1930s-era street lamps commonly in use. CosmoPolis uses a metal-halide technology, producing light by passing an arc of electricity through a mix of gases in the bulb.

But governments often don't have budgets to replace out-of-date street lighting. In each city, Philips staffers had to crunch the numbers to convince authorities they would soon get a payback on the new lights in a lower overall energy bill.

In the London borough of Redbridge, lighting project manager Mick Trussler decided to replace the 20,000 low-pressure sodium lamps that had long lit the streets with CosmoPolis lamps. Using an annual budget of £250,000, or about $500,000, he's installed 600 lamps with CosmoPolis bulbs since 2004.

Redbridge has been able to hold electricity spending steady despite rising energy costs, and the streets went from being bathed in a feeble light to bright white, Mr. Trussler said. "It just looks better."

Write to Leila Abboud at leila.abboud@wsj.com

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